REPORT 


OF  thf: 


FEDERAL  TRADE  COMMISSION 

ON 

* 

THE  GRAIN  TRADE 


^VOE.  l  ' 

COUNTRY  GRAIN  MARKETING 


•  September  15,  1920 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICE 


( • 


FEDERAL  TRADE  COMMISSION. 


Victor  Murdock,  Chairman. 
Huston  Thompson. 

WlULIAM  B.  C0L\’ER. 

Nelson  B.  Gaskill. 

John  Garland  Pollard.  . 

J.  P.  Yoder,  Secretary. 


additional  copies 

OF  THIS  PUBLICATION  MAT  BE  PROCURED  FROM 
THE  SUPERINTENDENT  OF  DOCUMENTS 
GOVERNMENT  PRINTING  OFFICE 
WASHINGTON,  D.  C. 

AT 

35  CENTS  PER  COPY 
V 


,  > 


t 


CONTENTS. 


Letter  of  acknowledgment _ 

Letter  of  submittal _ 

Chapter  I.  Origin  and  Scope  of  Grain  Report. 

Sec.  1.  The  report  as  a  whole _ 

Origin  of  inquiry _ 

‘  Study  of  the  grain  trade _ 

Divisions  of  report _ 

Period  covered  by  the  inquiry _ 1 _ 

Grains  covered  _ _ _ _ 

Sec.  2.  Scope  of'  country  marketing  volume _ 

Subject  matter _ ! _ 

Interviews _ 

Correspondence _ 

Statistical  data _ 

Chapter  II.  Functions,  Age,  and  Distribution  of  Elevators  and 

Wareho'^es. 

Sec.  1.  Functions  of  country  elevators  and  warehouses _ 

Elevators _ i 

Warehouses _ 

Sec.  2.  Physical  differences  of  elevators  and  warehouses _ 

Sec.  3.  Bulk  and  sack  handling _ _ _ 

Bulk  and  sack  areas _ * _ 

Historical  reasons  for  sack  handling _ 

Arguments  for  sack  handling _ 

Arguments  for  bulk  handling _ 

Attitude  of  different  interests _ 

Growers _ . _ 

Warehousemen _ 

Elevator  operators _ 

Millers _ 

Banks  and  investment  companies _ 

Farmers’  unions _ 

Summary _ 

Sec.  4.  Type  differences  in  country  houses _ - 

Line  houses _ 

Individual  houses _ 

Commercial  line  houses - 

Independent  houses - - - 

Line  and  individual  cooperative  houses _ 

*  Line  and  individual  mill  houses _ -  - - 

Line  and  individual  maltster  houses _ *_ - 

Sec  5.  I\uinbor  of  elevators  and  warehouses  reporting  and  reported — 

Method  of  tabulating  returns- - , - 

Number  of  houses  per  station - 

Geographical  distribution  of  country  houses - 

Pec.  6.  Avera^,e  distance  between  stations - 

SEr-.  7.  Average  number  of  country  houses  per  station - 

.jc.  8.  Causes  of  variations  in  number  of  houses  per  stati(»n - 

Age  of  houses _ 

Age  of  territory - : - 

Size  of  farms _ 

Railway  development - 

Conclusion - 


\ 


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16 


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31' 

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oo 

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3b 
3b 


3 


4 


COUNTRY  GRAIN  MARKETING. 


Page. 


Sec.  9.  Distribution  of  houses  by  types - 40 

By  single  types -  40 

By  consolidated  types -  41 

Sec.  10.  Relative  importance  of  cooperatives -  41 

Distribution  of  cooperatives -  41 

Volume  of  grain  handled _  42 

,  Recent  increases  in  cooperatives -  42 

Sec.  11.  Growth  and  decline  of  different  types  of  elevators  and  warehouses.  42 

Period  of  construction  of  all  houses -  42 

Age  of  different  types - 43 

Analysis  of  age  distribution - 45 

Relative  growth  and  decline  of  types -  46 

Growth  and  decline  of  consolidated  types -  49 

Sec.  12.  Geographical  distribution  of  different  types  of  elevators  and 

warehouses - - —  '49 

Extent  of  geographical  variations -  49 

Geographical  distribution  of  principal  types  of  elevators -  51 

Sec.  13.  Explanation  of  geographical  distribution  of  types  of  elevators -  53 

Commercial  lines  and  independents -  53 

Cooperative  development -  53 

Mill  elevators - 55 

Maltster  elevators _  57 

Sec.  14.  Geographical  distribution  of  warehouses -  57 


Chapter  III.  Physical  Characteristics  of  Country  Elevators  and 

Warehouses. 


Sec.  1. 
Sec.  2. 

Sec.  3. 

Sec.  4. 

Sec.  5. 


Sec.  6. 


Description  of  country  elevator _ 

Average  capacity  of  elevators  and  warehouses _ 

Results  of  tabulation _ 

Capacity  variations  of  elevators  and  warehouses 

Type  variations  in  capacity - 

Elevators _ _ 

Warehouses _ 

Geographical  variations  in  capacity - 

Elevators  _ 

Warehouses _ ^ 

Average  number  of  bins  per  house - 

Type  variations  of  elevators - 

Geographical  variations  of  elevators - 

Warehouse  variations - 

Construction  materials  of  elevators  and  warehouses. 

Construction  in  general - 

Present  tendencies _ 

Type  variations _ 

Commercial  line  construction - 

Independent  construction - 

Cooperative  construction _ 

Individual  and  mill  line  construction - 

Geographical  variations _ 


00 

61 

61 

62 

63 

63 

63 

64 

64 

65 
65 

65 

66 

67 

68 
68 
68 

70 

71 

71 
:72 

72 

73 


Chapter  IV.  Development  of  Country  Elevators  and  Country  Market¬ 
ing. 


Sec.  1.  Character  of  the  discussion _ 74 

Sec.  2.  General  characteristics  of  early  grain  marketing -  '  h 

Chicago  territory _ _ _ _  74 

The  Northwest _ .* -  75 

The  Southwest. _ • -  76 

Pacific  coast - 76 

Sec.  3.  Methods  of  handling  grain - -  76 

Sec.  4.  Commercial  line  elevators _  77 

Sec.  5.  Mill  line  elevators _ 78 

The  Northwest _  78 

Mill  elevators  and  character  of  wheat  production -  78 

Relation  of  hard  wheat  to  mill  line  development -  79 


CONTEXTS.  '  '  ■  ■  5 


Page. 

Sec.  6.  Individual  mill  elevators _  80 

Sec.  7.  Independent  elevators _  81- 

Sec.  8.  Early  cooperative  development _  82 

Orijrins _ 82 

The  penalty  clause _  83  ' 

Sec.  9.  Reasons  for  cooperative  development _  83 

Lack  of  competition _  83 

Situation  in  the  Northwest _  S3 

Chicago  territory _ 85 

Sec.  10.  Opposition  to  cooperatives _  86 

Sec.  11.  Irregular  dealers _  87 

Sec.  12.  Effects  of  opposition  to  cooperatives _ : _  iX) 

Sec.  13.  Patronage  dividend  cooperatives _  92 

lYoportion  of  cooperatives  paying  patronage  dividends _  92  ‘ 

Variations  in  geographical  distribution  of  patronage  divi¬ 
dend  cooperatives _  93 

Chaptek  V.  The  Purchase  and  Storage  of  Grain. 

Sec.  1.  Methods  of  sale  by  the  farmer _  94 

Sec.  2.  Local  purchasing  factors  other  than  elevators  and  warehouses _  95 

General  characteristics _ 95 

^Interior  brokers _  95 

VTrack  buyers _  95 

Scoop  shovelers _  96 

Terminal  dealers _ 96 

Other  factors _  97 

Scope  and  extent  of  operations _ 97 

Sec.  3.  Outright  sales  by  farmer  to  the  elevator _  99 

Delivery _ ' _  99 

Grading _ 1 _  99 

Interviews  with  country  agents  on  grading _  100 

Dockage _  101 

Interviews  with  country  agents  on  dockage _  101 

Weighing  in _ 102 

Payment  for  grain _  103 

The  elevating  operation _  104 

Sec.  4.  The  storage  function  and  the  sale  of  grain  after  storage _  104 

Conditions  affecting  storage _  104 

Summary  of  interviews  regarding  storage _  lOil 

Storage  charges _  106 

Sale  after  storage  transactions _  106 

Special  bin  storage _  110 

Storage  for  own  account _  111 

Pacific  coast _  112 

Sec.  5.  Sale  of  gi’ain  by  contracts _ < _  H- 

Interviews  on  grain  contracting _  112 

Pacific  coast _  11^ 

Sec.  6.  Distribution  of  total  purchases  by  kind  of  grain _  ^  114 

Relative  marketing  importance  of  different  grains _  114 

Distribution  of  purchases  of  different  grains  by  States _  11^ 

Sec.  7.  Purchases  of  grain  by  different  types  of  elevators _  110 

All  types _  110 

Mill  and  maltster  elevator  purchases _  110) 

Commercial  line,  cooperative,  and  independent  purchases _  116 

Sec.  8.  Average  bushels  handled  (purchased) _  117 

By  types -  117 

Explanation  of  type  variations _  117 

By  States _  118 

Si:c.  9.  Seasonal  variations  in  country  elevator  purchases _  118 

Sec.  10.  Rate  of  capacity  turnover _  120 

Results  of  study _  120 

Explanation  of  variations _  121 

State  variations  in  turnover _  123 

Capacity  turnover  by  capacity  of  house _  124 


6 


COUNTriY  GRAIN  MARKETING. 


Chapter  VI.  The  Sale  and  Shipment  oe  Grain. 

.  -Sec.  1.  Handling  country  elevator  shipments -  125 

■  ’  Time  of  sale -  ^ 

Ordering  cars -  \ 

Weighing  out - - -  y 

Loading  out -  \ 

Plugged  or  set-up  cars -  107  J 

Sec.  2.  Agents’  reports - 

Reporting  by  line  agents - 

Reports  of  elevators  other  than  line - - - 

Sec.  3.  Destinations  of  country  elevator  and  warehouse  shipments -  1-^ 

Movement  by  States  and  grand  divisions - - - - — 

Sec.  4.  Relation  of  size  of  terminal  markets  to  country  grain  movement—.  Idl 
Reported  receipts  of  country  grain  at  different  terminal 

markets - 

Direction  of  grain  movement - - - 

Effect  of  direction  of  movement  on  terminal  tributary  areas_ 

5.  Effect  of  terminal  market  organization  on  grain  movement -  1^4 

6.  Other  factors  affecting  terminal  market  movement - 

Minneapolis  consumption - 

Sample  selling  of  barley - 

Terminal  market  financing - - - 7—7-7,-":^ - 

7.  Shipments  in  territory  outside  Chicago-Minneapolis  tributary 

cirOQ, - ——————————  QQ 

8.  Analysis  of  mill  shipments - - - - - 

9.  Destination  of  total  grain  movement  by  kinds  of  grain - 

10.  Terminal-market  shipments  by  kind  of  grain - 

Results  of  tabulation - ■ -  ^ 

Rye  and  barley - -  f  „ 

Wheat - 

Corn  and  oats - 

11.  Shipments  by  kind  of  grain  to  smaller  points -  | 

12.  Shipments  to  mills  by  kind  of  grain - 1 - 

Wheat - 

Other  grains - - -  “ 

13.  Shipments  to  feeders  by  kind  of  grain - - - - — - - 

14.  Shipments  to  interior  brokers  and  others  by  kind  of  gram - 

Miscellaneous  shipments - 

15.  Consignment  and  direct  selling - -  .  . 

Geographical  variations - 

Variations  between  grains - - - - — - 

16.  Explanation  of  geographical  variations  in  consignment  and  direct 

Variations  in  grains  by  States -  ^ 

Effect  of  financing  on  consignments - 

Barley  and  the  consignment  business - 

•  Minneapolis  wheat  and  rye  consumption  and  consignments-— 

Situation  outside  of  Wisconsin  and  the  Northwest -  ^48 

Sec.  17.  Explanation  of  variations  in  grains— - - - - 

Sec.  18.  Consignment  and  direct  grain  sales  in  important  cities - 


Sec. 

Sec. 


Sec. 

Sec. 

Sec. 

Sec. 


Sec. 

Sec. 


Sec. 

Sec 


Sec. 

Sec. 


Chapter  VII.  Secondary  or  Incidental  Functions  oe  Country  Ele¬ 
vators  AND  Warehouses. 

Sec.  1.  Characteristics  of  incidental  functions - - — • — - 

Sec.  2.  Elevation  and  loading  for  the  account  of  others  than  the  local 

house  _ 

General  description - 

Extent  of  practice - - 

Sec.  3.  Relation  of  elevation  to  shipping  by  farmers - 

Extent  of  farmer  shipping - - - - - — 

Comparison  of  elevation  with  farmer  shipping  and  the  size 

of  farms _ 

Causes  of  direct  shipping - 


151 


151 

151 

151 

152 

152 

153 

154 


CONTENTS 


7 


Page. 


Sec.  4.  Variations  in  elevation  by  type  of  house _ 

Results  of  tabulation _ _ _ 

Elevation  by  mills _ :: _ 

Elevation  by  other  types _ 1 _ 

Sec.  5.  Elevation  or  loading  charges _ 

Sec.  6.  Mixing _ 

Intentional  mixing  operations _ 

Involuntary  mixing _ 

Sec.  7.  Conditioning _ 

Sec.  8.  Cleaning _ 

Advantages _ 

Extent  of  cleaning  facilities _ 

Sec.  9.  Variations  of  different  types  of  elevators  in  cleaning  facilities _ 

Commercial  line  houses _ 

Mill  houses _ 

Cooperatives  and  independents _ 

Sec.  10.  State  variations  in  cleaning  facilities _ 

Sec.  11.  Warehouse  cleaning  facilities _ _ 

Sec.  12.  Summary  of  interviews  in  regard  to  cleaning _ 

Northwest  territory _ 

Iowa  and  Illinois _ 

Sec.  13.  Cleaning  for  farmers  by  country  elevators _ 

Type  variations _ 

State  variations _ 

Terms  and  conditions _ _ 

Disposition  of  screenings  by  elevators _ 

Sec.  14.  Side-line  business  of  country  elevators _ 

Extent  of  business _ 

Type  variations  in  side-line  business _ 

Sec.  15.  Explanation  of  type  variations  in  side  lines _ 

Cooperatives _ 

Commercial  lines _ 

Independents _ 

IMill  elevators _ 

Sec.  16.  State  variations  in  side-line  business _ 

Sec.  17.  Relative  importance  of  different  side  lines _ 

Results  of  tabulation _ 

Type  variations _ 

State  variations  in  different  side  lines  handled _ 


Chapter  VIII.  Prices,  Margins,  Gkades,  Dockages,  and  WeightsT^ 


\ 


155 

155 

155 

156 

157 
157 
157 

159 

160 
161 
161 
161 
161 
161 
162 
163 

163 

164 
164 

164 

165 
165 

165 

166 
166 

167 

168 
168 
168 
169 

169 

170 

171 
171 

171 

172 
172 
172 
174 


Sec.  1.  Sources  of  price  information _ _  175 

General  statement _  175 

Daily  price  cards _  175 

Market  telephone  and  private  wire  services _  177 

C..N.  D.’s _  178 

Terminal  market  price  currents  or  price  reporters _  178 

“  On-track  ”  and  “  to-arrive  ”  bids _  178 

Main  office _  180 

Other  sources _  180 

Sec.  2.  Average  number  of  services  employed _  180 

Sec.  3.  Relative  extent  of  use  of  different  sources _  181 

In  total _  181 

Price  cards _  182 

Price  currents _  182 

Market  telephone  and  private  wire  services _  182 

“On-track”  and  “to-arrive”  bids _  183 

Main  office _ 184 

C.  N.  D.’s _  185 

Sec.  4.  Type  variations  in  the  use  of  price-information  services _  185 

Results  of  tabulation _  185 

Price  cards  and  telephone  and  private-wir^  services _  185 

Price  currents _ 186 

“  On-track  ”  and  “  to-arrive  ”  bids _  186 

Main  office _  186 


8 


COUNTRY  GRAIN  MARKETING. 


Page. 

Sec.  5.  Determination  of  country  prices -  187 

Local  competitive  conditions -  187 

Calculation  of  country  price -  187 

Pacific  coast -  188 

Sec.  6.  Nature  and  scope  of  study  of  margins -  •  188 

Method  of  obtaining  price  data -  188 

Representative  character  of  data -  189 

Method  of  computing  margin -  190 

Grains  selected -  190 

Sec.  7.  Analysis  of  results  of  study  of  margins -  191 

Average  margins  found - 191 

Margins  by  grains -  192 

Margins  by  types  of  elevators -  193 

Margins  by  months -  194  , 

Sec.  8.  Summary  of  interviews  on  buying  margins - 195 

Sec.  9.  Scope  of  study  of  grades,  dockages,  and  weights - 196  ^ 

Reasons  for  study -  196 

Elevators  studied -  197 

Grain  selected -  197 

Period  covered - 198  / 


Sec.  10.  Statistical  method  employed  in  study  of  grades,  dockages,  and 


weights _  195 

Sec.  11.  Analysis  of  results,  grades,  dockages,  and  weights - -  200 

All  companies  combined -  200 

Individual  companies -  202 

Sec.  12.  Explanation  of  the  profits  and  losses  involved -  208 

Errors  and  inaccuracies -  203 

Effect  of  competition -  204 

Psychology  of  the  line  agent -  204 

Explanation  of  weighing  profit - 205 

Sec.  13.  Profits  and  losses,  houses  other  than  line - - -  205 

Sec.  14.  Conclusions - 206 


Chapter  IX.  Hedging  Operations  of  Country  Houses. 


Sec.  1.  Theory  of  country  elevator  hedging - 

Sec.  2.  Theoretical  hedging  operations  and  results - 

Basis  of  illustrations  employed - 

Loss  on  cash  and  profit  on  futures - 

Speculative  possibilities  in  connection  with  hedging - 

Limitations  of  profits - - - 

Sec.  8.  Some  technical  details  of  country  elevator  hedging - 

Sec.  4.  Extent  and  prevalence  of  hedging - 

Sec.  5.  Geographical  variations  in  hedging - 

Extent  of  variations - 

Effect  of  consignment  business - 

Effect  of  commission  house  financing  on  hedging - 

Effect  of  the  presence  of  commercial  line  elevator  companies 

on  hedging - 

Sec.  6.  Type  variations  in  hedging - 

Results  of  tabulation - 

Commercial  line  variations - 

Individual  and  cooperative  variations - 

Mill  elevators _ 

Sec.  7.  Hedging  in  the  various  grand  divisions - 

Sec.  8.  Factors  affecting  the  extent  of  hedging - 

General  statement - 

Hedging  policy - 

Commercial  method  of  selling  grain - 

Market  conditions _ 

Kind  of  grain - 

Storage  and  contracting - 

Transportation  facilities - 

Sec.  9.  Markets  employed  by  country  elevators  for  hedging - 

Results  of  tabulation - - - 

Effect  of  shipments  upon  hedging  markets - - 

Chicago  as  a  hedging  market  for  country  elevators - 


207 

208 
208 
208 
210 
210 
212 

213 

214 

214 

215 

216 

217 

219 

219 

219 

219 

220 
221 
222 
222 
222 

224 

225 

226 
226 
227 
227 
227 

230 

231 


CONTENTS. 


9 


Chapi'er  X.  Financing  Country  Hotjses. 

Page. 

Sec.  1.  Sources  of  loans _  233 

Sec.  2.  Sources  of  loaus  type  of  elevator _  234 

Line  elevators _ ~~ 234 

Individual  elevators _ ”  235 

Sec.  3.  Sources  of  loans  by  States _  235 

\  Sec.  4.  Commission-house  tinancing _ _ _ _ _ _ _  _  _  235 

'  - iiiiiiiiiiiiiiizii::  235 

\  INlethods _ _ _  237 

Supervision  of  tiiianced  elevators _  238 

Sec.  5.  Contrasts  between  northwest  and  other  areas _  _  238 

Sec.  6.  Country  elevator  interviews  on  sources  of  loans _ _ 239 

Sec.  7.  IMaximum  amounts  of  capital  borrowed _ ~  240 

Sec.  8.  Rates  of  interest _ _  240 

Rates  reported _ _ ~ _ ” 240 

Country  elevator  interviews  on  interest  rates _  242 

Chapter  XI.  Competitive  Conditions  in  Country  Grain  Buying. 

Sec.  1.  Scope  of  inquiry  regarding  country  competition _  243 

Sources  of  information _  243 

Period  covered  by  the  correspondence _ 244 

v--^Sec.  2.  General  statement  with  reference  to  competitive  conditions  '  oaa 

Sec.  3.  Factors  in  competition _ _ _ IIZIIIZ 

Elevators _ j. _ _  94^ 

Scoopers - 245 

Direct  shipping _  246 

Sec.,  4.  Some  general  considerations  affecting  competition _ ZZ  247 

Competitive  and  noncompetitive  points _  247 

Competition  between  towns _ 248 

Potential  competition _ 248 

Effects  of  competition  between  towns  on  local  agreements _  249 

Railroads  and  town  competition _ _ ~ 250  ' 

^  vSec.  5.  Competition  in  prices _ ~ _ 95^ 

^  Price  wars _ 253 

Threats  of  price  wars _ _ 254 

Sec.  6.  Competition  in  grading  and  dockage _  254 

Sec.  7.  Competition  in  storage,  elevation,  and  cleaning  charges _ 25G 

Sec.  8.  Competition  in  side  lines _ ~ 259 

Sec.  9.  Character  of  cooperative,  hr  farmer,  and  mill  elevator  competition.  260 

Sec.  10.  Reasons  for  severity  of  mill  competition _  262 

Sec.  11.  Reasons  for  the  severity  of  cooperative  competition _  .264 

Opposition  to  line  companies _ , _ _  264 

Friendly  attitude  of  farmers  toward  cooperatives _  265 

Effect  of  dividends _ 1 _ _  906 

Sec.  12.  Independent  elevator  competition _ "3 _  267 

Sec.  13^.  Line  elevator  price  policy _  268 

w  Sec.  14.  Relation  of  Grain  Bulletin  to  price  competition _  269 

Basis  for  agreements _ .* _  270 

Probable  influence  of  Grain  Bulletin _  271 

Sec.  15.  Line-elevator  competitive  policies  on  grades,  dockages,  etc _  271 

Grades,  dockages,  and  weights.. _ •  271 

Elevation  and  storage  charges _ ^ _  274 

Sec.  16.  Line-elevator  policies  in  meeting  competition.Z _ Z _  275 

Paying  competitors’  prices _  275 

Reasons  for  paying  competitors’  prices, _  277 

Meeting  competition  on  grades,  dockages,  etc _  278 

Cooperation  of  line  companies  in  meeting  competition _  280 

Sec.  17.  Division  of  receipts _  282 

Competition  for  “  fair  share  ”  of  business _  282 

Agreements  and  understandings  on  division  of  receipts _  284 

Sec.  18.  Closing  and  wrecking  elevators  on  a  rental  basis _  288 

Explanation  of  practice _ _  288 

Rates  for  closing _  289 

Wrecking  and  not  rebuilding _  291 

Sec.  19.  Relation  of  commission  houses  to  local  competition _  293 


10 


COUNTRY  GRATN  MARKETING..* 


Sec.  20.  Agreements  and  understandings  among  local  agents - 

Local  elevator  agreements - - - 

Agreements  by  direction  of  head  office - 

Securing  harmonious  action  among  local  agents - 

Broken  agreements - 

Sec.  21.  Effecting  agreements  and  understandings  through  traveling  super- 

'  intendents _ 

Competitive  adjustments  by  individual  superintendents - 

Joint  efforts  by  superintendents - 

Sec.  22.  Agreements,  understandings,  and  cooperation  between  line  and 

head  offices - ^ - - 

Use  of  head  offices  for  adjustments - - - 

Complaints  of  line  companies  to  one  another - - 

Action  taken  on  complaints - 

Mutually^  cooperative  attitude  of  head  offices - 

LIST  OF  TEXT  TABLES. 


Page. 

294 

294 

296 

298 

300 

301 
301 
30:i 


300 

806 

307 

310 

312 


Table  1.  Number  of  elevators  and  warehouses  at  stations  and  proportion 

reporting  to  those  reported - - - 

Table  2.  Geographical  distribution  of  all  elevators  and  warehouses  re¬ 
porting  and  reported - 

Table  3.  Average  distance  between  stations  distributed  according  to  the 

number  of  elevators  and  warehouses  at  each  station - 

Table  4.  Average  and  most  frequently  recurring  number  of  elevators 
and  warehouses  per  station  in  specified  States  and  grand 

divisions - - 

Table  5.  Elevators  in  specified  States  constructed  prior  to  specified  dates 

in  comparison  with  the  average  number  per  station - 

Table  6.  Average  number  of  elevators  per  station  in  principal  grain- 
producing  States  as  compared  with  average  distances  between 
elevator  stations,  acreage  of  improved  land  per  farm,  and 

railway  mileage  per  100  sqfiare  miles - 

Table  7.  Numbers  and  percentages  of  different  types  of  elevators  and 

warehouses  in  the  United  States - 

Table  8.  Proportions  of  all  reporting  elevators  and  warehouses  con¬ 
structed  in  specified  periods - 

Table  9.  Period  of  construction  reported  by  different  types  of  counti’y 

elevators  and  warehouses - 

Table  10.  Percentages  of  different  types  of  existing  elevators  and  ware¬ 
houses  constructed  in  specified  periods - 

Table  11.  Percentage  distribution  between  types  for  all  elevators  and 

warehouses  constructed  prior  to  specified  dates - - - - 

Table  12.  Percentage  distribution  between  types  of  commercial  line,  inde¬ 
pendent,  mill,  cooperative,  and  maltster  houses  constructed 

prior  to  specified  years - 

Table  13.  Proportions  of  commercial  line,  independent,  individual,  coop¬ 
erative,  and  mill  elevators  in  specified  States - - - 

Table  14.  Proportion  of  cooperative  elevators  in  specified  States  in  com¬ 
parison  with  the  proportion  of  existing  elevators  built  prior 

to  specified  dates _ 1 - - — 

Table  15.  Average  capacity  of  elevators  and  warehouses  in  the  United 

States  by  types  and  by  States  and  grand  divisions - - — 

Table  16.  Average  elevator  capacity  in  specified  States  in  comparison 

with  the  proportions  of  specified  types  of  elevators - 

Table  17.  Comparison  of  average  capacity  of  specified  types  of  elevators 
with  average  number  of  bins  per  elevator  and  average 

capacity  of  bins _ 

Table  18.  Comparison  of  average  elevator  capacity  in  specified  States 
wihi  average  number  of  bins  per  elevator  and  average  bin 

capacity - 

Table  19.  Materials  of  which  elevators  were  constructed  in  specified 

periods _ 

Table  20.  Construction  materials  of  different  types  of  elevators  and 

warehouses  in  the  United  States - - - - 

Table  21.  Proportion  of  commercial  line  and  individual  mill  elevators  in 
specified  States  in  comparison  with  the  proportion  of  wooden 
elevator  construction - - 


83 


84 

35 


35 


’•37 


38 

40 

42 

44 


45 


47 


47 


51 


62 

64 


66 


67 


69 


70 

73 


contt<:nts. 


11 


Table  22.  Distribution  of  mill  elevators  by  specified  States  in  comparison 

with  hard-wbeat  production _  7.) 

Table  28.  Numbers  and  percentages  of  cooperative  elevators  and  ware¬ 
houses  paying  and  not  paying  patronage  dividends  in  speci¬ 
fied  States  and  grand  divisions _  <>2 

Table  24.  Number  and  percentage  of  elevators  in  specified  States  report¬ 
ing  direct  loading  by  buyers  in  their  vicinity  and  extent  of 

such  loading  reported _  9,^ 

Table  25.  Variations  in  crop  production  and  country  -elevator  marketings 
of  the  five  principal  grains  in  the  14  principal  grain-produc¬ 
ing  States  in  the  crop  years  1912-13  to  1916-17 _  115 

Table  26.  Proportions  of  different  kinds  of  grain  purchased  by  different 

types  of  elevators  during  the  five  crop  years  1912-1917 _  116 

Table  27.  Average  number  of  bushels  of  specified  grains  purchased  annu¬ 
ally  by  specified  types  of  country  elevators  in  14  States  dur¬ 
ing  crop  years  1912-13  to  1916-17 _  11 7 

Table  28.  Average  number  of  bushels  of  specified  grains  purchased  annu¬ 
ally  by  country  elevators  in  specified  States  during  the  crop 

years  1912-13  to  1916-17 _  US 

Table  29.  Monthly  distribution  of  country  elevator  purchases  ot  five 
principal  grains  in  the  14  principal  grain-producing  States 
expressed  in  cumulative  percentages,  crop  years  1913-14 

and  1916-17 _ ; _  119 

Table  30.  Ratio  of  elevator  capacity  to  average  purchases  (capacity  turn¬ 
over)  in  eight  States _  120 

Table  31.  Monthly  distribution  of  total  grain  purchases  in  specified  States 

in  the  crop  years  1913-14  and  1916-17 _  122 

Table  32.  Capacity  turnover  in  specified  States  in  comparison  with  the 
proportions  of  elevators  handling  specified  grains  and  combi¬ 
nations  of  grains _  124 

Table  33.  Rate  of  capacity  turnover  (capacity  into  purchases)  of  houses 

‘  of  specified  capacities  in  seven  States _  124 

Table  34.  Number  of  cars  shipped  to  specified  markets  receiving  more 
than  5,000  cars  and  proportion  of  total  shipments  reported  by 
by  country  elevators  and  warehouses,  crop  years  1912-13 

to  1916-17 _  120 

Table  35.  Destination  of  total  shipments  from  all  reporting  country  eleva¬ 
tors  and  warehouses  for  the  five  crop  years  1912-13  to 

1916-17 _  180 

Table  36.  Distribution  of  total  shipments  of  five  principal  grains  from 
country  elevators  and  warehouses  in  specified  States  and 
grand  divisions  according  to  specified  destinations  during 

the  five  crop  years  1912-13  to  1916-17 _ _ _  130 

Table  37.  Distribution  of  country  grain  shipments  to  specified  terminal 

markets  as  reported  for  crop  years  1912-13  to  1916-17 _  132 

Table  38.  Proportion  of  country  elevator  shipments  to  terminal  markets 
from  specified  States  in  comparison  with  the  proportion  of 

terminal  market  financing _  I37 

Table  39.  Proportion  of  total  country-elevator  shipments  from  specified 
States  to  mills,  crop  years  1912-13  to  1916-17,  in  comparison 

with  proportion  of  individual  mill  elevators _  138 

Table  40.  Proportion  of  country  elevator  and  warehouse  shipments  of 
specified  grains  going  to  specified  destinations,  crop  years 

1912-13  to  1916-17 _ : _  139 

Table  41.  Distribution  of  country-elevator  shipments  of  specified  grains 
from  specified  States  to  terminal  markets  during  the  crop 

years  1912-13  to  1916-17 _  140 

Table  42.  Distribution  of  country-elevator  shipments  of  specified  grains 
from  specified  States  to  smaller  points  during  the  crop  years 

1912-13  to  1916-17 _ 141 

Table  43.  Distribution  of  country-elevator  shipments  of  specified  grains 
from  specified  States  to  mills  during  the  crop  years  1912-13 

to  1916-17 _ 1 _  142 

TaliJe  44.  Distribution  of  country  elevator  shipments  of  specified  grains 
from  specified  States  to  feeders  during  the  crop  years  1912-13 
to  1916-17 _  143 


12 


COUNTRY  GRAIN  MARKETING. 


Page. 


Table  45.  Distribution  of  country  elevator  shipments  of  specified  grains 
from  specified  States  to  interior  brokei*s  during  the  crop 

years  1912-13  to  1910-17 - 

Table  46  Number  and  proportion  of  consignments  and  direct  sales  to 
terminal  and  smaller  markets  made  by  elevators  and  ware¬ 
houses  in  specified  States  and  grand  divisions  during  the 

crop  years  1912-13  to  1916-17 - - - - 

Table  47.  Proportion  of  consignment  and  direct  sales  to  terminal  and 
smaller  markets  made  by  all  country  elevators  and  ware¬ 
houses  reporting  during  the  crop  years  1912-13  to  1916-17 - 

Table  48.  Proportion  of  total  cars  of  different  kinds  of  grain  sold  to 
terminal  and  smaller  markets  by  country  elevators  in  specified 

States  during  the  crop  years  1912-13  to  1916-17 - 

Table  49.  Proportion  of  grain  sold  on  consignment  in  specified,  markets 
in  comparison  with  the  receipts  of  specified  kinds  of  grain, 

1912-13  to  1916-17 _ _ _ _ _ 

Table  50.  Number  and  proportion  of  cars  of  grain  sold  by  country  ele¬ 
vators  on  consignment  and  direct  to  various  markets  during 

the  crop  years  1912-13  to  1916-17 - 

Table  51.  Proportion  of  elevators  in  specified  States  reporting  elevation 
or  no  elevation  for  others,  together  with  the  extent  of  such 

elevation  reported - - - - 

Table  52.  Number  and  proportion  of  elevators  in  specified  States  report¬ 
ing  direct  shipping  by  farmers  and  the  extent  to  which  such 

shipping  is  reported - 

Table  53.  Comparison  of  the  proportions  of  elevators  in  specified  States 
reporting  direct  shipping  with  the  proportions  reporting  ele¬ 
vation  and  with  the  average  acreage  of  improved  land  per 

farm - - - - 

Table  54.  Number  and  proportion  of  elevators  of  different  types  report¬ 
ing  elevation  and  no  elevation  for  others - - - - 

Table  55.  Percentages  of  elevators  of  different  types  with  and  without 

cleaning  facilities  in  14  principal  grain-producing  States - 

Table  56.  Number  and  percentages  of  elevators  in  specified  States  report¬ 
ing  cleaning  facilities - 

Table  57.  Proportions  of  different  types  of  elevators  with  cleaning  facili-'' 
ties  reporting  cleaning  and  not  cleaning  for  farmers  in  eight 

grain-producing  States  of  the  Central  West - 

Table  58.  Proportions  of  elevators  with  cleaning  facilities  cleaning  and 
not  cleaning  for  farmers  in  eight  principal  grain-producing 
t0S  _ _ _ _ 

Table  59.  Number  and  percentages  of  elevators  of  different  types  handling 
side  lines  and  average  number  handled  per  elevator  in  14 

principal  grain-producing  States - 

Table  60.  Comparison  of  the  proportions  of  different  types  of  elevators 
handling  side  lines  with  the  average  number  handled  per 

elevator - - - - - 7- — ; — - 

Table  61.  Proportion  of  elevators  in  specified  States  handling  side  lines 

and  average  number  handled  per  elevator - 

Table  62.  Proportion  of  different  types  of  elevators  handling  side  lines 

which  deal  in  the  five  principal  side  lines - - 

Table  63.  Average  number  of  price  information  services  reported  by 

elevators  in  specified  States - 

Tal)le64.  Patio  of  times  specified  price  information  services  are  re¬ 
ported  to  total  elevators  reporting - 

Table  65.  Comparison  of  “  on-track  ”  and  “  to-arrive  ”  bids  in  14  specified 

States  with  direct  sales  to  terminal  and  smaller  markets - 

Table  66.  Ratio  of  instances  different  sources  of  price  information  are 
reported  to  number  of  elevators  of  different  types  reporting 

in  the  14  principal  grain-producing  States - - - 

Table  67.  Average  buying  margins  of  different  types  of  elevators  on  speci¬ 
fied  grades  of  grains  during  the  crop  years  1912-13  to 

1916-17 _ 

Table  68.  Average  monthly  per  bushel  margins  on  specified  grades  of 
grain  during  the  five  crop  years  1912-13  to  1916-17 - 


144 

145 

145 

146 

147 


150 


152 


153 

154 

155 
161 
163 


105 


166 


168 


169 

172 

173 
181 
181 
184 


185 


192 


194 


CONTENTS 


13 

Page. 

Table  61).  Average  buying  margins  in  comparison  with  average  Minneapo¬ 
lis  prices  and  as  a  percentage  of  average  Minneapolis  prices _  11)5 

Table  70.  Profits  and  losses  of  four  Minneapolis  commercial  line  elevator 
companies  on  country  grading,  weighing,  and  docking  of 

wheat  for  the  period  July  1,  1913,  to  June  30,  1916 _  201 

Table  71.  Profits  and  losses  per  bushel  of  four  specified  line  elevator  com¬ 
panies  on  country  grading,  weighing,  and  docking,  crop 

years  1913-14  to  1915-16 _  203 

Table  72.  Numl)er  and  percentages  of  reporting  elevators  and  warehouses 

customarily  hedging  and  not  hedging  grain  purchases _  213 

Table  73.  Number  and  percentage  of  elevators  customarily  hedging  and 

not  hedging  in  specified  States  and  grand  divisions _  214 

Table  74.  Proportions  of  elevators  in  specified  States  reporting  hedging 
in  comparison  with  the  reported  proportions  of  grain  sold 
“  on  consignment  ”  and  direct  during  crop  years  1912-13  to 

1916-17 _  215 

Table  75.  Proportion  of  elevators  in  specified  States  reporting  hedging  in 

comparison  with  the  prevalence  of  commission  house  financing-  216 
Table  76.  Proportion  of  elevators  reporting  hedging  in  specified  States  in 

comparison  with  the  proportion  of  commercial  line  elevators _  218 

Table  77.  Proportion  of  different  types  of  elevators  and  warehouses  hedg¬ 
ing  and  not  hedging  their  purchases  of  grain _  219 

Table  78.  Proportion  of  elevators  reporting  hedging  in  specified  States  in 
comparison  with  the  proportion  of  independent  and  individual 

cooperative  elevators _  220 

Table  79.  Number  and  proportion  of  times  specified  exchanges  are  re¬ 
ported  by  country  elevators  as  being  used  for  hedging _  228 

Table  80.  Number  of  country  elevators  in  specified  States  and  grand  divi¬ 
sions  hedging  in  specified  markets  in  comparison  with  the 

proportion  of  country  grain  receipts  in  those  markets _  229,  230 

Table  81.  Relative  importance  of  different  sources  of  country  elevator  and 
■warehouse  borrowing  as  indicated  by  the  proportion  of  times 

each  source  is  reported  to  total  sources  reported _  233 

Table  82.  Relative  importance  of  different  sources  of  borrowings  by  dif¬ 
ferent  types  of  country  elevators  and  w^arehouses _  234 

Table  83.  Proportion  of  elevators  of  specified  types  in  specified  States  in 
comparison  with  the  extent  of  commission  house  and  local 

bank  financing _  235 

Table  84.  Number  and  proportion  of  elevators  in  specified  States  reporting 
borrowed  funds  and  average  maximum  amounts  borrowed  in 

the  crop  years  1913-14  and  1916-17 _ _  240 

Table  85.  Average  maximum  and  minimum  rates  of  interest  paid  by 
countrv  elevators  on  borrowed  funds  in  the  crop  years  1913-14 
and  1916-17 _  241 

LIST  OF  TEXT  FORMS. 

Form  1.  Scale  ticket _  103 

Form  2.  Storage  ticket _  108, 109 

Form  3.  Daily  price  card _  176 

Form  4.  Grain  Bulletin  daily  price  card -  177 

Form  5.  “  On-track  ”  bid _ : -  179 

Form  6.  “  To-arrive  ”  bid _ 179 

LIST  OF  DIAGRAMS. 

Diagram  A.  Per  cent  (ratio)  of  commercial  line  elevators  to  all  classes 
of  elevators  reporting  in  14  principal  grain-producing 

States _ ;• _  50 

Diagram  B.  Per  cent  (ratio)  of  independent  elevators  to  all  classes  of 

elevators  reporting  in  14  principal  grain-producing  States.  52 
Diagram  C.  Per  cent  (ratio)  of  individual  cooperative  elevators  to  all 
classes  of  elevators  reporting  in  14  principal  grain-pro¬ 
ducing  States _ 54 

Diagram  D.  Per  cent  (ratio)  of  individual  mill  elevators  to  all  classes 
of  elevators  reporting  in  14  principal  grain-producing 

States _ 56 

Diagram  E.  Per  cent  (ratio)  of  mill  line  elevators  to  all  classes  of  ele¬ 
vators  reporting  in  14  principal  grain-producing  States -  58 


14 


COUNTRY  GRAIN  MARKETING. 


Page, 

Diagram  F.  Per  cent  distribution  by  types  of  elevators  in  each  of  14 

principal  grain  States - facing —  58 

Diagram  G.  Proportions  of  wheat,  corn,  oats,  rye,  and  barley  marketed 
through  country  elevators  in  each  month  during  the  crop 
years  1913-14  and  1916-17 - - facing—  120 

LIST  OF  APPENDICES. 

Appendix  1.  Letter  of  the  President  to  the  Chairman  of  the  Federal  Trade 

Commission  authorizing  the  food  investigation -  315 


Appendix  3.  Form  of  contract  between  country  elevator  and  farmer  for 

the  sale  of  grain  before  delivery -  321 

Appendix  4.  Notice  to  weighmaster -  322 

Appendix  5.  Report  of  shipment  and  instructions  for  reporting -  323-324 

Appendix  6.  Daily  load  report -  324 

Appendix  7.  Daily  receipts  report  (wheat  and  durum) -  32;) 

Appendix  8.  Form  of  commission-house  contract  for  financing  country 

elevators -  326 

Appendix  9.  St.  Louis  Daily  Market  Reporter - facing—  326 

LIST  OF  APPENDIX  TABLES. 

Table  1.  Period  of  construction  of  elevators  and  warehouses  in  specified 

States  and  grand  divisions -  327 

Table  2.  Distribution  of  elevators  and  warehouses  by  types  and  specified 

States  and  grand  divisions -  328 

Table  3.  Average  capacity  of  elevatbrs  and  warehouses  in  specified  States 

and  grand  divisions - 1 -  329 

Table  4.  Average  number  of  bins  per  house  in  elevators  and  warehouses 

in  specified  States  and  grand  divisions - 330 

Table  5.  Construction  materials  of  elevators  and  warehouses  in  specified 

States  and  grand  divisions -  331 

Table  6.  Purchases  of  five  principal  kinds  of  grain,  by  elevators,  in 


Table  7.  Purchases  of  the  five  principal  classes  of  grains  by  different 

_  ,  •  ^  j  •  _T  _ _ 1 _ • _ Cij _ 


Table  8.  Total  purchases  of  each  of  the  five  principal  grains  made  in 
each  month  of  the  crop  years  1913-14  and  1916-17  by  all  re¬ 
porting  elevators  in  the  14  principal  grain-producing  States—  339 
Table  9.  Rate  of  capacity  turnover  of  elevators  in  specified  States 

handling  specified  grains  exclusively  and  in  combination -  340 

Table  10.  Capacity  turnover  by  capacity  of  house  in  seven  specified 

States -  341 

Table  11.  Number  and  proportion  of  cars  of  different  kinds  of  grain  sold 
on  consignment  and  direct  in  specified  States  and  grand  divi¬ 
sions  for  the  five  crop  years  July  1,  1912,  to  June  30,  1917—  342, 343 
Table  12.  Proportion  of  different  types  of  elevators  handling  specified  side 
lines  in  14  principal  grain-producing  States  of  the  Central 

West _  344 

Table  13.  Proportion  of  elevators  handling  specified  side  lines  in  the  14 

principal  grain-producing  States  of  the  Central  AVest -  345 

Table  14.  Proportion  of  elevators  in  specified  States  reporting  the  use  of 

specified  classes  of  price  information -  346 

Table  15.  Percentage  of  specified  types  of  elevators  in  14  principal  grain- 
producing  States  reporting  use  of  specified  kinds  of  price  in¬ 
formation  service _  347 

Table  16.  Average  monthly  per  bushel  margins  on  No.  1  northern  wheat  in 

specified  years _ 348 

Table  17.  Average  monthly  per  bushel  margins  on  No.  3  northern  wheat  in 

specified  years _  348 

Table  18.  Average  monthly  per  bushel  margins  on  No.  3  oats  in  specified 

years _ 349 

Table  19.  Proportion  of  different  types  of  elevators  and  warehouses  hedg-  '■ 

ing  and  not  hedging  grain  purchases _  349 

Table  20.  Number  of  sources  of  borrowed  funds  reported  by  country  ele- 
^vators  and  warehouses  in  specified  States  and  grand  divisions 
’and  the  percentage  of  each  source  to  total  sources  reported — 


350 


ACKNOWLEDGMENT. 


The  Commission  desires  to  make  acknowledgment,  in  connection 
with  this  volume  of  the  report  on  the  Grain  Trade,  of  the  valuable 
services  rendered  by  Mr.  W.  H.  S.  Stevens,  assistant  chief  economist 
and  examiner  in  charge  of  the  inquiry,  who  had  immediate  charge 
of  the  preparation  of  this  volume,  and  by  Messrs.  Floyd  L.  Vaughan 
and  Byron  Phelps  Parry. 

The  Commission  also  desires  to  acknowledge  the  services  of  the 
Bureau  of  Markets  of  the  Department  of  Agriculture,  in  the  coun¬ 
try  elevator  field  work  in  Illinois  and  Iowa,  and  in  preparing  re¬ 
ports  upon  this  work. 

The  Commission  is  indebted  to  the  Bureau  of  the  Census  of  the 
Department  of  Commerce  for  the  tabulation  of  the  data  contained 
in  the  country  elevator  schedules  and  to  the  Bureau  of  Markets  for 
certain  assistance  in  connection  therewith.  * 


LETTER  OF  SUBMITTAL. 


Federal  Trade  Commission, 

W ashington^  September  15^  1920, 

To  the  Congress  of  thi;  United  States  : 

There  is  submitted  herewith  a  report  on  Country  Grain  Marketing, 
which  is  Volume  I  of  a  report  on  the  Grain  Trade.  This  inquiry 
had  its  origin  in  connection  with  the  general  food  investigation  made 
by  the  Commission,  but  was  later  continued  as  a  separate  inquiry. 

The  report  on  the  Grain  Trade  logically  falls  into  four  main 
divisions:  (1)  Country  elevators  and  country  grain  marketing; 
(2)  terminal  grain  markets  and  terminal  cash  grain  business;  (3) 
costs  and  profits  of  the  present  marketing  system;  and  (4)  future 
trading  operations  and  their  results.  The  present  volume  treats  of 
the  first  of  the  foregoing  subdivisions.  The  other  three  principal 
subdivisions  will  be  treated  in  subsequent  volumes. 

This  volume,  the  title  of  which  is  Country  Grain  Marketing,  pre¬ 
sents  a  detailed  description  of  the  mechanism  employ^  in  country 
marketing  and  a  somewhat  detailed  discussion  of  country  marketing 
methods,  based  largely  upon  schedule  returns  made  by  approxi¬ 
mately  10,000  county  elevators  and  warehouses  located  in  all  sec¬ 
tions  of  the  United  States.  It  includes  a  discussion  of  the  distribu¬ 
tion  of  the  various  types  of  country  elevators  and  warehouses,  their 
physical  characteristics,  functions,  and  operating  methods,  the  profits 
and  losses  on  grades,  dockages,  and  weights,  the  geographic  and 
commercial  movement  of  the  grain  from  the  country  elevator,  based 
on  reported  shipments  of  one  and  a  half  million  cars,  country  hedging 
and  financing,  and  competitive  conditions  during  the  last  seven  or 
eight  years.  • 

The  country  elevator  or  warehouse  is  devoted  to  the  storage  and 
handling  of  grain  in  the  country.  It  buys  and  stores  grain  hauled 
in  by  the  farmers  in  wagon  lots,  and  combines  such  wagon  lots  into 
car  lots,  which  it  sells  outright  to  various  purchasers,  or  ships  for 
sale  to  some  city  or  town  that  is  a  point  of  distribution  for  grain 
either  on  a  large  or  a  small  scale.  The  great  bulk  of  the  grain  which 
is  marketed  in  the  United  States  is  handled  through  such  country 
elevators  and  warehouses. 

Country  elevators  and  warehouses  are  of  two  general  classes,  indi¬ 
vidual  and  line.  An  individual  house  is  one  operated  as  a  unit 
within  itself.  A  line  house  is  one  of  two  or  more  operated  at  dif¬ 
ferent  towns  by  a  central  organization.  A  number  of  such  con¬ 
cerns  operate  more  than  a  hundred  houses,  and  there  are  numerous 
line  companies  operating  all  the  way  from  25  to  75  houses.  Alto¬ 
gether  eight  different  types  of  elevators  and  warehouses  are  distin¬ 
guishable — four  individual,  i.  e.,  cooperative,  independent,  mill,  and 
maltster,  and  four  line,  i.  e.,  commercial,  cooperative,  mill,  and 
maltster.  Only  five  of  these  types  are  of  major  numerical  importance, 
namely,  commercial  line,  mill  line,  independent,  individual  coopera¬ 
tive,  and  individual  mill. 

The  commercial  line  is  one  operated  for  the  purpose  of  deriving 
a  merchandising  profit  from  the  purchase  and  sale  of  grain.  A  mill 
line,  on  the  other  hand,  while  it  may  buy  and  sell  some  grain,  is  usually 

16 


LETTER  OF  SUBMITTAL. 


17 


run  largely  with  reference  to  supplying  the  grinding  requirements  of 
one  or  more  mills.  The  individual  cooperative  is  a  single  elevator  or 
warehouse  operated  or  owned  and  operated  by  grain  producers  and 
engaged  in  buying  and  selling  grain.  It  differs  from  the  independent 
in  the  fact  that  the  latter  is  not  operated,  or  owned  and  operated, 
by  producers.  On  the  other  hand,  the  individual  mill,  like  the  mill 
line,  is  usually  concerned  largely  with  supplying  mill  grinding 
requirements  and  only  incidentally  with  buying  and  selling  grain 
for  profit.  In  some  cases  the  individual  mill  elevator  does  no  mer¬ 
chandising  whatever.  It  is,  however,  a  single  unit  and  not  like  the 
mill  line  house  one  of  several  operated  by  a  single  organization. 

Commercial  line  elevators  are  relatively  most  important  in  Ne¬ 
braska  and  tlie  four  Northwestern  States,  and  independent  elevators 
in  Iowa  and  Kansas  and  the  States  east  of  the  Mississippi.  The  co¬ 
operative  type  is  most  important  in  Iowa,  Kansas,  Nebraska,  Minne¬ 
sota,  Montana,  and  North  and  South  Dakota.  Mill  line  elevators  are 
relatively  most  important  in  Oklahoma,  Kansas,  and  Missouri,  and 
individual  mill  elevators  in  Missouri  and  east  of  the  Mississippi  in 
Indiana,  Ohio,  Wisconsin,  and  Michigan. 

xVn  outstanding  development  in  the  marketing  of  grain  in  recent 
years  has  been  the  entry  of  the  farmer  into  the  elevator  business,  as 
shown  by  the  growth  in  the  number  of  individual  cooperative  ele¬ 
vators  organized  by  farmers  and  used  by  them  in  marketing  their 
grain. 

The  average  country  elevator  is  of  wood  construction,  most  fre¬ 
quently  the  cribbed  type,  with  a  capacity  of  between  25.000  and  26,000 
bushels.  About  one-half  of  the  country  elevators  are  equipped 
with  cleaning  machinery,  and  slightly  less  than  80  per  cent  handle 
other  commodities  than  grain.  The  five  principal  side  lines  so 
handled,  as  indicated  by  the  proportion  of  elevators  reporting  their 
handling,  are,  in  order  of  importance,  coal,  feed,  flour,  building 
material,  and  seed. 

On  the  average  the  country  elevator  buys  slightly  less  than  100,000 
bushels  of  grain  annually,  of  which  about  36  per  cent  is  wheat, 
31  per  cent  oats,  24  per  cent  corn,  7  per  cent  barley,  and  2  per  cent 
rye.  The  average  individual  cooperative  elevator,  however,  buys 
annually  about  153,000  bushels,  the  individual  mill  elevator  113,000 
bushels,*  and  the  independent  elevator  103,000  bushels.  The  com¬ 
mercial  line  and  mill  line  elevators,  on  the  other  hand,  buy  on  the 
average  only  about  77,000  and  79,000  bushels,  respectively. 

About  70  per  cent  of  the  grain  shipped  by  country  elevators  goes 
to  terminal  markets  (those  markets  receiving  annually  more  than 
1,000  cars  of  country  grain)  and  about  7  per  cent  to  smaller  markets 
(those  receiving  less  than  1,000  cars  annually).  The  local  mills 
absorb  13J  per  cent  of  the  country  elevator  shipments  and  interior 
brokers  6  per  cent ;  about  2  per  cent  goes  to  feeders,  and  approxi¬ 
mately  the  same  proportion  to  miscellaneous  purchasers.  Of  the 
grain  shipped  to  specified  markets,  about  71  per  cent  is  sold  on  con¬ 
signment,  the  balance  being  sold  “  to-arrive  ”  or  “  on-track  ”  to  rep¬ 
resentatives  of  these  market  organizations. 

About  40  per  cent  of  the  elevators  and  warehouses  generally  hedge 
their  grain,  another  10  per  cent  hedge  it  a  limited  extent,  while 

9904°— 20 - 2 


18 


COUNTRY  GRAIN  MARKETING. 


V 


about  50  per  cent  report  no  hedging.  The  proportion  of  elevator 
hedging  in  the  various  States  varies  directly  with  the  proportion  of 
consignment  sales  reported,  and  also  directly  with  the  extent  of 
commission-house  financing  of  country  elevators  and  the  proportions 
of  line  elevators  reported.  Hedging  is  usually  done  in  the  markets 
to  which  the  grain  is  generally  shipped. 

A  study  of  the  profits  and  losses  in  one  section  of  four  line  elevator 
companies  on  grades,  dockages,  and  weights  for  three  years  (1914-15 
to  1916-17)  revealed  the  fact  that  these  companies  lost  on  grades  but 
profited  on  dockages  and  weights,  incurring  a  loss  in  profits  so  far 
as  grades,  dockages,  and  weights  are  concerned.  This  does  not  mean, 
of  course,  that  the  entire  business  was  conducted  at  a  loss,  but  relates 
only  to  the  three  items  in  question.  The  elevator  companies  selected 
were  picked  as  fairly  representative  of  that  type  of  house  in  that 
section,  and  while  no  similar  statistical  study  was  practicable  for 
other  types  of  houses,  it  is  reasonably  deducible  that  these  others  have 
had  a  similar  experience. 

Though  country  elevators  obtain  funds  from  numerous  sources, 
the  major  portion  of  the  financing  of  elevators  is  done  by  local  banks, 
commission  houses,  and  the  head  office  of  the  line  elevator  companies. 
Line  elevators,  of  course,  procure  the  great  bulk  of  their  funds  from 
their  head  offices,  and  the  individual  elevators  are  financed  chiefiy 
by  either  the  commission  houses  or  the  banks.  Commission-house 
financing  is  of  great  importance  in  the  four  Northwestern  States. 
A  considerable  amount  of  such  financing  is  also  done  in  Wisconsin, 
Illinois,  and  Missouri.  In  the  other  principal  grain-producing 
States  it  is  unimportant.  The  average  maximum  amount  of  borrow¬ 
ing  per  elevator  in  the  crop  year  1913—14  was  $12,301  and  in  the 
crop  year  1916-17,  $17,309.  The  average  rate  of  interest  reported  in 
both  years  was  slightly  above  7  per  cent.  Practically  all  elevators 
reported  that  they  borrowed  money  to  some  extent. 

The  general  indications  are  that  competition  in  buying  grain  in 
the  country  is  keen,  especially  that  of  the  mill  and  cooperative  ele¬ 
vators.  The  mill  elevators  bid  for  grain  largely  to  supply  the  grind¬ 
ing  requirements  of  the  mill,  and  frequently  do  not  in  consequence 
calculate  upon  a  merchandising  profit  as  do  the  other  principal  types. 
The  frequent  opposition  of  some  farmers  to  the  line-elevator  com¬ 
panies,  their  friendly  attitude  toward  the  cooperative  elevator,  and 
the  inducement  of  stock  or  patronage  dividends,  places  the  latter  in 
an  advantageous  position. 

Competition  in  country  grain  buying  affects  all  phases  of  the  busi¬ 
ness.  Not  only  grain  prices,  but  also  grades,  dockages,  elevation 
and  storage  charges  and  side  lines,  become  subject  to  competitive  in¬ 
fluences,  including  agreements  and  understandings  among  the  ele¬ 
vators.  Country  grain  buying  appears  to  be  often  affected  by  these 
agreements  and  understandings,  which  are  not  peculiar  to  any  one 
type  of  elevator,  though  the  cooperative  elevators  appear  less  inclined 
than  the  others  to  enter  into  such  arrangements. 

Respectfully, 

Victor  Murdock,  Chairman, 
Huston  Thompson. 

William  B.  Colyer. 

Nelson  B.  Gaskill, 

John  Garland  Pollard. 


COUNTRY  GRAIN  MARKETING. 


ClIAl»TER  I. 

ORIGIN  AND  SCOPE  OF  GRAIN  REPORT. 

Section  1.  The  report  as  a  whole. 

Origin  of  inquiry. — This  inquiry  had  its  origin  in  connection 
with  the  general  food  investigation  made  the  Commission,  but 
was  later  continued  as  a  separate  inquiry,  the  Bureau  of  Markets 
of  the  Department  of  Agriculture  cooperating. 

In  the  division  of  the  work  between  the  Commission  and  the 
bureau  it  was  finally  arranged  that  the  bureau  should  study  country 
marketing  conditions  in  the  territory  tributary  to  Chicago;  that  the 
Commission  and  the  bureau  should,  in  conjunction  with  each  other, 
examine  terminal  marketing  conditions  in  Chicago;  and  that  the 
work  as  to  the  other  terminal  markets  and  grain-producing  areas 
should  be  done  by  the  Commission  alone. 

Study  of  the  grain  trade. — In  the  investigation  of  grain  ex¬ 
changes  and  grain  marketing  the  Commission  and  the  Bureau  of 
^larkets  made  a  careful  and  extensive  examination  of  all  the  processes 
involved  in  carrying  the  grain  from  the  producer  to  the  manufactur¬ 
ing  consumer  and  wholesale  and  export  distributor.  No  attempt 
was  made  to  study  the  marketing  process  beyond  these  stages,  for 
obvious  reasons.  Grain  that  has  been  converted  by  a  miller  or  by  a 
maltster,  or  a  feed  manufacturer,  is  no  longer  grain  as  such,  but  a 
derivative  or  mixed  product  thereof,  in  fact,  a  different  commodity. 
To  have  studied  the  marketing  of  grain  by  the  distributors  to  the 
retail  trade  (wholesalers)  would  have  necessitated  an  examination 
of  the  system  of  wholesale  feed  and  seed  distribution,  and,  similarly, 
the  study  of  the  grain  movement  beyond  the  exporter  would  have 
involved  a  study  of  grain  importation  into  other  countries.  No  one 
of  these  matters  was  regarded  as  being  within  the  scope  of  this 
investigation. 

Divisions  of  report. — An  analysis  of  the  foregoing  process  of 
distribution  from  the  producer  to  the  manufacturing  consumer  and 
wholesale  and  export  distributor  naturally  falls  into  four  main 
divisions:  (1)  Country  markets  and  country  marketing;  (2)  the 
terminal  markets  and  the  terminal  cash  grain  business;  (3)  the  costs 
and  profits  of  the  present  marketing  system;  and  (4)  future  trading 
operations  and  their  effects.  Each  of  these  main  divisions  is  sus¬ 
ceptible  of  further  subdivision,  and  each  of  these  latter  divisions 
must  be  further  subdivided  before  a  complete  picture  of  the  complex 
machinery  of  grain  marketing  can  be  presented.  In  this  volume 
and  those  which  follow  there  will  be  given  a  comprehensive  survey 
of  this  mechanism  and  the  cost  of  its  maintenance. 


\ 


19 


20 


COUNTRY  GRAIN  MARKETING. 


Period  covered  by  the  inquiry.— The  period  covered  by  this 
inquiry  is,  roughly,  1912  to  1918,  inclusive..  For  various  reasons  the 
grain  investigation  did  not  get  fully  under  way  until  the  late  fall 
of  1917.  The  field  work  was  practically  closed  at  the  end  of  1918, 
although  some  field 'work  was  done  in  19*19  and  1920.  A  considerable 
amount  of  data  was  also  obtained  by  correspondence  during  both  of 
these  years.  The  work  in  1919  and  1920,  however,  was  chiefly  in  the 
way  of  checking  the  results  obtained  and  bringing  material  other  than 
schedule  matter  up  to  date  as  nearly  as  possible. 

On  the  other  hand,  the  schedules  and  questionnaires  sent  out  by  the 
Commission  in  most  cases  covered  only  the  five  crop  years,  1912-13  to 
1916-17. 

The  reasons  for  neither  obtaining  nor  attempting  to  obtain  statis¬ 
tical  information  by  schedule  of  a  date  later  than  191^17  are  to  be 
found  in  the  situation  arising  out  of  Government .  price  fixing  and 
control.  The  abolition  of  trading  in  wheat  futures,  the  regulations 
of  the  Chicago  Board  of  Trade  and  of  other  exchanges  and  of 
the  Food  Administration  with  reference  to  future  trading  in  co.arse 
grains,  the  licensing  of  dealers,  the  fixing  of  wheat  prices.  Govern¬ 
ment  control  of  transportation.  Food  Administration  regulations 
with  reference  to  wheat  substitutes,  together  with  purchases  of  the 
Grain  Corporation  and  the  various  milling  regulations,  so  disturbed 
the  normal  operation  of  the  grain  trade  mechanism  that  any  statis¬ 
tics  secured  during  the  war  period  would  have  been  practically 
valueless  for  the  permanent  solution  of  problems  of  grain  marketing. 
Such  data  would  have  recorded  merely  war  conditions,  and  any 
studies  based  thereon  would,  in  effect,  have  constituted  a  discussion 
of  the  Government  control  of  the  grain  trade  during  the  Avar  and 
its  results.  Since  Government  control  was  expected  to  be  a  tem¬ 
porary  affair,  there  was  every  reason  to  belieA^e  that  with  the  com¬ 
plete  abolition  of  such  restrictions  as  were  imposed  as  a  result  thereof, 
the  grain  trade*  would  revert  to  practically  the  system  of  marketing 
employed  prior  to  1917  and  that  the  war-time  period  would  merely 
constitute  an  interlude  in  the  normal  operation  of  the  grain  mecha¬ 
nism  of  the  United  States.  For  these  reasons  it  appeared  that  the 
statistical  studies  and  the  conclusions  based  thereon  would  have 
practically  as  much  validity  for  the  solution  of  grain-marketing  prob¬ 
lems  as  though  the  statistics  in  question  bore  a  later  date. 

Grains  co\t:red. — The  grains  selected  for  study  were  the  five 
principal  small  grains — wlieat,  corn,  oats,  rye,  and  barley.  These 
grains  are  extensively  raised  in  the  United  States,  and  they  are 
also  those  which  are  most  extensively  traded  in  at  the  various  im¬ 
portant  organized  markets  or  exchanges. 

Sec.  2.  Scope  of  country  marketing  volume. 

Subject  viatter. — The  present  volume  deals  with  country  markets 
and  marketing,  the  first  of  the  four  principal  divisions  of  the  report 
enumerated  aboA^e.  It  describes  the  purchase  and  sale_  of  grain  at 
country  points,  and  also  the  various  conditions  and  circumstances 
affecting  this  trade.  Since  the  country  elcA^ator  is  the  predominat¬ 
ing  factor  in  country  purchasing,  the  bulk  of  the  material  presented 
herein  deals  Avith  tlie  processes  of  handling  grain  by  various  types 
of  country  elevators. 


ORIGIN  AND  SCOPE  OF  GRAIN  REPORT. 


21 


Charges  frequently  have  been  made  of  monopolistic  control  of 
country  markets  by  combinations  of  country  elevators;  of  price  cut¬ 
ting  and  of  price  agreements;  of  undergrading,  underweighing,  and 
overdocking;  and  of  various  unfair  trade  practices.  The  necessity 
of  hedging  by  country  elevators  has  been  the  subject  of  much 
dispute  as  well  as  the  margin  of  gross  profit  exacted  by  such 
elevators.  Country  elevator  operators  maintain  that  they  work 
on  an  extremely  narrow  margin,  while  the  producers  and  their  sup- 
l)orters  state  that  the  margins  are  entirely  too  wide.  All  these  and 
many  other  charges^  questions,  and  subjects  of  dispute  have  been 
carefull}^  examined  into  by  the  Commission,  and  for  the  most  part 
the  results  are  presented  in  this  volume.  Hedging  is  so  related,  how¬ 
ever,  to  the  whole  system  of  future  trading  that  the  general  question 
of  its  desirability  has  been  reserved  for  the  volume  dealing  with 
that  subject.  The  question  of  the  profits  of  country  elevators  has 
likewise  been  reserved  for  subsequent  discussion.  To  determine  the 
total  per  bushel  handling  charges  involved  in  the  marketing  process 
from  the  producer  to  the  manufacturing  consumer  or  wholesale  and 
export  distributor,  the  costs  and  profits  of  all  middlemen,  both 
country  and  terminal  dealers,  have  been  considered  together. 

Interviews. — The  information  used  in  preparing  this  volume  on 
country  marketing  was  obtained  primarily  from  three  sources,  i.  e., 
interviews,  correspondence,  and  statistical  data ;  the  last  obtained  by 
questionnaires  or  taken  directly  from  the  books  of  the  various  con¬ 
cerns  by  agents  of  the  Commission  and  the  Bureau  of  Markets.  , 

The  interviews  were  divided  into  three  classes : 

{a)  Interviews  with  the  operators  of  cooperative,  independent, 
and  mill-owned  country  elevators,  -^ents  of  the  Commission  visited 
approximately  175  elevators  in  the  States  of  Minnesota,  North  Da¬ 
kota,  South  Dakota,  and  Montana,^  and  representatives  of  the  Bu¬ 
reau  of  Markets  visited  about  90  elevators  in  the  States  of  Illinois 
and  Iowa. 

{h)  Interviews  with  various  line  elevator  operators  in  the  terminal 
markets. 

(c)  Interviews  with  parties  not  operating  country  elevators  but 
closely  affiliated  therewith,  such  as  various  grain  commission  firms 
handling  country  elevator  shipments,  etc. 

Correspondence. — Probably  the  most  illuminating  source  of  in¬ 
formation  as  to  country  marketing  methods  was  the  correspondence 
of  the  line  elevator  companies.  The  agents  of  the  Commission  ex¬ 
amined  the  files  of  some  15  line  elevator  companies,  making  copies 
of  the  letters  covering  a  wide  variety  of  subjects,  such  as  competitive 
methods,  grades,  dockage,  prices,  margins,  hedging,  etc. 

Statistical  data. — Data  on  country  prices,  margins,  grades,  dock¬ 
ages,  and  weights  were  taken  directly  by  representatives  of  the 


1  As  the  Commission  desired  to  ascertain  conditions  in  the  four  northwestern  States  as 
accurately  as  possible  and  as  the  expense  precluded  visiting  more  than  a  small  number 
of  elevators  relatively,  it  was  necessary  to  secure  as  representative  a  group  as  possible. 
For  this  purpose  the  number  of  elevators  visited  in  each  state  was  determined  accord¬ 
ing  to  the  number  of  elevators  in  that  state  compared  with  the  total  for  all  four  states. 
This  number  for  each  state  was  then  distributed  according  to  the  proportion  of  elevators 
of  each  type  within  the  State,  mill,  cooperative,  independent,  'etc.  Finally,  in  order  to 
check  as  accurately  as  possible,  competitive  conditions,  points  were  selected  in  each  of 
the  four  States  which  had  one,  two,  three,  four,  and  more  than  four  elevators  at  a 
station. 


COUNTRY  GRAIN  MARKETING. 


22 

Commission  and  the  Bureau  of  Markets  from  the  books  of  the  line 
elevator  companies  at  the  terminal  markets  and  also  (on  countiy 
prices)  from  certain  of  the  country  elevators  which  had  kept  records 
of  such  prices.  The  bulk  of  the  statistical  material,  however,  was 
obtained  from  the  returns  to  a  schedule  which  was  prepared  and  sent 
out  by  the  Commission  to  some  fifteen  thousand  country  elevators.- 
A-  copy  of  this  schedule  will  be  found  in  A.ppendix  2.  *  ,  *  n 

Approximately  10,000  returns  to  this  schedule  were  received  in  all 
degrees  of  completeness  and  incompleteness.  Line  elevators  made 
the  most  satisfactory  returns,  probably  owing  to  the  fact  tn^t  the 
returns  of  line  concerns  were  generally  made  by  the  head  ollice  o 
the  company  and  that  a  business  thus  operated  from  a  central  oihce 
usually  has  comparatively  good  records.  The  independent  and  the 
individual  mill-owned  elevators  made  the  most  unsatisfactory  reports, 
and  the  replies  of  the  cooperative  elevators  were  but  little  better 
than  those  of  these  two  former  types.  Generally  speaking,  the  books 
and  records  of  the  individually  operated  elevators  were  found  by 
the  Commission  to  be  poorly  kept.  In  the  case  of  each  of  the  more 
important  types  of  elevators,  however,  the  replies  were  sufficiently 
complete,  accurate,  and  numerous  to  furnish  an  adequate  statistical 
basis  for  conclusions  with  respect  to  most  of  the  questions  asked. 

■  » Tae  commission  attempt^  to  to^aU 

satisfactory  lists  n^mmission’s  list  was  compiled  from  a  variety  of  sources, 

schedule  was  seut  |  ®  f  Agriculture,  the  Food  Administration,  the  vxrain 

including  the  lists  of  rte  PepMtme^^^  bodies  of  the  various  States,  and  the 

ma'rnunetira  MinnSolis  coni™  a  dStly  price  card  to  country  elevators. 


Chapter  II. 

FUNCTIONS,  AGE,  AND  DISTRIBUTION  OF  ELEVATORS 

AND  WAREHOUSES. 

Section  1.  Functions  of  country  elevators  and  warehouses. 

Elevators. — The  farmer  may  sell  his  grain,  either  in  wagonload 
or  carload  quantities,  the  former  method  being  by  far  the  more  prev¬ 
alent.  Depending  upon  local  marketing  conditions  and  the  number 
of  factors  operating  in  the  local  market,  he  may  sell  his  grains 
to  any  one  or  more  of  the  following  purchasers :  Elevators,®  ware¬ 
houses,  track  buyers,  feeders,  scoop  shovelers,  interior  brokers,  re¬ 
tailers,  solicitors  of  terminal  market  grain  dealers,  and  solicitors  or 
buyers  for  mills  and  other  converters.  Of  all  these  factors  the 
elevators  and  Avarehouses  are  by  far  the  most  important,  and  owing 
to  this  fact  they  are  considered  first. 

At  the  present  time  the  primary  functions  of  country  -elevators 
are  two  in  number,  and  in  the  order  of  importance  they  are,  first,  the 
merchandising  of  grain,  and,  second,  the  warehousing  of  grain. 
jMinor  functions  are,  the  elevating  of  grain  for  farmers  and  others, 
the  cleaning  and  conditioning  of  grain  either  for  the  elevator’s  own 
account  or  for  others,  the  handling  of  side  lines,  etc.  In  the  early 
days  of  the  elevator  l3usiness  the  primary  function  of  country  ele¬ 
vators  seems  to  have  been  warehousing — that  is,  the  storage  of  grain 
in  return  for  a  fee.®  Merchandising,  or  the  buying  and  selling  of 
grain  by  the  elevator  for  profit,  was  then  of  secondary  importance, 
and  even  now  it  continues  to  be  so  on  the  Pacific  coast. 

In  performing  its  various  functions,  the  elevator  becomes  a  very 
important  factor  in  the  marketing  of  grain.  Most  of  the  grain 
marketed  at  country  points  is  bought  by  the  elevators  directly  from 
the  farmers  for  the  purpose  of  resale.  If,  however,  the  farmer 
does  not  care  to  sell  his  grain  immediately  after  harvest,  he  may  store 
it  in  the  elevator,'^  for  which  service  a  fee  is  usually  charged.  In 
some  cases  the  farmer  may  decide  that  he  will  ship  his  grain  himself. 
In  such  a  case  the  elevator  perhaps  elevates  the  grain  and  loads  it 
into  the  car.  Or,  again,  if  the  grain  received  by  an  elevator  either 
for  its  own  account  or  for  that  of  farmers,  contains  an  admixture 
of  foreign  matter  the  elevator,  if  it  is  equipped  to  do  so,  may  clean 
the  grain  thus  improving  its  merchantability. 

In  addition  to  handling  grain,  either  as  a  merchandiser  or  ware¬ 
houseman,  many  country  elevators,  and  to  a  lesser  extent  warehouses, 
deal  in  various  other  commodities.  These  commodities,  especially 
coal,  feed  and  flour,  seed,  and  lumber,  are  sold  in  large  quantities 
to  farmers,  and  numerous  elevajors  also  buy  and  sell  wool,  beans, 
poultry,  eggs,  potatoes,  etc.  So  far  as  the  elevator  or  warehouse  is 


s  Country  mill  and  maltster  elevators  included. 

8  See  Cb.  IV. 

Some  elevators,  however,  refuse  to  accept  grain  for  storage. 


\ 


23 


COUNTRY  GRAIN  MARKETING. 


enffaffed  in  these  operations,  it  acts  as  an  ordinary  merchandiser, 
and  such  operations  have  no  direct  relation  to  the  functions  ot  the 

elevator  in  connection  with  the  grain  business.  4.1^ 

Warehouses.— The  primary  functions  of  warehouses,  like  those 
of  elevators,  are  merchandising  and  warehousing,  except  that  in  the 
Pacific  coast  area  their  order  of  importance  is  reversed,  merchandis¬ 
ing  being  secondary  to  warehousing.  ‘ 

The  reason  that  warehousing  ranks  first  in  importance  on  the 
Pacific  coast  is  due  to  the  methods  of  marketing  which  prevail. 
There  the  farmers,  as  a  general  rule,  store  their  gram  instead  ot  sell¬ 
ing  it  to  the  warehouse,  receiving  therefor  warehouse  receipts  which 
they  sell  to  various  purchasers.  The  country  warehouse  receives  a 
storage  fee  for  its  services.  As  regards  secondary  functions,  neither 
loading  for  farmers  nor  cleaning  is  done  by  warehouses  in  this  sec¬ 
tion,  and  side  lines  are  handled  to  a  relatively  smaller  extent  as 

compared  with  other  parts  of  the  country.  .  „ 

In  other  sections  than  the  Pacific  coast  the  functions  of  warehouses 
conform  more  closely  to  those  of  elevators,  and  merchandising  is  o 
more  importance  than  warehousing. 

Section  2.  Physical  differences  of  elevators  and  warehouses. 

A  country  elevator  is  a  building  specially  designed  for  elevating, 
storing,  ‘and  loading  grain  in  bulk,  in  which  form  it  is  handled 
throughout  the  operation.  An  endless  chain  of  scoops  cairies  the 
grain  to  the  top  of  the  building,  from  which  it  is  spouted  into  a  bin, 

where  it  is  stored.  ^  i  •  n 

A  country  warehouse,  sometimes.called  a  flat  house,  is  usually  noth¬ 
ing  but  a  shed  in  which  grain  is  collected  and  stored  in  the  country. 
Almost  any  building  will  serve  for  this  purpose,  and  in  practice  ware¬ 
houses  will  be  found  which  formerly  served  as  barns,  stores,  etc. 
More  often,  however,  the  warehouse  is  constructed  specifically  tor 
the  purpose  of  handling  grain.  The  construction  of  such  a  house 
usually  differs  radically  from  that  of  an  elevator.  The  warehouse  is 
usually  a  low  building,  which  occupies  considerable  ground  space  as 
compared  with  an  elevator,  whose  greatest  dimension  is  i^ually 
heio-ht.  In  warehouses  which  handle  grain  in  sacks,  as  on  the  y  acme 
coast,  bins  are  not  necessary,  and  the  construction  of  the  building 
itself  does  not  in  consequence  require  the  strength  and  rigidity  ot  an 
elevator.  Warehouses  handling  grain  in  sacks  are  not,  moreover, 
equipped  with  elevating  machinery,  as  a  rule.  In  tact,  the  sack- 
handling  process  may  be  entirely  by  man  power,  although  some^sack 
warehouses  are  equipped  with  power  appliances,  such  as  pilers  tor 
stacking  the  sacks  of  grain  and  with  conveyors  for  carrying  these 
sacks  from  one  part  of  the  building  to  another. 

It  is  interesting  to  note  that  in  some  sections  of  the  country,  as  m 
Minnesota,  a  few  warehouses,  as  well  as  some  elevators,  receive 
in  sacks,  but  empty  the  grain  into  bins  and  ship  it  m  bulk.  his, 
however,  is  exceptional.  The  other  warehouses  m  the  Central  West 
usually  handle  grain  in  bulk,  storing  it  in  bins  which  have  been  con¬ 
structed  in  the  warehouse.  A  few  of  the  warehouses  are  of  crib  con¬ 
struction.®  _ 


®  This  construction  is  ciescribetl  in  Ch.  Ill,  sec.  1. 


FUNCTIONS,  AGE,  AND  DISTRIBUTION  OF  HOUSES. 


25 


Both  elevators  and  warehouses  i)urchase  grain  chiefly  from  the 
farmers  who  haul  it  in  by  wagon.  In  some  cases  both  buy  grain  from 
farmers  in  carload  lots,  as  when  a  farmer  has  loaded  a  car  to  ship 
and  has  been  later  persuaded  to  sell  it  to  the  local  elevator  or  ware¬ 
house. 

Section  3.  Bulk  and  sack  handling. 

Bulk  and  sack  areas. — Broadly  speaking,  elevators  and  ware¬ 
houses  are  adapted  to  and  are  the  results  of  two  distinctly  different 
methods  of  handling  grain.  In  practically  all  of  the  great  grain- 
fi^rowing  areas  of  the  Central  West,  the  practice  of  handling  giain  in 
bulk  prevails  both  in  the  country  and  at  the  terminal  markets. 
While  a  number  of  warehouses  are  also  found  within  this  area,  their 
total  number  is  relatively  insignificant  as  compared  with  the  total 
number  of  elevators  which  are  located  there,  and  it  seems  probable 
that  where  they  appear  in  this  area  they  are,  at  least  in  part,  relics  of 
the  days  preceding  the  development  of  the  elevator. 

In  the  area  to  the  westward  of  the  great  grain-growing  States  ot 
the  Central  West  and  extending  to  the  Pacific  coast,  however,  the 
warehouse  is  much  more  important  than  is  the  elevator.  The  great 
bulk  of  the  grain  produced  in  this  area  ^  is  raised  in  California, 
Oreo’on,  and  Washington,  all  three  of  which  are  important  grain- 
producing  States.  In  these  States  the  method  of  sack  hamlling 
predominates  and  alwaj^s  has.  The  production  of  the  other  States 
in  this  group  is  relatively  negligible. 

While  there  is  a  large  and  important  milling  demand  tor  wheat 
in  these  States,  especially  Washington  and  Oregon,  a  very  large 
proportion  of  the  grain  grown,  especially  wheat,  is  exported. 

Historical  reasons  for  sack  handling.— Over  25  years  ago  at¬ 
tempts  were  made,  particularly  by  the  Northern  Pacific  and  the 
Great  Northern  Kailroads  and  the  Oregon- Washington  Kailroad  & 
Navigation  Co.  to  handle  grain  in  bulk  in  the  Pacific  Northwest 
section.  Elevators  were  constructed  and  much  of  the  grain  was 
moved  from  interior  points  to  the  coast  in  bulk,  particularly  to  the 
Portland  terminal.  This  attempt  at  bulk  handling,  however  soon 
ceased  and  the  elevators  were  either  torn  down  or  converted  into  hat 
warehouses.  One  reason  for  the  failure  of  this  attempt  was  that 
shippers  refused  to  receive  grain  for  export  unless  it  was  sacked.  At 
that  time,  and  earlier,  the  larger  part  of  the  grain  shipped  from 
Seattle,  Portland,  and  Tacoma  Avent  to  Europe,  generally  moving 
in  sailing  A-essels  around  Cape  Horn,  a  voyage  both  long  and  rough. 
Many  of  these  vessels  were  tramp  boats  that  had  left  European  ports 
for  the  Orient,  whence  they  crossed  to  the  ports  on  our  western  coast 
picking  up  a  cargo  of  grain  for  home.  These  vessels  not  being 
equipped  for  bulk  handling  soon  found  that  the  only  safe  way  to 
handle  the  grain  was  in  sacks.  Otherwise  there  was  great  danger  ot 
the  cargo  shifting  and  the  vessel  failing  to  right  itself.  In  addition, 
the  trip  through  the  Tropics  overheated  bulk  grain,  and  after  several 
disastrous  experiences  the  insurance  companies  made  their  rates  so 
high  as  to  be  practically  prohibitive,  and  even  in  some  instances  re¬ 
fused  to  insure  bulk  grain  at  all.  j,  1  • 

A  second  reason  for  the  failure  of  bulk  handling  Avas  found  in  the 
fact  that  the  farmers  had  grown  accustomed  to  the  use  of  sacks  prior 
to  railroad  development,  when  shipments  from  the  interior  were 


26 


COUNTRY  GRAIN  MARKETING. 


handled  through  river  warehouses  and  river  boats,  neither  of  which 
was  equipped  for  bulk  handling.® 

In  more  recent  years,  when  a  desire  was  shown  on  the  part  of  some 
for  a  reestablishment  of  elevators  and  the  system  of  bulk  handling, 
difficulties  were  encountered.  Many  farmers,  accustomed  to  sack¬ 
ing,  did  not  care  to  change.  A  lucrative  business  had  grown  up  in 
the  importation  and  sale  of  sacks  and  twine.  In  some  instances  the 
railroads  were  opposed  to  elevators,  and  the  assertion  is  even  made 
that  the  rental  charged  for  sacks  was  made  to  vary  inversely  to  the 
strength  of  the  demand  for  elevators.  Moreover,  a  “  spread  ”  had 
developed  between  the  price  of  bulk  as  compared  with  sacked  grain, 
the  latter  being  from  3  to  4  cents  higher.  Furthermore,  for  a  long 
time,  terminal  facilities  for  handling  bulk  grain  were  entirely  in¬ 
adequate.^® 

According  to  the  information  obtained  by  the  Commission’s  agents, 
the  revival  of  the  agitation  for  the  bulk  plan  of  handling  grain  in 
the  Pacific  Northwest  section  has  been  largely  due  to  the  increase 
there  of  farmers’  cooperative  companies,  which  are  generally  favor¬ 
able  to  this  method,  and  to  the  abnormally  high'  price  of  sacks  re¬ 
sulting  from  war  conditions. 

Arguments  for  sack  handling. — Broadly  speaking,  most  of  the 
arguments  in  favor  of  sack  handling  in  the  Pacific  Northwest  find 
their  basis  in  the  difficulties  of  changing  the  system  rather  than  in  the 
economic  desirability  of  the  one  or  the  other  method.  The  following 
are  the  principal  arguments  made  for  sack  handling. 

(1)  Elevators  have  been  tried  in  the  past  in  the  Pacific  coast 
region  and  largely  abandoned  at  a  heavy  loss  to  all  interested  in 
them. 

(2)  Sacked  grain  brings  from  2  to  4  cents  per  bushel  more  than 
bulk  grain.  This  difference  in  price  is  supposed  to  cover  the  value 
of  the  bag. 

(3)  With  reference  to  the  price  of  sacks,  it  is  pointed  out  that 
the  prevailing  figure  during  the  war  was  much  above  normal,  and 
that  this  war  price  arose  largely  from  the  exceptionally  heavy  de¬ 
mand  for  sacks,  the  higher  cost  of  importing,  and  the  fact  that 
jute  was  on  the  embargo  list.  Moreover,  the  high  price  of  jute  has 
been  counterbalanced  by  the  high  price  paid  farmers  for  their  wheat. 
It  is  therefore  unfair  to  base  any  criticisms  of  sack  shipments  on 
the  abnormal  conditions  arising  out  of  and  subsequent  to  the  war. 

(4)  It  is  estimated  that  in  the  State  of  Washington  alone  there  is 
somewhere  between  a  million  and  a  million  and  a  half  dollars  in¬ 
vested  in  flat  warehouses  and  their  equipment.  To  scrap  this  prop-' 
erty  and  substitute  other  equipment  the  initial  cost  of  which  would 
be  greater  w'ould  be  a  tremendous  waste. 

(5)  Higher  insurance  is  required  on  bulk  grain. 

(6)  It  is  urged  that  prior  to  the  war  a  large  part  of  the  export 
grain  moved  in  sailing  vessels,  that  can  not  go  through  the  Panama 


®  This  preference  on  the  part  of  the  farmers,  combined  with  the  insistence  upon  sacks 
by  the  export  trade,  led  the  railroads  to  furnish  them  in  many  cases  to  the  farmers. 
In  the  early  nineties  some  of  the  roads  actually  gave  sacks  away  and  many  later  rented 
them  at  from  1  to  2  cents  a  sack  upward.  More  often,  however,  the  farmer  bought  his 
sacks  from  the  warehouseman  on  credit,  agreeing  in  return  for  the  accommodation  to 
sell  all  of  his  crop  to  the  warehouseman  or  at  least  a  sufficient  portion  to  cover  the  cost 
of  sacks  supplied. 

Cf.  Howard  T,  Lewis,  Elevator  Movement  in  the  Pacific  Northwest,  Jour,  of  Pol.  Ec., 
Oct.,  1916,  p.  794.  This  study  has  been  freely  used  in  connection  with  this  discussion. 


■FUNCTIONS,  AGE,  AND  DISTRIBUTION  OF  HOUSES.  27 

Canal  anyway,  since  to  do  so  means  entering  the  zone  of  calms  and 
the  loss  of  a  great  deal  of  valuable  time. 

(7)  The  experience  of  the  Middle  West  concerning  bulk  handling 
is  by  no  means  conclusive  evidence  of  success  on  the  Pacific  coast, 
because  of  the  difference  in  growing  conditions,  such  as  the  large 
number  of  varieties  of  wheat  grown,  prevalence  of  smut,  leased  lands 
on  which  it  would  not  pay  to  put  permanent  storage  improvements, 
varying  soil  conditions  due  to  abrupt  changes  in  the  topography  of 
grain-lowing  sections,  and  length  of  haul  to  country  stations. 

(8)  ^he  sack  method  is  the  only  economical  and  satisfactory  way 
to  handle  the  large  number  of  varieties  and  grades  grown  so  as  to 
keep  them  distinct,  which  is  necessary  if  the  producer  is  to  get  the 
true  value  for  his  wheat.  Smutty  grain  in  varying  degrees  is  preva¬ 
lent  in  much  of  the  Pacific  section,  and  the  different  lots  of  this  grain 
should  be  kept  separate  as  well  as  apart-  from  sound  grain.  The 
practicable  way  of  doing  this  is  by  the  sack  method. 

(9)  By  the  method  of  using  sacks  and  piling  in  flat  warehouses 
grain  can  be  stored  more  cheaply  than  in  any  other  way.  The  large 
concentrated  movement  to  the  country  station  during  the  harvest 
season  can  be  taken  care  of  more  expeditiously  and  at  less  cost  by  this 
method. 

(10)  The  extensive  demands  of  the  millers  that  the  different  kinds 
of  grain  be  kept  separate  are  much  more  easily  met  when  sacks  are 
used. 

(11)  The  present  facilities  of  the  average  Pacific  coast  farmer  are 
better  adapted  to  handling  grain  in  sacks,  and  it  would  mean  a  con¬ 
siderable  outlay  for  each  farmer  to  equip  himself  to  handle  in  bulk. 

(12)  Some  individuals  favorable  to  the  sack  method  claim  that 
the  bulk-handling  costs  through  an  elevator  are  not  less  than  for 
handling  sacks  through  the  flat  warehouse,  but,  on  the  contrary, 
that  sack-  handling  is  the  cheaper  on  account  of  the  much  higher 
construction  costs  of  elevators  as  compared  with  those  for  the  flat 
warehouses. 

(13)  In  sack  handling  the  grain  movement  can  be  expedited  and 
hand  labor  eliminated  by  using  power-operated  conveyors  wherever 
possible,  as  for  piling,  moving  the  sacks  from  the  warehouse  to  cars, 
boats,  etc.,  as  is  now  being  done  in  some  instances. 

(14)  The  plan  of  converting  flat  warehouses  into  bulk-handling 
plants  would  be  expensive  and  inefficient.  The  result  would  not  give 
a  satisfactory  elevator,  because  the  two  types  of  houses  are  so  totally 
different. 

Arguments  for  bulk  handling. — Some  of  the  arguments  ad¬ 
vanced  in  support  of  bulk  handling  by  those  in  favor  of  it  are  as 
follows : 

(1)  Grain  in  bulk  can  be  handled  much  more  rapidly  and  efficiently 
through  elevators  either  in  the  country  or  at  terminal  points  than 
can  grain  in  sacks  through  warehouses.  This  applies  to  unloading 
the  farmer’s  wagon,  to  storing  in  the  house,  to  loading  or  unloading 
from  or  into  boats  or  cars,  and  effects  a  considerable  saving  through¬ 
out  the  entire  handling  process. 

(2)  It  is  alleged  that  grain  in  bulk  can  be  better  protected  from 
moisture,  vermin,  fire,  etc. 


28 


COUNTRY  GRAIN  AIARKETING. 

(3)  The  farmer  in  the  long  rim,  it  is  claimed,  can  provide  himself 
with  the  equipment  for  bulk  handling,  such  as  granaries,  bins,  and 
tight  wagon  boxes  at  as  loiv  or  less  cost  than  is  required  for  him  to 
equip  himself  with  sacks. 

(4)  Bulk  grain  can  be  inspected  and  graded  with  much  greater  ease 
and  accuracy  than  grain  in  bags,  and  there  is  probably  less  chance 

of  fraudulent  practices.  .  . 

(5)  By  means  of  cleaning  machinery,  dirty  and  damaged  gram  in 
bulk  may  be  improved  in  quality  and  conditioned  more  readily  and 
with  less  expense  than  can  sacked  grain.  In  the  latter  case  the  sacks 
must  be  opened  and  the  grain  emptied  before  cleaning,  and  the  grain 
rebagged  and  the  sacks  tied  up  after  cleaning. 

(6)  In  bulk  handling  most  of  the  work  will  be  done  by  machine 
power  instead  of  man  power,  a  means  both  easier  and  cheaper. 

(7)  Eastern  grain  buyers  prefer  grain  bulked,  and  as  there  is  a 
possibility  in  the  future  that  Pacific  coast  grain  will  be  shipped  east 
to  a  greater  extent  than  formerly,  this  is  an  argument  in  favor  of 

the  bulk  plan.  ^  ^  i  ^ 

(8)  So  far  as  the  Pacific  Northwest  is  concerned,  it  is  said  that  the 

grain  buyers  are  usually  the  parties  interested  in  the  importing  and 
selling  of  sacks,  and  that 'they  are  the  ones  who  insist  that  sacks 
must  be  used,  because  this  business  means  large  additional  profits  to 

them.^^  * 

(9)  As  the  situation  is  now  on  the  coast,  it  is  claimed  that  practi¬ 
cally  the  entire  supply  of  grain  must  be  sacked  in  order  that  about 
25  per  cent  may  be  shipped  in  the  export  trade.  If  this  latter  por¬ 
tion  must  be  sacked  before  shipment,  it  would  seem  but  fair  that 
the  burden  should  rest  only  on  the  grain  that  is  actually  shipped 
sacked,  and  the  entire  Pacific  Northwest  should  not  be  saddled  ^vith 
this  apparently  uneconomical  system  merely  because  of  the  require¬ 
ments  for  a  small  portion  of  the  grain. 

Furthermore,  it  is  stated  that  a  basic  argument  for  the  use  of  sacks 
rests  upon  the  shipping  of  the  grain  by  sailing  vessels  on  the  long 
voyage  around  Cape  Horn.  The  opening  of  the  Panama  Canal  and 
the  use  of  steamers  with  compartments,  it  is  contended,  will  eliminate 
the  necessity  for  using  sacks  and  even  render  bulk  shipments 
preferable. 

(10)  It  is  stated  that  the  present  method  is  especially  uneconomical 
on  the  coast  on  account  of  the  fact  that  the  exported  grain  is  rarely 
shipped  in  the  identical  sacks  in  which  it  is  received.  The  sacks 
upon  arrival  at  the  terminal  are  opened,  the  grain  cleaned,  and  then 
resacked.  The  old  sacks  are  not  returned,  and  the  new  sacks  are 
left  to  the  importer  to  dispose  of  as  he  sees  fit.  To  say  nothing  of 
the  loss  of  time  occasioned  by  this  double  operation,  the  additional 
sack  loss  is  considerable. 

(11)  Lastly,  it  is  urged  that  there  is  no  sound  reason  against  bulk 
handling  on  the  coast  because  of  the  existence  of  flat  warehouses, 
since  it  is  contended  that  they  can  be  converted  into  buildings  capable 
of  handling  bulk  grain  by  installing  an  air-pressure  conveyor,  en¬ 
gines,  and  scales,  and  dividing  the  warehouse  into  bins  at  an  expendi¬ 
ture  by  no  means  excessive. 


J.  D.  Brown,  president  Farmers’  Union  of  Oregon  and  Soutliern  Idaho. 


FUNCTIONS,  AGE,  AND  DISTRIBUTION  OF  HOUSES.  29 

AiTiTUDE  OF  DIFFERENT  TNTERESTS.^^ — The  general  attitude  of  vari¬ 
ous  interests  in  the  Pacific  Northwest  may  be  summarized  as  follows: 

Growers. — Many  of  the  growers,  particularly  the  moderately  large 
])roducei's,  favor  bulk  handling  and  are  of  the  opinion  that  facilities 
for  that  purpose  will  continue  to  be  provided  rapidly.  They  con¬ 
sider  that  bulk  handling  will  not  again  be  abandoned,  and  that  it  is 
now  a  safer  proposition  than  ever  before.  On  the  other  hand,  quite 
a  number,  particularly  of  the  smaller  growers,  and  some  very  large 
ones,  who  produce  under  varied  conditions,  think  the  permanency 
of  bulk  handling  doubtful  on  account  of  the  unwillingness  of  the 
average  famier  to  try  new  methods  and  his  desire  to  preserve  the 
identity  of  his  individual  grain.  They  believe  that  when  the  grain 
movement  of  the  section  under  discussion  is  once  more  to  the  coast 
and  the  price  of  sacks  becomes  normal  the_trend  will  again  be  toward 
the  sack  method.  Naturally,  the  growers  who  have  changed  to  bulk 
handling  and  provided  equipment  for  it  generally  feel  that  the 
method  will  grow,  but  some  state  that  bulk  handling  is  not  as  cheap 
as  the  sack  method  if  the  price  of  sacks  drops  to  anything  com¬ 
parable  with  the  prewar  level. 

Warehousemen. — The  warehousemen  generally  show  a  preference 
for  handling  wheat  in  sacks,  but  some  acknowledge  that  many 
growers  want  bulk  handling  and  think  it  bound  to  come,  though 
they  are  not  Avilling  to  predict  how  soon  or  how  fast.  ^  Some  ware¬ 
house  representatives  believe  the  farmers’  elevators  will  not  be  suc¬ 
cessful  in  the  Pacific  Northwest,  and  that  those  erecting  them  will  not 
meet  with  success  largely  because  the  original  cost  of  construction, 
as  compared  with  that  of  flat  warehouses,  is  so  heavy  that  it  will  not 
be  easy  to  obtain  sufficient  grain  to  pay  for  their  operation. 

Elevator  operators. — Those  in  charge  of  elevators  recently  placed 
in  operation  are  apparently  almost  unanimous  in  the  opinion  that 
bulk  handling  is  the  only  method  of  handling  wheat,  because  in  this 
way  the  grower  gets  rid  of  the  use  of  sacks,  the  uncertainty  of  pro¬ 
curing  them,  and  the  constantly  fluctuating  price. 

MilleVs. — The  millers  as  a  rule  favor  sack  handling.  At  the 
same  time  a  feeling  exists  among  them  that  the  sentiment  for  bulk 
handling  is  grooving.  They  believe,  however,  that  the  change  will 
come  slowly.  They  also  express  the  opinion  that  if  the  price  of 
sacks  again  becomes  normal  farmers  will  buy  them  instead  of  going 
to  the  expense  of  installing  equipment  necessary  for  bulk  handling. 

Banks  and  investment  companies. — The  officials  of  banks  and  in¬ 
vestment  companies  are  conservative  in  their  opinions  as  to  the  growth 
or  permanency  of  the  bulk-handling  movement.  They  state  that  the 
high  cost  of  sacks  and  the  shipping  of  wheat  east  by  rail,  where  it 
comes  in  competition  with  bulk  grain,  have  had  more  to  do  with  the 
growth  of  the  sentiment  for  bulk  handling  than  any  permanent 
desire  on  the  part  of  the  growers.  Some,  however,  think  that  lack 
of  interior  elevators  and  terminal  bulk-handling  facilities  are  pri¬ 
marily  the  factors  that  have  retarded  the  more  extensive  use  of  bulk 
handling. 

Farmers'*  unions. — In  general,  the  farmers’  unions  emphatically 
contend  that  there  is  no  sound  objection  to  bulk  handling;  that  grain 


Based  largely  upon  a  Report  of  Engineer  G.  B.  llegardt  to  the  Commission  of  Public 
Docks.  Portland'  covering  an  Investigation  of  the  Movement  to  Adopt  the  System  of 
Bulk  Handling  of  Wheat. 


COUNTRY  GRAIN  MARKETING. 


30 


is  so  handled  nearly  eA'eryAvhere  else;  and  that  with  the  opening  of 
the  Panama  Canal  the  last  obstacle  thereto  on  the  Pacific,  coast  has 
been  removed.  Xhey  say  the  whole  question  is  a  matter  of  educa¬ 
tion,  and  that  the  sentiment  for  bulk  handling  is  steadily  gaining 

^^Su^fMARY.— While  it  Avould  seem  probable  that  the  bulk  method  of 
handlin^’^  will  ultimately  prevail  on  the  Pacific  coast  as  elsewhere  in 
the  United  States,  it  is  likely  that  the  sack  method  will  continue  to  be 
used  for  a  long  time  to  come. 


Section  4.  Type  differences  in  country  houses. 

Line  houses. — A  concern  engaged  in  the  country  elevator  or  ware¬ 
house  business  may,  theoretically,  operate  any  number  of  houses. 
Actually,  something  under  200  houses  seems  to  be  about  the  maxi¬ 
mum.  The  largest  number  of  houses  operated  by  a  single  organiza¬ 
tion  which  was  reported  in  the  returns  to  the  Commission  s  country 
elevator  schedule  was  178.  There  are  instances,  however,  where  the 
ownership  and  control  of  two  or  more  organizations,  each  operating 
several  houses,  are  in  the  hands  of  a  third  organization,  and  in  such 
cases  it  is  evident  that  the  latter  concern  might  be  operating,  at  least 
indirectly,  more  than  the  above-stated  maximum. 

Between  the  companies  thus  operating  from  30  or  40  to  150  or  more 
houses  located  at  different  points  and  between  companies  operating 
a  smaller  nuinber  of  houses  there  is  no  essential  distinction  except 
in  size.  For  this  reason  all  these  houses  have  been  classed  together 
and  designated  as  line  houses.  For  the  purposes  of  this  report, 
therefore,  a  line  house  may  be  defined  as  one  operated  by  an  organ¬ 
ization  which  operates  two  or  more  houses  located  at  different  points. 

Individual  houses. — Between  the  line  type  of  elevator  or  ware¬ 
house  and  the  individual  type  there  is  a  fairly  clear  line  of  demarca¬ 
tion.  A  single  line  house  is  only  a  part  of  a  larger  organization 
buying  grain  in  two  or  more  localities,  and  all  its  operations  are 
directed  and  controlled,  with  reference,  more  or  less,  to  the  operations 
of  all  the  other  houses  composing  the  line.  The  individual  plevator 
or  warehouse,  on  the  other  hand,  operates  locally  only  and  is  managed 
AAdthout  reference  to  the  operations  of  other  houses,  except  in  so  far  as 
it  may  be  competitively  affected  by  them. 

In  each  of  these  two  principal  classes  of  houses  there  may  be  dis¬ 
tinguished  four  subclasses  based  on  the  character  of  control  or  owner¬ 
ship.  On  this  basis  the  line  type  may  be  divided  into  commercial, 
cooperative,  mill,  and  maltster  subtypes,  and  individual  type  into 
independent,  cooperative,  mill,  and  maltster  houses. 

Commercial  line  houses. — A  commercial  line  company  may  be 
defined  as  a  company  operating  two  or  more  houses  at  different  sta¬ 
tions  for  the  purpose  of  buying  and  selling  grain  at  a  profit.  The 
typical  large  commercial  line  company  is  one  which  has  a  head  office 
in  one  of  the  primary  markets  and  Avhich  operates  a  comparatiA^ely 
large  number  of  elevators,  ranging,  say,  from  30  or  40  to  150  or  more. 
The  great  bulk  of  such  companies  are  found  in  the  North Avestern 
States,  most  of  them  haAung  head  offices  in  Minneapolis,  from  which 
the  buying  and  selling  operations  of  the  various  country  stations  are 
supervised. 


OccEsionally  a  single  line  company  wi’l  operate  more  than  one  house  at  a  particular 
point,  but  these  instances  are  rather  exceptional. 


FUNCTIONS,  AGE,  AND  DISTRIBUTION  OF  HOUSES.  31 

Independent  houses. — An  independent  elevator  or  warehouse  is 
one  operated,  as  is  the  commercial  line  house,  for  merchandising 
profit.  In  short,  an  independent  elevator  or  warehouse  is  a  single 
house  organized  and  operated  by  an  individual,  partnership,'  or  cor¬ 
poration  for  the  purpose  of  making  a  profit  in  the  buying  and  selling 
of  grain.  If  two  or  more  such  houses  are  operated  by  the  same  com¬ 
pany,  the  result  is  a  commercial  line  concern. 

Line  and  individual  cooperative  houses. — “  Cooperative”  as  em¬ 
ployed  in  this  volume  in  referring  to  elevators  and  warehouses  in¬ 
cludes  not  only  elevators  and  warehouses  paying  patronage  divi¬ 
dends  but  also  those  operated  or  owned  and  operated  by  farmers. 
In  fact,  a  more  accurate  designation  of  many  of  the  houses  report¬ 
ing  themseh^es  to  the  Commission  as  cooperative  would  perhaps  be 
“  farmers’  houses.”  As  commonly  employed  in  the  grain  trade  the 
meaning  of  the  terms  “  cooperative  ”  and  farmers  ”  as  applied  to 
country  houses  is  decidedly  inexact  and  indefinite.  Both  terms  are 
frequently,  perhaps  most  commonly,  used  to  describe  houses  operated 
or  else  oAvned  ‘and  operated  by  farmers.  But  they  are  also  employed 
in  many  instances,  especially  the  term  “cooperative,”  to  designate 
those  which  pay  patronage  dividends.  The  loose  usage  of  both  terms 
is  indicated  by  the  fact  that  one  often  encounters  the  expression 
“  patronage  dividend  cooperatives.” 

Moreover,  the  dividing  line  between  these  two  classes  of  houses  is 
not  as  definite  as  might  appear  to  be  the  case.  The  farmer’s  com¬ 
pany,  even  though  not  paying  patronage  dividends,  frequently  has 
as  its  stockholders  or  owners  a  very  large  proportion,  and  in  some 
cases  practically  all  of  the  farmers  in  the  vicinity  who  would  nor¬ 
mally  be  its  patrons.  Such  an  elevator  or  warehouse,  therefore,  is 
cooperatiA^e  in  the  sense  that  the  patrons  receive  the  great  bulk  or  all 
of  the  profits,  although  the  distribution  thus  made  as  between  indi¬ 
vidual  farmers  is  not  in  any  exact  proportion  to  the  business  which 
they  offer  the  house. 

Since  a  very  large  proportion  of  the  houses  reporting  to  the  Com¬ 
mission  as  cooperatives  also  report  that  they  do  not  pay  patronage 
dividends,  the  term  cooperative  wherever  employed  in  the  volume  is 
to  be  interpreted  as  including  not  only  patronage  dividend  co- 
operatiA^es  but  also  farmers’  elevators  or  warehouses  Avhich,  Avhile 
not  paying  patronage  dividends,  are  either  operated  or  else  OAvned 
and  operated  by  their  farmer  patrons.  Elevators  and  warehouses  of 
this  type,  therefore,  may  be  distinguished  from  those  of  other  types 
chiefly  by  reason  of  the  fact  that  they  are  operated  by  and  in  the 
interest  of  producers. 

A  cooperative  line  house  is  the  same  as  an  individual  cooperative, 
except  that  the  former  is  operated  by  a  concern  which  is  operating 
tAvo  or  more  houses  located  at  different  stations. 

Line  and  individual  mill  houses. — The  primary  function  of  the 
mill  elevator  or  warehouse  is  to  insure  the  mill  a  supply  of  grain 
(usually  Avheat)  for  milling  purposes.  This  is  the  fundamental 

a  patronage  dividend  house  is  one  which  pays  a  dividend  based  upon  the  amount  of 
business  done  by  the  house  with  those  from  •v^hom  it  purchases.  AARiile  the  returns  to  the 
Commission’s  inquiry  as  to  the  basis  of  patronage  dividend  payment  (Cf.  Appendix  2, 
Inquiry  9)  are  not  sufficiently  numerous  nor  comprehensive  to  warrant  presentation,  it 
may  be  stated  that  the  method  of  paying  such  dividends  most  frequently  reported  was 
according  to  the  number  of  bushels  of  grain  sold  to  the  elevator,  although  a  considerable 
number  of  houses  based  these  dividends  upon  the  value  of  the  grain  thus  sold  instead  of 
upon  the  quantity.  For  further  information  on  patronage  dividends  see  Ch,  IV,  sec.  13, 
of  this  volume. 


32 


COUNTRY  GRAIN  MARKETING. 


purpose  of  its  operation.  Whether  or  not  such  houses  engage,  in  i 

addition,  in  a  merchandising  business,  depends  upon  various  cir-  i 

cumstances.  But  even  though  they  do,  this  merchandising  is  usually  • 

regarded  as  of  subordinate  importance  in  all  but  exceptional  cases.  , 

By  constructing  an  elevator  or  warehouse,  the  mill  provides  storage  j 

space  for  grain  which  may  be  held  therein  and  used  as  required.  j 

By  the  ownership  of  one  or  more  elevators  or  warehouses,  the  mill 
avoids,  in  many  cases,  middlemen’s  charges  and  thus  secures  its  grain 
at  a  lower  price.  In  case  of  a  shortage  in  local  receipts  the  mill 
house  will  usually  pay  a  higher  price  than  other  types  of  houses. 
Since  it  is  buying  for  milling  purposes  it  does  not,  in  consequence, 
find  it  necessary  in  bidding  to  consider  the  merchandising  profit  as 
do  the  other  principal  types  of  houses.  Two  or  more  of  such  houses 
at  different  points  operated  together  constitute  a  line. 

Line  and  individual  maltster  houses. — The  purpose  of  maltsters 
in  operating  elevators  and  warehouses  is  primarily  the  same  as  that 
of  the  mill  operator — ^to  insure  a  supply  of  grain,  barley.  Malt^er 
houses,  like  those  operated  by  mills,  may  or  may  not  merchandise 
grain,  depending  on  circumstances.  These  houses  are  distinguish¬ 
able  from  the  mill  type,  therefore,  only  in  the  fact  that  they  are 
operated  by  maltsters  and  brewers  instead  of  millers  and  that  thev 
buy  chiefly  barley  instead  of  wheat.  Two  or  more  of  them  located 
at  different  points  and  operated  by  one  concern  are  regarded  as  a  line. 

Section  5.  Number  of  elevators  and  warehouses  reporting  and  reported. 

Method  or  tabulating  returns. — Keturns  to  the  country  elevator 
schedule  (Appendix  2)  were  made,  by  9,906  elevators  and  ware¬ 
houses.  According  to  information  obtained  from  the  Department 
of  Agriculture  and  the  F ood  Administration,  there  are  probablw  not 
far  from  30,000  country  elevators  and  warehouses  in  the  United 
States.  These  returns  therefore  probably  embrace  about  one-third  „ 

of  all  such  houses  in  the  country.  »  ,  • 

In  tabulating  these  replies  the  returns  to  most  of  the  inquiries  are 
presented  according  to  geographical  distribution  of  elevators  and 
warehouses  and  also  according  to  the  type  of  houses  reporting. 

Elevators  were  tabulated  separately  for  14  States,  as  follows: 
Illinois,  Indiana,  Iowa,  Kansas,  Michigan,  Minnesota,  JVBssouri, 
Montana,  Nebraska,  North  Dakota,  Ohio,  Oklahoma,  South  Dakota_, 
and  Wisconsin;  and  for  three  grand  divisions,  i.  e..  Mountain  and 
Pacific,  Southern,  and  Middle  Atlantic.  The  14  States  tabulated 
were  selected  partly  because  of  the  fact  that  they  were  leading  gram- 
producing  States,  but  more  especially  by  reason  of  the  fact  that  they 
were  the  only  ones  returning  a  sufficient  number  of  schedules  to  war¬ 
rant  separate  presentation  by  States.  i  x  •  j 

Warehouses  were  tabulated  for  four  divisions — the  Mountain  and 
Pacific,  Central,  Southern,  and  Middle  Atlantic.  The  States  in¬ 
cluded  in  the  latter  divisions  are  as  follows :  Mountain  and  Pacific 
Arizona,  California,  Colorado,  Idaho,  Montana,  Nevada,  Kew 
Mexico,  Oregon,  Utah,  Washin^on,  and  Wyoming.  Central^Illi- 
nois,  Indiana,  Iowa,  Kansas,  Michigan,  Minnesota,  Missouri,  ^e- 
])raska,  North  Dakota,  Ohio,  South  Dakota,  and  Wisconsin.  South¬ 
ern— Alabama,  Arkansas,  Delaware,  District  of  Columbia,  Ilorida, 
Oeorgia,  Kentucky,  Louisiana,  Maryland,  Mississippi,  North  Caro¬ 
lina,  Oklahoma,  South  Carolina,  Tennessee,  Texas,  ^  ^rg^ia,  and 
West  Virginia.  Middle  Atlantic — New  Jersey,  ^ew  T  ork,  and  Penn- 


FUNCTlO^sS,  AliE,  AND  DISTRIBUTION  OF  HOUSES. 


33 


sylvania.  The  Mountain  and  Pacific  division  of  elevators  coincides 
with  the  Mountain  and  Pacific  division  of  warehouses,  except  that 
the  State  of  Montana,  which  was  separately  tabulated  for  elevators, 
is  omitted,  and  the  Solithern  division  of  elevators  coincides  with  the 
Southern  division  of  warehouses,  except  that  the  former  does  not 
include  the  State  of  Oklahoma,  which  was  separately  tabulated. 

The  Central  division  for  elevators,  where  used,  included  12  States, 
which  are  the  same  as  those  for  which  elevators  were  separately  tabu¬ 
lated,  excluding  Montana  and  Oklahoma, 

Xo  tabulations  were  made  for  the  New  England  States  on  account 
of  lack  of  replies. 

Returns  to  most  of  the  inquiries  Avere  also  tabulated  for  each  of  the 
eight  types  of  houses  discussed  in  the  preceding  section,  i.  e.,  com¬ 
mercial,  cooperative,  mill,  and  maltster  line,  and  individual  coop- 
erath^e,  mill,  maltster,  and  independent  houses.  In  some  cases  ware¬ 
houses  and  elevators  Avere  tabulated  together  and  in  other  instances 
separately.  In  many  cases,  owing  to  the  small  number  of  Avare- 
houses  reporting,  the  results  for  elevators  alone  were  employed. 

Number  of  houses  per  station. — Of  the  9,906  houses  returning  the 
country  eleA^ator  schedule,  9,219  reported  the  number  of  elevators  and 
Avarehouses  operating  at  their  station.  For  the  purposes  of  this  re¬ 
port  a  station  is  defined  as  any  point,  town,  or  place  where  one  or 
more  eleA^ators  or  AA’arehouses  are  located.  Although  the  house  maj^ 
be  situated  on  a  railway  siding  in  the  country,  far  aAvay  from  any 
town  or  post  office,  nevertheless  it  constitutes  a  station.  Inquiry  12 
pf  the  country  elevator  schedule  (see  Appendix  2)  asked  the  names 
of  all  other  mills  and  elevators  at  each  station.  From  these  data  there 
was  computed  the  number  of  elevators  and  warehouses  per  station 
and  the  total  number  of  houses  at  all  reporting  stations,^®  the  latter 
by  multiplying  the  number  of  stations  reporting  by  the  number  of 
elevators,  warehouses,  and  mills  reported  at  each  of  such  stations. 
Table  1  presents  the  result  of  this  tabulation. 

Table  1. — Numher  of  elevator.^  and  warehouses  at  stations  and  proportion  re¬ 
porting  to  those  reported.^ 


Number  of  elevators  and  warehouses  reported  at 
stations. 

Number  of 
stations 
reporting. 

Elevators 
and  ware¬ 
houses 
answering 
inquiry. 

Number  of 
elevators 
and  ware¬ 
houses 
reported. 

Per  cent 
of  number 
answering 
inquiry  to 
num^r 
reported. 

1,810 

1,810 

1,810 

100.00 

i;887 

2,500 

3,774 

66.24 

1,223 

2,131 

3,669 

58. 08 

525 

1,216 

2,100 

57.90 

259 

^  780 

1,295 

60.23 

118 

439 

708 

62.01 

47 

205 

329 

62.31 

20 

89 

160 

55.62 

4 

30 

36 

83.33 

2 

8 

22 

36.36 

13  and  over . 

1 

11 

13 

84,62 

Total . 

5,896 

9,219 

13,916 

66.25 

“  Attention  is  directed  to  the  fact  that  the  percentages  in  th^  various  tables  in  this 
volume  do  not  in  all  cases  add  to  exactly  100  per  cent. 

*  Inquiry  12,  Appendix  2.  ,  _ 

16  Each  mill  being  counted  as  one  house  and  excluding  Diose  not  replying  to  the  inquiry. 


9904°— 20 - 3 


34 


COUNTRY  GRAIN  MARKEtiNG. 


From  this  table  it  appears  that  the  9,219  elevators  and  warehouses 
answering  this  inquiry  were  located  at  5,896  stations  and  that  these 
5,896  stations  reported  13,916  elevators  there  located.  In  other 
words,  approximately  66  per  cent  of  the  houses  reported  at  all  sta¬ 
tions  replied  to  the  questionnaire.  This  fact  is  important,  since  it  in¬ 
dicates  the  representative  character  of  the  returns. 

The  great  bulk  of  the  stations  (nearly  5,000  out  of  5,896)  report 
three  houses  or  less  per  station.  A  little  less  than  one- third  of  the 
stations  reporting  are  single-house  stations  and  about  another  third 
have  two  houses.  In  the  case  of  stations  having  more  than  two 
houses  the  number  of  stations  reporting  declines  very  sharply  as  the 
number  of  houses  at  the  station  increases.  Less  than  10  per  cent  of 
the  total  stations  reporting  have  more  than  four  houses  and  only 
seven  stations  report  more  than  eight  houses. 

Geographical  distribution  of  country  houses. — ^Table  2  presents 
the  geographical  distribution  of  all  elevators  and  warehouses  mak¬ 
ing  returns  to  the  country  elevator  schedule.  (Appendix  2,  in¬ 
quiry  2.) 


Table  2 —Geographical  dutrilmtion  of  all  elevators  and  icarehmises  reporting 

and  reported. 


State  or  dh'ision.i 


ELEVATORS. 


Oklahoma . 

Kansas . 

Michigan . 

Nebraska . 

Wisconsin . 

Ohio.... . 

Missouri . 

Iowa . T . 

North  Dakota . 

Indiana . 

Illinois . 

Montana . 

Minnesota . 

South  Dakota . . . 

Southern  Di^^sion . 

Middle  Atlantic  Division. ..... 

Mountain  and  Pacific  Division 

Total . 


•WAREHOUSES. 

Middle  Atlantic  Division . 

Mountain  and  Pacific  Division .... 

Southern  Division . 

Central  Division . . 

Total . . 

Grand  total . 


Total 
elevators 
and  ware¬ 
houses 
making 
returns. 

Elevators 
and  ware¬ 
houses 
answering 
inquiry  12.2 

Number  of 
elevators 
and  ware¬ 
houses 
reported. 

Per  cent 
of  number 
answering 
inquin'  12^ 
to  number 
reported. 

175 

162 

342 

47.37 

629 

591 

1,109 

53.29 

249 

222 

398 

55.78' 

597 

581 

983 

59.10 

J228w 

208 

341 

61.00 

iOA 

'  60% 

ouy 

228 

198 

297 

66.67 

i  801 

756 

1,123 

67.32 

1  1,438 

1,415 

2,092 

67.64 

i  421 

360 

520 

69.23 

i  1,057 

985 

1,371 

71.85 

477 

470 

641 

73.32 

1,284 

1,254 

1,671 

75.04 

!  966 

920 

1,196 

76.92 

1  128 

100 

178 

56.18 

167 

141 

232 

60.78 

196 

179 

290 

61.72 

9,395 

8,851 

13,264 

66.72 

25 

20 

38 

52.63 

283 

196 

369 

53.12 

42 

32 

58 

55.17 

j  161 

120 

187 

64.17 

511 

368 

652 

56. 44 

9,906 

9,219 

13,916 

66. 25 

1  For  States  included  see  above. 


2  Appendix  2. 


Section  6.  Average  distance  between  stations. 

The  following  table  presents  according  to  the  number  of  houses 
at  the  station  the  average  distance  in  miles  to  the  nearest  elevator  or 


This  table  was  derived  from  the  replies  to  the  country  elevator  schedule  by  multi¬ 
plying  each  distance  to  the  nearest  station — 1,  2,  o,  4,  5  miles,  etc.  by  the  ni^bei 
of  times  it  appeared  in  the  schedules,  usually  foui',  corresponding  to  pie  four  directions, 
north,  south,  Ust,  and  west  (Cf.  Appendix  2),  adding  all  the  products  and  dividing  the 
resultant  total  by  the  number  of  distances. 


35 


FUNCTIONS,  AGE,  AND  DISTRIBUTION  OF  HOUSES. 

warehouse  for  all  elevators  and  warehouses  answering  the  Com¬ 
mission’s  inquiry  upon  this  subject  (xippendix  2,  inquiry  12)  : 

Table  3. — Average  distance  between  stations  distHbuted  according  to  the  number 

of  elevators  and  warehouses  at  each  station. 


Nuiniier  of  elevators  and  warehouses  at 
station. 

Average 
distance 
in  miles. 

Number  of  elevators  and  warehouses  at 
station. 

r- 

Avorage 
distance 
in  miles. 

1 . 

8.80 

9 . 

11.33 

2  . 

9.47 

10 . 

3  . 

10.16 

11 . 

11.00 

4  . 

10.91 

12 . 

5  . 

11.11 

13  and  over . 

4.00 

6  .  . 

11.09 

11.19 

Average . 

9.70 

8 . 

12. 16 

The  significant  fact  of  the  foregoing  table  is  the  tendency  for  the 
average  distance  between  stations  to  increase  with  the  number  of 
elevators  at  the  station,  a  fact  subsequently  discussed  in  section  8  of 
this  chapter. 

Section  7.  Average  number  of  country  houses  per  station. 

From  the  replies  to  inquiry  12  it  was  also  possible  to  compute  the 
average  and  most  frequently  recurring  numbers  of  elevators  and 
warehouses  at  reporting  stations.  Table  4  presents  the  results  of  this 
tabulation. 


Table  4. — Average  and  most  frequently  recurring  number  of  elevators  and  ware- 
houses  per  station  in  specified  States  and  grand  divisions. 


State  or  division.^ 

Number  of 
stations 
answering 
inquiry  12.2 

Number  of 
elevators 
and  ware¬ 
houses 
reported  at 
stations. 

Average 
number  of 
elevators 
and  ware¬ 
houses  per 
station. 

Modal 
figure  per 
station. 

ELEVATORS. 

Missouri . . j . 

174 

297 

1.71 

1 

Indiana . 

279 

520 

1.86 

1 

Illinois . 

717 

1,371 

1.91 

1 

248 

480 

1.94 

1 

571 

1, 123 

1.97 

2 

Michigan . 

195 

398 

2.04 

1 

Wisconsin . 

162 

341 

2. 10 

2 

Montana . 

269 

641 

2.38 

1 

Kansas . 

444 

1,109 

2.50 

2 

Nebraska . 

393 

983 

2.50 

2 

Miimesota . 

638 

1,671 

2.62 

2 

Oklahoma . 

127 

342 

2.69 

3 

North  Dakota . 

638 

2,092 

3.28 

3 

South  Dakota . 

362 

1,196 

232 

3.30 

3 

Middle  Atlantic  Division . 

124 

1.87 

1 

Mountain  and  Pacific  Division . 

143. 

290 

2.03 

1 

Southern  Division . 

85 

178 

2.09 

1 

Total . . - . 

5,569 

13,264 

2.38 

2 

WAREHOUSES. 

Central  Division . 

113 

187 

1.65 

1 

Southern  Division . . . 

28 

58 

2.07 

1 

Middle  Atlantic  Division . 

18 

38 

2.11 

1 

Mountain  and  Pacific  Division . 

168 

369 

2.20 

1 

Total . 

327 

652 

1.99 

1 

Grand  total . 

5,896 

13,916 

2.36 

2 

»  For  States  included,  see  sec.  5. 


*  Inquiry  12,  Appendix  2. 


36  ,  COUNTRY  GRAIN  MARKETING. 

The  average  number  of  elevators  located  at  a  station  as  ascer¬ 
tained  from  the  returns  to  the  schedule  is  2.38;  the  average  num¬ 
ber  of  warehouses,  1.99 ;  and  the  average  number  of  both  warehouses 
and  elevators,  2.36.  The  most  frequently  recurring  number  of  ele¬ 
vators  at  a  station  is  2;  of  warehouses,  1;  and  of  both  elevators 
and  warehouses,  2.  An  examination  of  this  table  reveals  the  fact 
that  the  7  more  westerly  of  the  14  principal  grain-producing  States 
for  which  the  figures  were  separately  tabulated,  i.  e.,  Montana,  Kan¬ 
sas,  Nebraska,  Oklahoma,  Minnesota,  and  the  Dakotas,  show  the 
highest  average  number  of  elevators  per  station,  while  the  7  more  east¬ 
erly  of  these  States,  i.  e.,  Missouri,  Iowa,  Wisconsin,  Indiana,  Illi¬ 
nois,  Ohio,  Michigan,  show  a  considerably  lower  average  number  per 
station.  In  all  the  States  in  the  former  area  the  number  of  elevators 
at  each  station  is  either  equal  to  or  greater  than  the  average  of  2.38 
for  all  elevators  reporting,  while  in  all  the  States  in  the  latter  area 
the  average  per  station  is  considerably  below  this  general  average. 

Section  8.  Causes  of  variations  in  number  of  houses  per  station. 

Age  of  houses. — The  explanation  of  the  variations  in  the  num¬ 
ber  of  elevators  at  local  stations  is  to  be  found  primarily  in  the 
age  of  the  grain-producing  territory  with  reference  to  various  other 
factors  in  its  development. 

Elevators  and  warehouses  to  the  number  of  4,634  reported  to  the 
Commission  the  date  of  their  construction  (Appendix  2,  inquiry 
10).  Except  for  those  built  prior  to  1880  and  subsequent  to  1915, 
these  houses  Avere  grouped  together  by  five-year  periods  according 
to  the  reported  date  of  construction.  Those  constructed  prior  to 
,  1880  Avere  placed  in  a  single  group  on  account  of  the  small  number 
reporting  construction  prior  to  that  date.  All  construction  re¬ 
ported  as  of  1915  or  later  Avas  tabulated  under  the  heading  “  1915 
and  after.”  The  first  of  the  country  elevator  schedules  were  sent 
out  early  in  1918  and  the  last  a  little  before  the  middle  of  the  year. 
The  period  covered,  therefore,  is,  roughly,  1915  to  1917.  On  ac¬ 
count  of  the  date  of  the  sources  from  Avhich  the  country  mailing 
list  was  made  up,  however,  it  can  be  accepted  that  probably  not  as 
full  a  proportion  of  1917  construction  is  included  as  might  have  been 
the  case  if  all  such  sources  were  of  a  date  subsequent  to  that  year. 

Table  5  compares  the  average  number  of  elevators  per  station  in 
different  States  with  the  relative  age  differences  of  elevators  and 
Avarehouses  as  indicated  by  the  period  of  their  construction. 

Appendix  Table  1  presents  the  period  of  construction  of  elevators 
and  warehouses  (Appendix  2,  inquiry  10)  by  States  and  grand  di¬ 
visions  and  mav  be  consulted  for  details  of  elevator  and  warehouse 
development. 


FUNCTIONS,  AGE,  AND  DISTRIBUTION  OF  HOUSES.  37 

Tablk  5. — Elevators  in  specified  SItates  constructed  prior  to  specified  dates  in 
comparison  with  the  average  number  per  station. 


State. 

Average 

number 

Elevators  constructed  prior  to — 

at 

station. 

1880 

1885 

1890 

1895 

1900 

1905 

1910 

1915 

1918 

Per  ct. 

Per  ct. 

Per  ct. 

Per  ct. 

Per  ct. 

Per  ct. 

Per  ct. 

Per  ct. 

Per  ct. 

South  Dakota . 

3.30 

0.48 

2. 40 

7.68 

12.96 

20.87 

38.61 

79. 14 

95.45 

100 

North  Dakota . 

3.28 

.19 

1.72 

3. 25 

7  07 

27  72 

70  36 

Q9  09 

inn 

Oklahoma . 

2.69 

2  13 

35  11 

63  83 

86  17 

100 

Minnesota . 

2.62 

3.28 

6.93 

10.61 

18.84 

37.  02 

70h4 

86.16 

96.  33 

100 

Nebraska . 

2.50 

.35 

.70 

11.08 

19.04 

29.  77 

47.  76 

74.06 

89.  98 

100 

Kansas . 

2.50 

.79 

1.31 

5. 51 

9.18 

14.17 

35.  69 

60.10 

77.  95 

100 

Montana . 

2. 38 

.43 

.86 

1.29 

13.41 

63. 19 

100 

Wisconsin . 

2.10 

11.20 

21.60 

29.60 

39.  20 

48.80 

68.80 

76.80 

96.00 

100 

Michigan . 

2.04 

7.09 

8.66 

16.53 

25.98 

37.00 

53.54 

75.59 

91.  34 

100 

Iowa . 

1.97 

3. 97 

7.14 

9.52 

14.  55 

25.93 

48.  42 

66.  94 

91.54 

100 

Ohio . 

1.94 

8.52 

14. 77 

21.02 

29.54 

39.  20 

61.36 

76.  70 

95.  45 

100 

Illinois . 

1.91 

4.  66 

8. 21 

13.  75 

22.62 

36.59 

61.20 

75.  61 

94.  24 

100 

Indiana . 

1.86 

4. 78 

6. 77 

10.  75 

19. 91 

29.07 

49.  79 

67. 72 

91.62 

100 

Missouri . 

1.71 

2.03 

3.38 

10, 14 

18. 25 

21.63 

33. 79 

54. 74 

81.09 

100 

All  States  and  grand 

divisions . 

2. 38 

2.88 

5. 01 

9.29 

15.01 

23. 66 

43. 97 

67.03 

87.73 

100 

An  examination  of  this  table  reveals  the  fact  that  the  seven  grain 
States  of  the  Central  West  reporting  the  highest  average  number  of 
elevators  per  station  are,  on  the  whole  and  measured  by  the  reported 
period  of  construction,  much  more  recent  grain-producing  territory 
than  the  seven  States  reporting  a  lower  concentration  of  elevators  at 
stations.  Except  in  the  case  of  Minnesota  and  Nebraska,  the  propor¬ 
tion  of  existing  construction  in  the  former  area  built  prior  to  1905 
is  consistently  below  the  average  of  total  elevator  construction,  while 
with  one  or  two  exceptions  the  proportion  in  every  State  in  the  latter 
territory  is  above  this  average.  Prior  to  1880  no  "State  in  the  former 
area  except  Minnesota  reported  as  much  as  1  per  cent  of  the  total 
reported  present  construction  and  no  construction  whatsoever  was 
reported  for  North  Dakota,  Montana,  or  Oklahoma.  This  last  situa¬ 
tion  continued  to  be  true  of  Oklahoma  even  as  late  as  1894  and  of 
Montana  until  1890. 

In  the  latter  area,  on  the  other  hand,  construction  prior  to  1880 
ranged  from  about  2  per  cent  of  the  existing  total  in  Missouri  to  as 
high  as  11  per  cent  in  Wisconsin. 

Age  of  territory. — In  the  earlier  stages  of  agricultural  de¬ 
velopment  land  is  comparatively  cheap  and  a  one-crop  system  fre¬ 
quently  prevails.  Cultivation  is  extensive  rather  than  intensive,  and 
a  given  production  is  secured  rather  by  cultivating  a  large  number  of 
acres  than  by  more  carefully  cultivating  smaller  areas.  As  a  result 
large  farms  tend  to  predominate,  and  the  average  acreage  cultivated 
per  farm  is  considerably  greater  than  in  older  and  more  thickly  settled 
regions,  where  land  is  more  expensive  and  where  intensive  cultiva¬ 
tion  and  especially  mixed  farming  have  developed.  Cheap  land,  ex¬ 
tensive  cultivation,  the  one-crop  system,  and  large  farms  in  an  agri¬ 
cultural  territory  tend  to  result  in  a  relatively  slow  development  of 
railway  facilities,  since  the  volume  of  traffic  per  square  mile  of  area 
is  relatively  low  as  compared  with  that  in  an  area  where  the  reverse 


38 


COUNTRY  GRAIN  MARKETING. 


of  these  conditions  prevails.  As  already  explained,  the  area  com¬ 
prising  the  T  more  Avesterly  of  the  14  principal  grain  States,  i.  e., 
Oklahoma,  Kansas,  Nebraska,  Minnesota,  Montana,  and  the  Dakotas, 
is  a  relatively  younger  grain-producing  area  than  that  including 
Wisconsin,  Michigan,  Ohio,  Indiana,  Illinois,  Iowa,  and  Missouri. 
In  the  former  area  there  is  more  extensive  cultivation  than  in  the 
latter,  crops  are  less  diversified,  the  farms  are  larger,  and  the  rail¬ 
way  net  much  less  developed.  As  a  result  the  average  distance  be¬ 
tween  stations  is  greater  than  in  the  States  lying  to  the  eastward, 
the  territory  from  which  each  station  draws  is  larger,  and  a  larger 
number  of  elevators  at  the  station  is  required  to  handle  the  volume 
of  grain  offered.  This  appears  somewhat  more  clearly  from  the 
following  table,  which  shows  the  average  number  of  elevators  per 
station  in  the  principal  producing  States  in  comparison  with  the 
average  distances  between  elevator  stations,  size  of  farms,  and  rail¬ 
way  mileage  per  100  square  miles. 

Table  6. — Average  number  of  elevators  per  station  in  principal  grain-producing 
States  as  compared  with  average  distances  between  elevator  stations,  acreage 
of  iinproved  land  per  farm,  and  railway  mileage  per  100^  square  miles. 


State. 

Average 
number 
elevators 
per  station. 

Average 
distance  to 
nearest  ele¬ 
vator  or 
warehouse. 

Acres  of 
improved 
land  per 
ferm.i 

Railway 
mileage  per 
100  square 
miles  of 
territory 
in  1916.2 

Rmitb  "Dalrnta  . 

3.30 

11.23 

203.84 

5.57 

Mnrfli  TAalrnti\  . 

3.28 

10.81 

275.08 

7.52 

Olrl^Vinmci  . . «... 

2.69 

11.70 

92.28 

9.29 

. 

2.62 

9.68 

125.80 

11.37 

2.50 

9.98 

188.02 

8.03 

Transas.  . 

2.50 

10.36 

168. 15 

11.51 

Montana . . . 

2.38 

13.63 

138.87 

3.32 

Wisfnnsiri  . 

2.10 

9.85 

67.22 

13.89 

lUinbipfari-  .  . 

2.04 

9.61 

62.00 

15. 46 

T  owa  . - . 

1.97 

8.64 

135. 87 

17. 70 

Ohio  . . - . - . . 

1.94 

7. 10 

70.67 

22. 28 

Tllinnis  . . . 

1.91 

6.85 

111.35 

21.63 

TriHiana.  . 

1.86 

7. 81 

78.57 

20.63 

Missouri . 

1.71 

10.94 

88.66 

11.98 

All  Hl-ato«!  anH  CTand  HivisioTlS  . 

2. 38 

9.62 

75.21 

8.54 

- 1 - 

* 

1  Statistical  Abstract,  TJ.  S.,  1918,  Tables  97-99,  from  data  of  Census  of  1910. 

2  Ibid.,  Table  213,  compiled  from  Poor’s  Manual  and  I.  C.  C.  Statistics  of  Railways. 


An  examination  of  Table  6  shows  that  in  the  more  westerly  States 
of  the  central  group,  where  the  average  number  of  elevators  is 
greatest  per  local  station,  the  average  distance  between  houses  is 
also  greatest,  while  in  the  more  easterly^  States  with  a  lower  concen¬ 
tration  per  station  the  average  distance  is  considerably  less.  All  the 
States  in  the  former  group  show  an  average  distance  between  sta¬ 
tions  above  9.62  miles,  the  average  for  all  States  and  grand  divisions 
ranging  from  9.68  miles  in  Minnesota  to  13.63  miles  in  Montana.  In 
the  latter  group  the  average  distance  ranges  from  6.85  miles  in  Illi¬ 
nois  to  10.94  in  Missouri.  AVisconsin  and  Missouri  alone  report  an 
average  higher  than  the  average  for  all  States  and  grand  divisions. 

Size  of  farms. — The  average  acreage  of  all  improved  land  on  farms 
in  the  United  States  according  to  the  census  of  1910  was  75.2. 


These  figures  are  employed  as  being  the  latest  available  at  the  time  of  writing  this 


FUNCTIONS,  AGE,  AND  DISTRIBUTION  OF  HOUSES. 


39 


All  the  States  in  the  more  westerly  group  of  the  central  grain 
•  States  report  an  acreage  of  improved  land  far  in  excess  of  this  aver¬ 
age,  ranging  from  above  92  acres  in  Oklahoma  to  about  275  acres  in 
North  Dakota.  Six  out  of  the  seven  States  in  this  region  report  an 
average  acreage  of  improved  land  in  excess  of  120  acres. 

In  the  more  easterly  area,  on  the  other  hand,  the  acreage  of  im- 
})roved  land  per  farm  ranges  from  about  62  acres  in  Michigan  to 
slightly  less  than  136  in  Iowa.  Only  four  out  of  the  seven  States 
in  this  group,  however,  report  an  acreage  in  excess  of  the  average  and 
only  two,  Iowa  and  Illinois,  an  average  in  excess  of  90  acres. 

Kaiiavay  deveiaipment. — As  also  appears  from  Table  6,  the  average 
railwa}^  mileage  per  100  square  miles  of  territory  in  the  United  States 
is  8.51.  In  tlie  7  more  westerly  of  the  14  central  grain  States,  the 
railway  mileage  per  100  square  miles  is  below  this  average,  except 
in  three  States,  Kansas,  Oklahoma,  and  Minnesota,  and  ranges  from 
as  low  as  3.32  in  IMontana  to  as  high  as  11.51  in  Kansas.  In  the  east¬ 
ern  group  of  States,  on  the  other  hand,  the  average  State  mileage  is 
far  above  the  general  average  in  every  case,  and  no  State  in  this 
group  reports  an  average  railway  mileage  as  low  even  as  the  highest 
average  mileage  reported  by  any  one  of  the  western  group  of  States 
under  discussion.^® 

Conclusion. — Summarizing,  it  may  be  stated  that  the  higher  aver¬ 
age  number  of  houses  per  station  shown  by  the  more  westerly  of  the 
principal  grain  States — Montana,  the  Dakotas,  Kansas,  Nebraska,  and 
Oklahoma — and  the  lower  average  number  in  the  more  easterly 
group — Wisconsin,  Iowa,  Illinois,  Mich^an,  Indiana,  Ohio,  and  Mis¬ 
souri — is  probably  due  primarily  to  differences  in  the  degree  of  de¬ 
velopment  of  the  two  areas  as  grain-producing  territory.  Intensive 
cultivation  and  especially  mixed  farming  in  the  eastern  and  older 
area,  combined  with  its  industrial  development,  has  greatly  expanded 
'  railway  facilities.  As  a  result  of  this  great  development  of  the  rail¬ 
way  net,  the  area  serA^ed  by  a  given  mileage  in  the  eastern  territory 
has  tended  to  decline.  Since  countr}^  houses  must  be  located  at  points 
where  transportation  is  available,  the  increase  in  such  facilities 
renders  possible  the  location  of  elevators  and  warehouses  closer  to¬ 
gether  than  in  areas  less  well  supplied  with  transportation  and  where 
the  aA-erage  distance  between  stations  is  in  consequence  greater.  As  a 
result,  therefore,  there  is  less  concentration  of  the  elevators  and  ware¬ 
houses  at  particular  stations  in  the  east,  because  the  territory  seiwed 
by  each  station  is  relatively  small  as  compared  with  areas  less  well 
developed  in  transportation  facilities. 

In  Minnesota  and  the  most  westerly  of  great  grain-producing 
States  of  the  Central  Wesl^the  reA^erse  of  the  foregoing  situation  ob¬ 
tains.  This  area  is,  as  indicated,  a  relatively  ncAv  grain-producing 
territory  as  compared  with  the  eastern  group  of  States  under  dis¬ 
cussion.  Extensive  cultivation  of  one  or  two  crops  is  still  largely 
preA^alent  and  mixed  farming  is  of  comparatively  small  importance, 
at  least  in  scA^eral  of  these  States.  Industrially  this  territory  is  also 
much  less  deA-eloped  than  the  more  easterly  States,  as,  for  example, 
Illinois,  Michigan,  and  Ohio.  In  consequence,  transportation  facili- 

It  is  not.  of  course,  intended  to  imply  that  the  differences  in  the  railway  net  in 
these  two  areas  are  alone  due  to  differences  in  a,a:ricultural  development;  the  industrial 
development  as  well  is  responsible,  and  in  the  eastern  group  is  probably  a  more  important 
factor. 


/ 


40  COUNTRY  GRAIN  MARKETING. 

ties  are  comparatively  underdeveloped,  and  the  area  served  by  a  given 
mileage  is  much  greater  than  in  the  eastern  grain  States,  and  the 
average  distance  between  stations  is  higher.  The  lesult  is  a  gieatei 
concentration  of  elevators  at  stations  in  the  more  westerly  group 
of  the  central  grain-producing  States.  •  •  i 

While  the  higher  concentration  of  houses  at  stations  in  the  west¬ 
ern  States  of  the  central  grain-producing  territory  is  probably  ac¬ 
counted  for  in  the  main  by  the  foregoing  explanation,  it  ought  to  be 
pointed  out  that  the  large  development  of  cooperatives,  at  least  in 
Minnesota,  Montana,  and  the  Dakotas,  has  probably  tended  to  in¬ 
crease  this  concentration.  In  these  States  elevators  were  organized 
in  no  inconsiderable  measure  to  combat  the  line  companies,  and  one 
of  these  elevators  is  very  likely  to  be  found  at  a  very  large  propor¬ 
tion  of  the  stations  where  one  or  more  line  companies  are  operating. 

Section  9.  Distribution  of  houses  by  types. 

By  single  types. — The  principal  characteristics  of  the  eight  differ¬ 
ent  types  of  country  elevators  and  warehouses,  as  well  as  the  more 
important  distinctions  between  types,  have  been  discussed  in  section 
4.  The  following  table  presents  the  number  and  percentage  distri- 
tion  of  the  9,906  elevators  and  warehouses  reporting  to  the  Commis¬ 
sion  according  to  the  type  of  house  (Appendix  2,  inquiry  9)  : 


Table  1— Numbers  and  percentages  of  different  types  of  elevators  and  ware¬ 
houses  in  the  United  States. 


Country  elevators. 

Country  warehouses. 

Total  country  elevators 
and  warehouses. 

Type. 

Number 

reporting. 

Per  cent 
of  total. 

Number 

reporting. 

Per  cent 
of  total. 

Number 

reporting. 

Per  cent 
of  total. 

LINE. 

nnTnTnftrm'fl.l  . 

3,383 

100 

36.01 

126 

24. 66 

3,509 

35.42 

PnnnArativA  . 

1.06 

6 

1.17 

106 

1.07 

Mill  . 

655 

6.97 

98 

19. 18 

753 

7.60 

Maltster . 

30 

.32 

30 

.30 

Total . . . 

4,168 

44. 36 

230 

45.01 

4,398 

44.40 

INDIVIDUAL. 

Pnnpp.ra.tive  . 

1,731 

18.42 

31 

6.07 

1,762 

17.79 

TnHp.nftndpnt  . 

2,971 

31.62 

234 

45.  79 

3,205 

32.35 

Mill . 

520 

5. 54 

16 

3.13 

536 

5.41 

Maltster . 

5 

.05 

5 

.05 

Total . 

 - 

5,227 

55. 64 

281 

54. 99 

5,508 

55. 60 

Grand  total . 

9,395 

1 

100.00 

511 

100.00 

9,906 

1  100.00 

1  Percentages  in  this  and  subsequent  tables  do  not  always  add  to  100  (see  Ch.  I,  sec.  3). 


Line  houses  of  all  types,  4,398  in  number,  constitute  44.40  per  cent 
of  all  houses  reporting  and  all  individual,  5,508  in  number,  55.60 
per  cent.  The  great  bulk  of  the  line  houses  are  of  the  commercial 

Specific  instances  of  the  high  degree  of  concentration  in  the  territory  under  dis¬ 
cussion  are  interesting.  Some  years  ago  there  were  at  Eureka,  S.  Dak.,  16  elevators. 
These  elevators,  however,  drew  grain  from  hundreds  of  miles  of  territory,  and  it  is  re¬ 
ported  that  it  was  not  uncommon  for  them  to  handle  from  two  to  three  million  bushels 
of  grain  a  year.  Even  to-day,  Beach,  N.  Dak.,  has  eight  elevators  which  draw  from  very 
long  distances.  Prom  the  information  obtained,  it  api^ears  probable  that  the  points 
showing  the  greatest  concentration  are  located  at  the  ends  of  branch  lines. 


FUNCTIONS,  AGE,  AND  DISTRIBUTION  OF  HOUSES.  41 

line  type  (8,509).  This  type  is  numerically  the  most  important, 
composing  over  85  per  cent  of  all  the  elevators  and  warehouses  re¬ 
porting.  The  independent  is  the  second  in  importance  with  above 
82  per  cent  of  the  total  houses  reporting.  The  only  other  type  of 
very  considerable  numerical  importance  is  the  individual  coopera¬ 
tive.  Houses  of  this  class  amount  to  nearly  18  per  cent  of  the  tytal. 
Mill  line,  individual  mill,  cooperative  line,  and  line  and  individual 
maltster  houses  follow  one  another  in  importance  in  the  order  named. 

The  distribution  of  elevators  by  types  is  in  approximately  the 
same  proportion  as  the  distribution  of  elevators  and  warehouses 
combined.  The  number  of  warehouses  reporting  is  so  small  as  com¬ 
pared  with  the  number  of  elevators  that,  although  the  type  distribu¬ 
tion  of  the  former  varies  greatly  from  the  latter,  it  but  slightly 
alfects  the  combined  figures. 

By  consolidated  types. — As  indicated  in  section  4,  the  eight  types 
of  houses  may  be  consolidated  into  five  from  the  standpoints  of  con¬ 
trol  and  ownership  and  the  general  characteristics  of  the  business, 
i.  e.,  commercial  line,  independent,  cooperative,  mill,  and  maltster. 

The  following  statement  presents  the  numbers  and  percentages  of 
elevators  and  warehouses  according  to  these  five  types : 


Type. 

Country  elevators. 

Country  warehouses. 

Total  country  elevators 
and  warehouses. 

Number 

reporting. 

Per  cent 
of  total. 

Number 

reporting. 

Per  cent 
of  total. 

Number 

reporting. 

Per  cent 
of  total. 

Commercial  line . 

3,383 

36.01 

126 

24.66 

3,509 

35.42 

Cooperative . 

1,831 

19.49 

37 

7.24 

1,868 

18.86 

Independent . 

2,971 

31.62 

234 

45. 79 

3,205 

32. 35 

Mill . . . 

1,175 

12. 51 

114 

22.31 

1,289 

13.01 

\f  n It^fpr  ... 

35 

.37 

35 

.35 

Total . , . 

9, 395 

100.00 

511 

100.00 

9,906 

‘100.00 

Section  10.  Relative  importance  of  cooperatives. 

Distribution  of  cooperatives. — The  foregoing  tables  indicate  the 
present  predominance  of  the  commercial  line  and  independent  types 
of  elevators  and  warehouses  which  until  very  recently  have  been  by 
far  the  most  important  in  the  growth  and  development  of  country 
houses.  For  several  reasons  the  importance  of  the  cooperatives,  how¬ 
ever,  should  not  be  measured  merely  by  the  percentage  relationship 
which  the  total  number  of  such  houses  bears  to  the  total  houses  re¬ 
porting.  The  first  of  these  reasons  is  the  distribution  of  cooperative 
houses  and  the  second  is  the  volume  of  business  handled  by  this  type 
of  house.  A  third  consideration  is  the  growing  importance  of  the 
cooperative  house  relative  to  other  types  as  indicated  by  the  reported 
construction  of  houses. 

Although  in  practically  every  one  of  the  large  grain-producing 
States  the  cooperative  houses  are  exceeded  in  number  by  either,  or 
both,  the  commercial  line  and  independent  houses,  the  influence 
which  is  exerted  by  the  first-mentioned  type  in  determining  the  prices 
paid  for  grain  at  country  points  is  probably  greater  than  that  of  any 
other  type  of  house.  This  is  due  to  the  fact  that  the  distribution  of 
:  the  cooperatives  is  usually  such  that  there  is  seldom  to  be  found  more 


42 


COUNTRY  GRAIN  MARKETING. 


than  one  cooperative  at  a  single  station,  although  there  may  be  two, 
three,  or  even  more  houses  oi  either  one  or  more  of  the  other  types 
operating  at  the  same  point.  In  other  words,  although  the  number 
of  the  cooperatives  is  relatively  small  as  compared,  for  example,  with 
the  commercial  line  and  independent  types,  the  former  probably 
operate  at  a  disproportionately  large  number  of  stations  as  com¬ 
pared  with  either  of  the  latter.^® 

As  elsewhere  discussed  in  this  volume  (Ch.  IV),  the  cooperative 
house  came  into  existence,  in  large  measure,  in  order  to  remedy  the 
situation  created  by  the  lack  of  competition  in  country  grain  buying 
and  the  practices  employed  by  the  various  other  types  of  elevators 
and  warehouses.  As  a  rule  one  cooperative  elevator  in  a  locality 
was  all  that  was  necessary  in  order  to  secure  the  economic  relief 
desired  by  the  farmers,  although  two,  three,  four,  and  even  more 
houses  of  another  or  other  types  might  be  in  operation  at  the  point 
in  question.  In  consequence  there  was  little  duplication  of  coopera¬ 
tives  at  individual  stations,  and,  as  a  result,  in  spite  of  their  numerical 
weakness  as  compared  with  the  commercial  lines  or  independents, 
their  influence  in  the  country  market  is  generally  as  great  if  not 
greater  than  that  of  any  other  type. 

Volume  of  grain  handled. — The  number  and  proportions  of  co¬ 
operative  houses  also  fail  as  an  index  of  the  importance  of  this  type 
by  reason  of  the  extensiveness  of  the  business  of  the  average  coopera¬ 
tive  house.  Though  this  subject  is  discussed  in  detail  in  a  later  chap¬ 
ter  (see  Ch.  V),  it  may  be  pointed  out  here  that  the  average  coopera¬ 
tive  handles  a  considerably  larger  volume  of  grain  than  does  any  other 
type  of  country  house,  a  fact  which  greatly  increases  the  significance 
of  its  operations. 

Kecent  increases  in  cooperatives. — Thirdly,  as  indicated  above, 
the  importance  of  the  cooperative  house  is  greater  than  that  indicated 
by  the  number  of  houses  by  reason  of  the  fact  that  the  number  of 
houses  of  this  type  has  been  and  is  increasing  much  more  rapidly  at 
present  than  is  the  case  with  any  other  type.  This  appears  from  the 
figures  of  reported  construction  by  type  of  house  discussed  in  the 
next  section. 

Section  11.  Growth  and  decline  of  different  types  of  elevators  and  ware¬ 
houses. 

Period  of  construction  of  all  houses. — The  following  table  shows 
the  percentage  distribution  of  all  reporting  elevators  and  warehouses 
according  to  the  period  of  construction : 

Table  8. — Proportions  of  all  reporting  elevators  and  ivarehouses  constructed  in 

specified  periods. 


Period  of  construction. 

Percent¬ 
age  of 
total. 

Cumula¬ 
tive  per¬ 
centage. 

Period  of  construction. 

Percent¬ 
age  of 
total. 

Cumula¬ 
tive  per¬ 
centage. 

Prior  to  1880 . 

2.87 

2. 87 

1900-1904 . 

20.03 

43.55 

1880-1884 

2.05 

4.92 

1905-1909 . 

22.94 

66. 49 

1 88.'1-1 88Q 

4.25 

9.17 

1910-1915 . 

21.06 

87. 55 

1 800-1 804 

5.80 

14.97 

1915  and  after . 

12. 45 

100.00 

1895-1899 . 

8.55 

23.52 

^  Although  roughly  there  are  about  twice  as  many  commercial  line  elevators  as 
cooperatives  in  the  four  Northwestern  States  of  Minnesota,  North  and  South  Dakota, 
and  Montana,  it  was  admitted  by  several  Minneapolis  grain  men  thoroughly  familiar 
with  the  country  grain  business  and  including  two  or  three  large  line  operators,  that 
roughly,  and,  of  course,  with  frequent  exceptions,  there  was  a  cooperative  elevator  located 
at  almost  every  point  where  there  was  a  line  house. 


FUNCTIONS,  AGE,  AND  DISTRIBUTION  OF  HOUSES.  43 

Only  133  reporting  elevators  and  warehouses  now  in  operation,  or 
2.87  per  cent,  were  constructed  prior  to  1880,  and  in  fact  only  about  15 
per  cent  were  built  .before  1895.  Considerably  over  75  per  cent  of 
them  were  erected  since  1899. 

The  foregoing  figures  should  not  be  taken  as  indicative  of  the  rate 
of  growth  from  period  to  period  in  the  total  number  of  elevators, 
because  many  of  the  older  elevators  have  ceased  to  operate  and  have 
been  dismantled,  while  others  have  been  destroyed.  Although  nearly 
10,000  elevators  and  warehouses  replied  to  the  Commission’s  schedule, 
only  about  one-half  of  these  answered  the  inquiry  as  to  the  date  of 
construction.  It  is  logical  to  assume  that  a  large  proportion  of  those 
failing  to  report  are  elevators  which  were  built  during  the  earlier 
periods  under  discussion,  since,  other  things  being  equal,  the  older 
the  elevator  the  greater  the  number  of  changes  in  the  management 
and  the  less  the  likelihood  that  the  date  of  construction  can  be  fixed. 
Furthermore,  many  of  the  older  elevators  and  Avarehouses  have  been 
destroyed  by  fire,  tornado,  or  otherwise,  and  have  been  rebuilt. 
Many  of  the  older  elevators  and  warehouses  have  also  been  driven 
out  of  business  by  the  competition  of  other  elevators  which  may  have 
been  constructed  at  a  later  date.  For  example,  in  the  northwest 
territory  many  of  the  line  elevators,  which  were  as  a  rule  old  houses, 
haA^e  been  closed  for  competith^e  or  other  reasons. 

Age  of  different  types. — Table  9  presents  the  results  of  tabu¬ 
lating  the  period  of  elevator  and  warehouse  construction  (Appendix 
2,  inquiry  10)  by  type  of  house. 


.  -V 


‘ 

S;  1  «' 


I'. 


■ ' '  'X  •  Ml*,’,”'-  ■  / ;  ,'• 


func'tions,  age,  and  distribution  of  houses.  45 

The  figures  in  Table  0  do  not  reflect  with  absolute  correctness  the 
facts  with  reference  to  the  growth  and  decline  of  different  types, 
because  a  considerable  percentage  of  houses  have  doubtless  passed 
from  one  type  to  another  since  they  were  originally  built.  Outside 
of  this  factor,  however,  there  would  seem  to  be  no  good  reason  for 
assuming  that  the  differences  in  the  amount  of  construction  of  one 
tyjie  as  compared  with  another  in  a  particular  period  would  be 
caused  by  other  considerations  than  actual  differences  in  the  extent 
of  construction  by  different  types  within  the  period.  This  of  course 
assumes  that  the  number  of  houses  involved  is  large  enough  to  be 
fairly  representative.  As  over  4,500  houses  reported,  which  is  about 
one-seventh  of  the  probable  number  in  the  United  States,  it  is 
thought  that  the  sample  is  of  sufficient  size  to  reflect  approximately 
actual  conditions  of  development  as  between  types  in  spite  of  such 
shifts  and  changes  in  control  as  have  unquestionably  taken  place 
and  the  relatively  small  amounts  of  construction  reported  for  the  ear¬ 
lier  years. 

Analysis  of  age  distribution. — Table  10  presents  a  summary  of 
the  percentages  in  Table  9  and  is  designed  to  show  the  age  distribu¬ 
tion  of  the  existing  construction  in  the  case  of  each  of  the  five  prin¬ 
cipal  types  of  country  houses. 

Table  10. — Percentages  of  different  types  of  existing  elevators  and  ivarehouses 

constructed  in  specified  periods. 


Percentage  constructed. 


Period  of  construction. 

All 

elevators 
and  ware¬ 
houses. 

Commer¬ 
cial  line. 

Mill 

line. 

Inde¬ 

pendent. 

Individ¬ 
ual  coop¬ 
erative. 

Individ¬ 
ual  mill. 

Before  1880 . 

2.87 

1.44 

0.75 

5.05 

0.96 

6.93 

1880-1884 . 

2.05 

1.59 

1.26 

3.29 

.64 

2. 92 

1885-1889 . 

4.25 

4.33 

3.77 

5.30 

2.45 

4. 75 

1890-1894 . 

5.80 

4. 94 

8.29 

7.24 

2.56 

9.85 

1895-1899 . 

8.55 

9.79 

6. 28 

8.58 

6.92 

.  10. 22 

Total  to  1899 . 

23.52 

22. 09 

20. 35 

29.46 

13. 53 

34. 67 

1900-1904 . 

20.03 

23. 01 

25.88 

19.11 

15.65 

18. 98 

1505-1909 . 

22. 94 

23.84 

18.09 

21.24 

27. 16 

20.07 

1910-1915 . 

21.06 

20.65 

22. 36 

19. 54 

24.92 

16.42 

After  1915 . 

12. 45 

10.40 

13. 32 

10. 65 

18.  74 

9.  85 

Total  since  1899 . 

76. 48 

77.90 

79. 65 

70.54 

86.47 

65. 32 

Of  the  4,634  elevators  and  warehouses  reporting  the  period  of 
construction,  23.52  per  cent  were  built  prior  to  1900  and  76.48  per 
cent  subsequently.  Tlie  percentage  of  commercial  and  mill  line  con¬ 
struction  in  each  of  these  two  periods  is  approximately  the  same,  but 
the  proportions  of  the  other  types  built  prior  to  1900  and  subse¬ 
quently  reveal  considerable  variations  from  the  figures  for  all  ele¬ 
vators  and  warehouses  and  the  mill  and  commercial  line  types. 
According  to  these  figures,  nearly  35  per  cent  of  the  total  number  of 
individual  mill  houses  reporting  were  built  prior  to  1900  and  only  a 
little  over  65  per  cent  subsequently.  Independent  elevators  also  show 
a  somewhat  higher  proportion  of  construction  prior  to  1900  than  the 
total  construction  reported  and  a  somewhat  lower  proportion  subse- 


46 


COUNTRY  GRAIN  MARKETING. 


quent  to  that  date.  In  the  case  of  the  individual  cooperatives,  how¬ 
ever  the  reverse  of  the  last  situation  obtains.  Only  about  13.5  per  cent 
of  the  houses  of  this  type  operating  in  1917  were  built  before  1900 
while  about  86.5  per  cent  were  erected  subsequently.  As  compared 
with  the  total  elevator  construction  or  with  the  construction  of  any 
other  of  the  five  important  types,  therefore,  a  very  much  lower  pro¬ 
portion  of  the  individual  cooperatives  were  built  prior  to  1900  and  a 
very  much  higher  proportion  subsequent  to  that  period. 

Relative  growth  and  decline  of  types. — Table  11  indicates  the 
relative  importance  of  different  types  of  houses  at  different  dates 
from  1880  to  1917  as  shown  by  the  ratio  of  houses  of  each  type  to  total 
of  all  types  constructed  prior  to  such  dates. 


Table  11. — Perrcniage  distribution  between  types  for  all  elevators  and  warehouses  constructed  prior  to  specified  dates. 

Constructed  prior  to — 


y 


FUNCTIONS,  AGE,  AND  DISTRIBUTION  OF  HOUSES. 


47 


O  'rt  — 


1918 

Per 

cent. 

04005  05 
^  iO 

06  1-H  06 

04 

38.30 

20.26 

35.46 

5.91 

.07 

61.70 

100.00 

Num¬ 

ber. 

r-  1-H  00  05 
— <  lO  05 

CO  CO 

^H 

1,775 

05  CO  X 

2, 859 

4, 634 

1915 

Per 

cent. 

29.09 

1.04 

8.50 

.22 

38. 85 

18.81 
36. 18 
6.09 
.07 

61.15 

-  »  - 

8 

S 

^H 

Num¬ 

ber. 

1,180 

42 

345 

9 

1,576 

763 

1,468 

247 

3 

2,481 

4,057 

1910 

Per 

cent. 

29.47 

.94 

8.31 

.23 

38.95 

17.17 
37.23 
6.55  ! 
.10 

61.05 

100.00 

Num¬ 

ber. 

O0  050t^ 
QC410 

0  C4 

1,200 

529 

1,147 

202 

3 

X 

X 

3,081 

1905 

Per 

cent. 

29.44 
.59 
9. 12 
.30 

39.45 

'  X  Tj<  X  VO 

VO  VO  04  1-H 

c605I>^ 

1  1-H  X 

60.55 

100,00 

Num¬ 

ber. 

^C4-^CO 
05  f-H  00 

10  1-H 

CP  1  TfH  X  X 

35  05  Tjl 

r»  1  04 1-H 

1,222 

2,018 

1900 

Per 

cent. 

0  CO  CO 
|>  kO 

0  ■  t>I  * 
04 

35.14 

11.65 
44.40 
8. 72 
.09 

64.86 

8 

8 

Num¬ 

ber. 

r-(  0  ^  VO 

0  X 
?4 

383 

r-.  VO  1-H 
04  X05 
t-H 

707 

1,090 

1895 

Per 

cent' 

23.34 

.29 

8.07 

.14 

CO 

COCOO'^ 
05  1-H  Cp  ^ 

060  05 

68. 16 

8 

8 

rH 

Num¬ 

ber. 

<N  04  CO  1-H 
0  VO 

1-H 

221 

04Xt>- 1-H 
0  ’1^H  CO 

X 

694 

1890 

Per 

cent. 

V 

04  ^  1-H  ^ 
X  04  04 

04  *  VO  * 

C4 

28.71 

0  1-H  Tj< 
05  -If  04 

X  04  05 

VO 

71.29 

8 

8 

Num¬ 

ber. 

i 

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C5  04 

04 

04 

XrfiOi-H 
C0  04-rt< 

04 

303 

VO 

04 

0 

00 

00 

^H 

Per 

cent. 

17.54 

.44 

3.51 

21.49 

6.58 

60.09 

11.84 

78. 51 

8 

8 

Num¬ 

ber. 

0  1-H  X  * 

• 

49 

VO  I 

t-h  X  04  • 

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• 

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f 

179 

228 

1880 

Per 

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'  04  •  04  • 

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t  1— H  *  .«  • 

1  •  • 

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C£> 

6.77 

62.41 

14.28 

83.46 

100.00 

Num¬ 

ber. 

19 

3 

22 

9 

83 

19 

111 

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t>-  rr  T«i  10 

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05  04  10 
1000  CO 


CO  1-H 


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i&saa 


# 


48 


COUNTRY  GRAIN  MARKETING. 


This  table  confirms,  in  general,  the  conclusions  drawn  from  the 
preceding  table  with  reference  to  the  development  of  different  types 
of  country  houses,  but  in  addition  renders  it  easier  to  trace  the  rela¬ 
tive  increase  and  decline  in  importance  of  these  types  since  1880. 
The  most  striking  result  shown  is  the  sharp  and  uninterrupted  de¬ 
cline  in  the  relative  numerical  importance  of  the  independent  type  of 
house.  Of  the  elevators  reported  as  constructed  prior  to  1880,  the 
independent  comprises  above  62  per  cent  of  the  total.  From  this  high 
point  it  has  steadily  declined  in  relative  importance  until  just  prior 
to  1915  it  constituted  only  about  36  per  cent  of  the  total  number  of 
elevators  and  was  even  somewhat  less  important  relatively  as  of  the 
date  of  the  returns. 

Of  equal,  though  perhaps  not  so  striking  interest,  is  the  rise  of  the 
individual  cooperative.  Prior  to  1895  the  cooperatives  at  no  time 
constituted  as  much  as  10  per  cent  of  the  total  number  of  elevators 
and  warehouses  of  all  types  and  such  increases  in  the  proportion  of 
these  houses  as  did  occur  were  relatively  very  slight.  From  1895  on, 
however,  the  proportion  of  individual  cooperatives  in  the  total 
country  house  construction  reported  has  pronouncedly  increased. 
Just  prior  to  1915  the  individual  cooperatives  constituted  close  to 
19  per  cent  of  the  total  number  of  existing  houses  reporting  and 
above  20  per  cent  at  the  date  of  the  returns. 

In  relative  numerical  importance  the  commercial  line  houses  under¬ 
went  a  comparatively  steady  increase  until  about  1904.  These  houses 
constituted  14.28  per  cent  of  those  reported  prior  to  1880,  and  29.44 
per  cent  in  1904.  At  this  point  the  relative  increase  of  this  type 
apparently  stopped  and  the  figures  indicate  that  since  1910  this  type 
has  undergone  a  slight,  but  perceptible,  decline. 

The  relative  numerical  importance  of  mill  line  houses  also  appears 
to  have  reached  its  maximum  about  1904.  Since  1910  it  seems  to  have 
-remained  about  stationary.  The  individual  mill,  on  the  other  hand, 
like  the  independents,  seems  to  have  undergone  a  comparatively 
steady  decline  throughout  the  period.  Nearly  15  per  cent  of  the 
existing  elevators  constructed  prior  to  1880  were  of  this  type,  while 
at  the  date  of  the  return  this  type  constituted  something  less  than 
6  per  cent  of  the  total  reporting.^^ 

Up  to  about  1904,  according  to  these  figures,  the  relative  numeri¬ 
cal  importance  of  line  houses  of  all  types  steadily  increased,  wMe 
the  importance  of  the  individual  houses  of  all  types  steadily 
This  increase  of  the  lines  was  due  chiefly  to  the  increase  in  HP 
numerical  importance  of  the  commercial  line  type,  but  also  to  a  con¬ 
siderable  development  of  the  mill  line.  The  decline  in  the  nu^  jrical 
importance  of  the  individual  house  was  due  to  a  decline  in  b(  h  the 
independent  and  individual  mill  types,  chiefly  the  former.  The 
individual  cooperatives  were  increasing  relatively  althouj  i  very 
slowly  during  this  period. 

Since  1904  the  relative  importance  of  all  lines  and  all  individual 
houses  has  apparently  remained  about  stationary,  the  lines  at  just 
below  39  per  cent  and  the  individual  at  just  above  61  per  cent  of  the 
total  houses  reporting.  In  the  case  of  the  lines  this  is  due  to  the  fact 

21  It  seems  probable  that  tbe  individual  mill  elevator  has  been  unfavorably  affected  by 
the  larger  and  larger  scale  of  commercial  flour  milling,  especially  in  th<‘  liard-wheat 
areas  of  the  West  and  the  decline  in  importance  of  the  local  milling  industry.  See 
Commission’s  Report  on  Commercial  Wheat  Flour  Milling. 


FUNCTIONS,  AGE,  AND  DISTRIBUTION  OF  HOUSES. 


49 


that  both  the  mill  and  commercial  line  types  have  remained  almost 
stationary,  a  slight  decrease  in  the  commercial  lines  having  been  com¬ 
pensated  by  slight  increases  in  the  cooperatives  and  mill  lines.  In 
the  case  of  the  individual  elevators  the  decline  in  numerical  im¬ 
portance  noted  in  the  independents  and  mills  prior  to  1904  continued 
throughout  the  balance  of  the  period,  and  the  maintenance  of  the 
relative  imjx>rtance  of  individual  houses  .as  a  whole  has  been  due  to 
the  compensating  growth  of  the  cooperatives. 

Growth  and  decline  of  consolidated  tyi^es. — Table  12  presents 
the  relative  growth  and  decline  of  different  types  of  elevators  and 
Ava rehouses  on  the  same  basis  as  in  the  preceding  section,  all  co¬ 
operatives,  both  line  and  individual,  however,  being  consolidated  as 
one  type,  and  also  all  maltster  and  all  mill  houses. 

Section  12.  Geographical  distribution  of  different  types  of  elevators  and 

warehouses. 

Extent  of  geographical  variations. — Appendix  Table  2  indicates 
the  distribution  of  elevators  and  warehouses  separately  and  by  types 
in  specified  States  and  grand  divisions.  This  table  reveals  a  wide 
discrepancy  in  the  relative  importance  of  different  types  of  eleva¬ 
tors  in  different  States.  For  example,  line  elevators  of  all  types  in 
Xorth  Dakota  compose  59.81  per  cent,  and  all  individual  elevators 
40.19  per  cent  of  the  total  eleA^ators  reporting,  while  Missouri  reports 
21.05  per  cent  of  the  former  and  78.95  per  cent  of  the  latter. 

Similar  contrasts  appear  in  the  distribution  of  different  subtypes  of 
line  and  individual  elevators.  In  Xorth  Dakota,  Montana,  Nebraska, 
^linnesota,  and  South  Dakota  commercial  line  elevators  constitute,  re¬ 
spectively,  54.17  per  cent,  49.90  per  cent,  48.58  per  cent,  46.42  per  cent, 
and  43.37  per  cent  of  the  total  elevators  reported  in  each  of  these 
States,  while  this  type  of  elevator  comprised  only  9.38  per  cent,  10.96 
per  cent,  and  13.60  per  cent  of  all  the  eleA^ators  reported  in  the  States 
of  Kansas,  Missouri,  and  Wisconsin,  respectively.  The  proportion 
of  mill  line  elevators  to  total  elevators  as  betAveen  States  ranges  from 
38.29  per  cent  in  Oklahoma  to  less  than  1  per  cent  in  Iowa.  Other 
States  with  A^ery  low  percentages  of  mill  line  elevators  are  Nebraska, 
Illinois,  Indiana,  and  South  Dakota.  The  cooperative  line  elevators 
are  unimportant,  both  absolutely  and  relatively  speaking.  The  only 
State  having  an  appreciable  number  of  such  elevators  is  Kansas, 
Avhich  reported  37  of  such  houses,  or  about  6  per  cent  of  the  total 
eleA^ators  reported  in  the  State.  Line  eleA-ators  of  maltsters  appear 
only  in  three  States — Ohio,  Minnesota,  and  Wisconsin.  In  each  of 
the  first  two  States  this  type  of  elevator  constitutes  less  than  1  per 
cent  of  the  total  elevators  reported.  Wisconsin,  howcA^er,  has  nearly 
9  per  cent  of  such  eleA^ators.  In  every  State  independent  elevators 
are  a  type  of  considerable  importance.  In  fact,  the  lowest  per¬ 
centages  in  any  States  are  found  in  Montana  and  North  Dakota, 
each  reporting  approximately  14  per  cent  of  this  type  of  elevator. 
All  the  other  States  show  larger  percentages  than  these,  the  highest 
being  Michigan,  with  about  51  per  cent.  The  individual  cooperative 
elevator  constitutes  more  than  20  per  cent  of  all  the  elevators  in 
each  of  the  States  of  North  Dakota,  Minnesota,  South  Dakota,  loAva, 
Kansas,  Nebraska,  and  Montana,  but  less  than  8  ])er  cent  of  those  in 
Indiana,  Ohio,  ^fichigan,  Missouri,  Wisconsin,  and  Oklahoma. 

0004°— 20 - 4 


Diai^ram  A. — Per  cent  (ratio)  of  commercial  line  elevators  to  all  classes  of  elevators  reporting  in 

fourteen  principal  srain-producing  States. 


FUNCTIONS,  AGE,  AND  DISTRIBUTION  OF  HOUSES. 

Differences  in  the  relative  importance  of  individual  mill  elevators 
are  likewise  very  noticeable  as  between  certain  States.  Missouri, 
I  Indiana,  Ohio,  Wisconsin,  and  Michigan  report,  respectively,  26.75, 
i  14.96,  13.56,  13.16,  and  12.45  per  cent  of  such  houses,  while  Iowa 
'  and  Xorth  Dakota  have  only  between  1  and  2  per  cent.  Individual 
!  elevators  of  maltsters  appear  only  in  Ohio  and  Wisconsin  and  are 
I  insignificant  in  number.  Diagrams  A  to  E  present  graphically  the 
relative  importance  of  the  five  principal  types  of  elevators  in  the 
principal  producing  States. 

Geographical  distribution  of  principal  types  of  elevators. — An 
anal^^sis  of  the  distribution  of  types  of  elevators  reveals  the  fact  that 
the  14  principal  grain-producing  States  fall  into  two  more  or  less 
well-defined  areas  or  divisions,  the  first- being  the  line  and  cooperative 
area  and  the  second  the  independent  and  mill  area.  The  former 
includes  Minnesota,  Montana,  North  and  South  Dakota,  and  Ne¬ 
braska.  'The  first  four  of  these  States  comprise  the  group  frequently 
referred  to  in  this  report  as  the  Northwestern  States,  a  term  com¬ 
monly  employed  by  the  grain  trade  to  designate  this  area.  As  is 
explained  in  a  succeeding  chapter,  the  commercial  line  elevator  was 
one  of  the  earliest,  if  not  the  first,  type  of  country  house  to  develop 
in  this  territory,  and  it  seems  to  have  maintained  a  numerical  pre¬ 
dominance  ever  since  this  early  development,  despite  the  growing- 
importance  of  the  cooperative  type.  The  mill  and  independent  area 
includes  the  balance  of  the  14  large  grain-producing  States  which 
were  separately  tabulated,  i.  e.,  Indiana,  Illinois,  Iowa,  Michigan, 
Ohio,  Oklahoma,  Wisconsin,  Kansas,  and  Missouri. 

The  following  table  presents  the  proportion  of  commercial  line, 
independent,  cooperative,^^  and  mill  elevators  which  are  reported  in 
each  of  the  14  principal  grain  States.  Maltster  houses  are  disre¬ 
garded  on  account  of  their  numerical  unimportance. 

Table  13. — Proportimis  of  commercial  line,  independent,  individual,  cooperative, 

and  mill  elevators  in  specified  States. 


- - - - - 

state. 

Commer¬ 

cialline 

elevators. 

Individ¬ 
ual  co¬ 
operative 
elevators. 

Inde¬ 

pendent 

elevators. 

All  mill 
elevators. 

Mill  line 
elevators. 

Individ¬ 
ual  mill 
elevators. 

North  Dakota . . 

54. 17 

23.71 

14.67 

7.23 

5.42 

1.81 

Montana . 

49.90 

23.90 

13.63 

11.32 

6.71 

4.61 

Nebraska . 

48.58 

26. 30 

20.77 

-  3.52 

.67 

2.85 

Minnesota . 

46.42 

21.34 

19.08 

12.08 

7.87 

4.21 

South  Dakota . 

43.37 

23.08 

25.26 

6.72 

4.24 

2. 48 

Indiana . 

31.59 

5.46 

44. 18 

18.76 

3.80 

14.96 

Illinois . 

29.99 

14.47 

48.34 

5.86 

2.74 

3. 12 

Iowa . 

28.96 

25.84 

42.45 

2.00 

.25 

1.75 

Michigan . 

27.31 

2v8l 

51.41 

18. 47 

6.02 

12. 45 

Ohio.  . 

21.75 

7.63 

49.72 

19.21 

5.65 

13.56 

Oklahoma . 

20.57 

4.57 

29.71 

45. 15 

38. 29 

6. 86 

Wisconsin . 

13.60 

5.70 

49. 12 

21.05 

7.89 

13. 16 

Missourii . 

10.96 

6. 14 

46.05 

36.84 

10.09 

26. 75 

Kansas . 

9.38 

21.30 

35.93 

27. 51 

19.08 

8. 43 

All  States  and  grand  divisions . 

36.01 

V' 

18.42 

1 

31.62 

12.51 

6.97 

5.54 

Nebraska  and  the  four  States  commonly  known  as  the  Northwest 
report  percentages  of  commercial  line  and  of  individual  coopera¬ 
tive  elevators  considerably  above  the  average  for  all  States  and 


Excluding  the  small  number  of  cooperative  lines  reporting. 


FUNCTIONS,  AGE,  AND  DISTRIBUTION  OF  HOUSES.  53 

^rand  divisions.  On  the  other  hand,  all  other  States  report  per¬ 
centages  of  commercial  line  elevators,  and,  excepting  Iowa  gind 
Kansas,  percentages  of  cooperatives  very  much  below  the  respective 
general  averages  of  these  two  types.  In  the  case  of  independent  and 
mill  elevators  approximately  the  reverse  of  the  foregoing  distribu¬ 
tion  obtains.  Nebraska  and  the  four  Northwestern  States  are  all 
below,  and  in  most  ca^es  considerably  below,  the  average  in  inde¬ 
pendent  elevators,  and  are  also  lower  than  the  average  in  mill  ele¬ 
vators.  Each  of  the  remaining  14  States,  with  the  exception  of 
Oklahoma,  is  considerably  above  the  average  for  the  United  States 
in  its  proportion  of  independent  elevators  and  also  excepting  Illinois 
and  Iowa  in  its  proportion  of  mill  elevators.  Broadly  speaking, 
therefore,  it  may  be  stated  that  the  proportions  of  commercial  line 
and  of  cooperative  elevators  in  the  principal  grain-producing  States 
vary  directly  with  one  another,  as  do  also  the  proportions  of  inde¬ 
pendent  and  all  mill  elevators,  while  the  two  former  vary  inversely 
with  the  two  latter.  Diagram  F  (facing  p.  58)  presents  graphically 
the  foregoing  direct  and  inverse  correlations.  This  distribution  of 
different  types  of  elevators  among  different  States  is  of  considerable 
importance  in  explaining  certain  other  statistical  facts  in  subsequent 
chapters  of  this  report. 

Section  13.  Explanation  of  geographical  distribution  of  types  of  elevators. 

Commercial  lines  and  independents. — It  is  impossible  to  explain 
with  any  great  degree  of  accuracy  the  reasons  for  all  of  the  fore¬ 
going  variations  in  the  geographical  distribution  of  types  of  ele¬ 
vators.  Certain  facts,  however,  may  be  pointed  out  which  undoubt¬ 
edly  have  some  bearing  upon  this  distribution.  As  has  been  shown, 
the  proportions  of  commercial  line  and  independent  elevators  tend  to 
A^ary  inversely  with  one  another  as  between  the  various  States. 
These  two  types  of  houses  are  closely  analogous  to  one  another  in 
that  they  are  conducted  solely  as  merchandising  undertakings,  buy¬ 
ing  and  selling  for  a  profit.  Such  houses  are  owned  and  operated 
by  private  concerns  or  individuals,  and  unless  they  are  able  to  obtain 
a  sufficient  volume  of  grain  to  make  this  merchandising  profit,  there 
is  no  reason  for  their  continuing  operations.  It  appears  probable 
that  in  the  very  early  days  the  independent  type  developed  in  the 
eastern  portion  of  the  central  grain-producing  area  and  so  firmly 
established  itself  there  that  line  houses  never  attained  the  relative^ 
importance  which  they  did  west  of  the  Mississippi.  The  latter' 
area,  according  to  the  information  obtained,  especially  Minnesota 
and  the  Dakotas,  developed  with  comparative  rapidity  as  grain- 
producing  territory^  Local  capital  accumulations  were  not  at  first 
nearlv  sufficient  to  keep  pace  with  this  development,  and  as  a  result 
elevator  construction  was  financed  and  large  lines  built  up  by  con¬ 
cerns  operating  from  the  terminal  market  which  either  possessed  the 
capital  or  were  able  to  obtain  it.  (See  Ch.  IV,  secs.  4  and  I,  and 
Ch.  X,  sec.  5,  for  further  discussions.) 

Cooperative  development. — ^The  importance  of  the  cooperative 
moA'ement  since  1895  has  been  already  alluded  to  in  a  preceding  , 
section  in  connection  with  the  period  of  construction  of  different 
types  of  houses.  This  age  factor  perhaps  partially  explains  the 
distribution  of  the  cooperatives  and  the  tendency  of  this  type  to  A^ary 
’  directlv  with  the  commercial  lines. 


\ 


55 


FUNCTIONS,  AGE,  AND  DISTRIBUTION  OF  HOUSES.  » 

The  folloAviiig  table  presents  the  percentage  of  cooperative  eleva¬ 
tors  in  14  States,  in  comparison  with  the  total  amount  of  existing 
elevator  construction  which  is  reported  in  each  of  such  States  prior 
to  1880  and  prior  to  1900. 


Table  14. — Proportion  of  cooperative  elevators  in  specified  States  in  comparison 
with  the  proportion  of  existing  elevators  huilt  prior  to  specified  dates. 


State. 

• 

Per  cent 
of  co¬ 
operative 
elevators. 

Per  cent  of  total 
construction  re¬ 
ported  prior  to — 

1880 

1900 

27. 18 

0.79 

14. 17 

27. 14 

.35 

29. 77 

26.59 

3.97 

25.93 

25. 16 

.86 

24.63 

.48 

20.87 

23. 92 

7.07 

21.73 

3.68 

37.02 

15.79 

4.66 

36. 59 

8.76 

8.52 

39.20 

6. 14 

2.03 

21.63 

5. 70 

11.20 

48.80 

5. 46 

4.78 

29.07 

4.57 

2. 13 

2. 81 

7. 09 

37.00 

Average  al  States  and  divisions . 

19. 48 

2.' 88 

23.66 

Reference  to  this  table  shows  that  the  cooperatives  constitute  less 
than  10  per  cent  of  the  total  elevators  in  Oklahoma,  Missouri,  and  in 
each  of  the  five  important  grain  States  east  of  the  Mississippi,  except 
Illinois,  while  all  of  the  other' central  grain  States  report  a  propor¬ 
tion  of  cooperative  elevators  considerably  above  the  average  for  the 
United  States.  This  table  also  indicates  that  prior  to  1900  the  de¬ 
velopment  of  elevators  in  the  latter  area  was  considerably  slower  on 

the  whole  than  in  the  former  area. 

Reference  to  the  tables  of  the  period  of  construction  by  types  in 
section  11  above  shows  that  there  was  comparatively  little  devel¬ 
opment  of  the  cooperatives  prior  to  about  the  last  five  years  of  the 
last  century.  The  territory,  roughly,  west  of  the  Mississippi  being 
relatively  undeveloped  at  the  time  when  the  rise  of  the  cooperatives 
began,  probably  offered  a  more  fertile  field  for  this  type  of  organiza¬ 
tion  than  did  the  older  and  more  developed  area  to  the  east.  vVhile 
these  facts  perhaps  account  partially  for  the  large  proportion  of  co¬ 
operatives  in  the  States  west  of  the  Mississippi,  the  age  of  me  terri¬ 
tory  is  not  the  sole  reason  for  the  foregoing  distribution.  Owing  to 
numerous  agreements,  local  and  otherwise,  and  various  other  prac¬ 
tices  among  the  lines  and  independents,  especially  in  the  Dakotas, 
Minnesota,  Iowa,  and  Nebraska,  the  farmer  became  convin^d  that 
there  was  a  lack  of  competition  in  country  grain  buying.  This  at¬ 
titude  upon  his  part  undoubtedly  was  a  most  potent  factc^  iii  stimu¬ 
lating  the  development  of  the  cooperatives  in  this  area,  (bee  Ch.  1 V , 

secs.  8-12.)  ,  .  •  .L  .L  •  .Li 

elf.vators. — Mill  elevators  are  relatively  important  in  those 

States  in  which  the  local  milling  industry  is  highly  developed  and 


- - •  I 


56 


COUNTRY  GRAIN  MARKETING. 


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FUNCTIONS,’  AGE,  AND  DISTRIBUTION  OF  HOUSES.  57 

is  less  centralized  than  in  the  Northwest. The  seven  States  having 
the  largest  percentages  of  mill  elevators  are,  in  the  order  of  impor¬ 
tance,  Oklahoma,  Missouri,  Kansas,  Wisconsin,  Ohio,  Indiana,  and 
Michigan.  With  the  exception  of  Missouri  (Kansas  Ci-ty)  no  one  of 
these  States  possesses  a  milling  center  anywhere  nearly  comparable 
wit'll  Minneapolis.  Each  of  them,  however,  according  to  the  census 
of  manufacturers  for  1914,  produced  over  3,000,000  b^arrels  of  flour 
Jn  the  census  year,  and  all  these  States,  with  the  exception  of  Okla¬ 
homa,  were  among  the  first  13  States  in  milling  production  in  the 
same  census  year. 

Maltster  elevators. — Nearly  all  maltster  elevators,  both  line  and 
individual,  are  located  in  Wisconsin,  a  fact  probably  attributable  to 
the  number  of  maltsters  located  in  this  State  who  obtained  barley 
through  their  own  country  elevators. 

Section  14.  Geographical  distribution  of  warehouses. 

Of  the  511  warehouses  making  returns,  283,  or  more  than  50  per 
cent,  are  located  in  the  Mountain  and  Pacific  division.  The  explana¬ 
tion  of  this  relatively  high  percentage  of  the  warehouses  in  these 
States,  as  compared  with  the  other  three  divisions  (Appendix  Table 
2),  is  due  to  the  fact  that,  as  previously  indicated,  the  great  bulk  of 
the  grain  on  the  Pacific  coast  is  handled  in  sacks,  and  that  in  conse¬ 
quence  there  are  relatively  few  elevators  in  the  territory,  the  country 
grain  being  handled  almost  exclusively  through  flat  warehouses. 

The  Central  division  reported  a  total  of  161  warehouses  and  the 
Southern  and  Middle  Atlantic  divisions  only  a  comparatively  small 
number.  No  warehouses  of  maltsters  and  no  line  warehouses  were 
reported  to  the  Commission  in  the  Middle  Atlantic  division.  In 
the  Southern  division  only  14  line  warehouses  were  reported,  and 
as  a  result  it  seems  possible  to  say  that  line  warehouses  are,  prac¬ 
tically  speaking,  confined  to  the  Mountain  and  Pacific  and  Central 
divisions.  It  seems  probable  that  the  most  of  the  warehouses  in 
the  Central  division  are  relics  of  earlier  days,  since,  according  to 
all  information  the  Commission  was  able  to  obtain,  there  is  little  or 
no  handling  of  grain  in  the  Central  division  except  in  bulk.  Some¬ 
thing  over  36  per  cent  of  the  Mountain  and  Pacific  warehouses  are 
independents,  nearly  31  per  cent  commercial  lines,  and  a  little  over 
22  per  cent  are  owned  by  mill  lines.  In  the  States  on  the  coast, 
especially  in  Washington  and  Oregon,  the  grain  business  is  chiefly 
in  the  hands  of  mills  and  large  grain  merchandising  concerns,  and 
the  line  warehouses  are  largely  the  outgrowth  of  this  situation.  Un¬ 
til  very  recently  the  cooperative  movement  in  the  country  grain 
business  has  not  appeared  extensively  in  this  area,  which  accounts, 
presumably,  for  the  relatively  small  proportion  of  cooperative  houses 
reported.  In  the  Pacific  northwest  there  does  not  exist  the  same 
antagonism  to  the  line  company  that  is  found  in  the  northwestern 
grain  States,  for  the  reason  that,  as  already  stated,  these  warehouses 
are  generally  used  chiefly  for  storage  and  only  secondarily  for  mer¬ 
chandising.  In  the  former  area  the  farmer  stores  his  grain  in  a 
warehouse,'  and  receives  therefor  a  warehouse  receipt.  Samples 
of  his  grain  are  sent  to  many  of  the  buyers  and  they  send  bids  to 
the  farmer,  who  sells  when  he  desires,  the  warehouse  receiving  a 


“  For  further  development  of  this  point  see  Ch.  IV,  secs.  5  and  G. 


58 


COUNTRY  GRAIN  AlARKETING. 


■>  ^ 


FUNCTIONS,  AGE,  AND  DISTRIBUTION  OF  HOUSES. 


59 


fee  for  storing  the  grain.  This  system  eliminates  the  buying  and 
selling  country  middleman,  and  consequently  there  is  less  likelihood 
of  dissatisfaction  with  the  warehouse  on  the  part  of  the  farmers. 
Another  factor  which  places  the  farmer  upon  a  somewhat  friendly 
basis  with  commercial  line  and  mill  line  warehouses  is  that  in  this 
territory  such  warehouses  finance  farmers  to  a  considerable  extent. 
This  financial  assistance  is  sometimes  by  way  of  furnishing  sacks, 
though  often  an  outright  loan  of  money.  The  security  for  such 
loans  is  either  a  note  or  a  grain  contract. 

The  distribution  of  elevators  by  types  in  the  Mountain  and  Pacific 
divisions  corresponds  roughly  to  the  distribution  of  warehouses  by 
types. 


I 


Chapter  III. 

PHYSICAL  CHARACTERISTICS  OF  COUNTRY  ELEVATORS 

and  warehouses. 

Section  1.  Description  of  country  elevator.  . 

In  the  inquiry  into  the  country  marketing  of  gram, 
was  secured  regarding  the  physical  characteristics  of  elevators  a 
warehouses,  especially  with  reference  to  the  materia  •. 

such  elevators  and  warehouses  are  constructed,  their  total  capacity, 
and  the  number  and  capacity  of  the  bins  (see  Appendix  ,  .  . 

10  and  11).  This  chapter  presents  the  results  of  these  inqu  r  e 

together  with  other  descriptive  details.  ^  ,  ,  ,  -j.  „ 

The  typical  country  elevator  is  constructed  of  wood,  with  a  ca¬ 
pacity  of  between  25,000  and  26,000  bushels,  and  contains  some  10 

^^^rL^'usual  construction  of  wooden  elevators  is 

as  wood  cribbing.  The  peculiarity  of  this  construction  lies  in  the 

fact  that  the  house  is  built  by  laying  the  lumber  for 

bins  with  flat  side  down  instead  of  sideways,  as  in  I’ 

inU  Usually  2  by  4  inch  or  2  by  6  inch  lumber  is  laid  in  this 

falhion  and  securely  nailed.  This  type  of  construction 

strength  and  rigidity  and  prevents  the  bulging  of  the  sides  of  the 

Cse  or  bin  walls  and  consequent  leakage  from  the  pressure  of  gram 

At  times  cribbed  houses  are  covered  with  sheet  metal  as  a  protection 

agmnst  ordinary  country  elevator  is  usually  roughly  rectangular 
in  shape,  the  dfmensions  depending  upon  the  ®apacity  of  the  Jouse 
The  greatest  dimension  is,  as  a  -rule,  the  height.  In  the  middle 

the  elevator  is  the  work  floor,  where  the  ®l®7t®'’ 

cated  This  floor  usually  runs  across  the  entire  house.  Flanki  g 

Sis  work  floor  on  opposite  sides  are  the  stock  bins,  which  are  set 

in  blocks  or  series  of  2,  3,  4,  or  more,  as  the  case  “^e'work 

extend  from  the  top  to  the  bottom  of  the  hou^.  Above  the  work 

floor  are  the  work  bins,  usually  3  in  J*'^®^7oSe  wldS'^S 

nracticallv  always  smaller  than  the  stock  bins.  Ihe  one  which  i 

Focated  on  the  same  side  of  the  house  as  the  railroad  track  is  com¬ 
monly  known  as  the  shipping  bin;  the  middle  .°*^®>  “  *^®. 
bin ;  \nd  the  third  and  farthest  from  the  railroad  track,  as  the 

Asindicated  above,  the  average  country  ®l®^^t:?>'X‘!JfYsLTbins 
or  11  bins.  In  the  case  of  an  11-bin  house,  a  block  of  ^-stock  bins 

would  be  located  at  one  end  or  side  of  the  ®l®7f  ^h®  side  of 

the  work  floor,  another  block  of  4  at  the  opposite  side  or  end  and  the 
3  trk  bins  above  the  work  floor.  Houses  with  a  larger  or  smaller 

'TTho  system  of  bln  arrangement  Is  not  uniform  and  varies  with  the  ideas  of  the 
owners. 

60 


f 


/ 


CHAKACTERISTICS  OF  COUNTRY  HOUSES. 


61 


number  of  bins  usually  have  a  greater  or  less  number  of  stock  bins, 
the  increase  or  decrease  not  resulting  in  a  change  in  the  number  of 
work  bins  unless  the  house  is  either  very  large  or  A^ery  small. 

While  the  average  bin  capacity  of  all  elevators  is  2,471  bushels,  as 
shoAvn  in  section  5  of  this  chapter,  this  average  includes  both  stock 
and  Avork  bins.  As  a  matter  of  fact  the  capacities  of  these  tAvo  classes 
of  bins  vary  considerably,  the  stock  bins  usually  holding  from  tAVo 
to  four  or  fiA^e  times  as  much  as  the  Avork  bins.  In  the  elevators 
visited  by  the  agents  of  the  Commission  the  stock  bins  usually  held 
from  3,000  to  4,000  bushels  each;  the  shipping  bin  around  1,200 
bushels;  and  the  cleaning  and  transfer  bins  about  1,000  bushels  each. 

The  wagon  scale  for  weighing  the  farmers’  grain  is  usually  located 
on  the  side  of  the  house  opposite  to  the  side  nearest  the  railroad  track 
in  a  lean-to,  which  protects  the  scales  at  all  times  whether  the  house 
is  open  or  closed.  This  wagon  scale  is  placed  directly  over  the  load¬ 
ing  pit  which  slopes  doAvn  into  the  bottom  of  the  elevator.  Up  to 
and  oA-er  this  scale  and  doAvn  on  the  other  side  runs  the  elevator. 
driA^eway,  Avhich  is  sometimes  inclosed  its  entire  length,  although  this 
is  not  usual.  In  deliA^ering  grain  to  the  elevator  the  farmer  drives 
up  this  inclined  roadway  onto  the  scale,  unloads  his  grain,  and  driA^es 
down  on  the  other  side.^ 

The  office  of  the  country  elevator  is  usually  in  an  annex  to  the 
elevator  proper.  Sometimes  it  is  in  the  scale  lean-to  on  the  opposite 
side  of  the  driveway  from  the  Avork  floor ;  sometimes  it  is  located  in 
a  shed  against  the  side  of  the  elevator  proper,  usually  just  off  the 
drWeAvay ;  in  still  other  cases  it  is  in  a  separate  building. 

The  operating  equipment  of  mi  aA^erage  country  elevator  is 
described  hereafter  in  connection  with  the  use  of  each  machine  em¬ 
ployed  in  the  handling  of  grain  (Ch.  V).  Many  elevators,  how¬ 
ever,  contain  various  machines  and  contrivances  not  found  at  the 
average  house.  Special  cleaning  machines,  oats  clippers,  man  lifts  or 
passenger  elevators,  dump  scales,  etc.,  are  included  in  the  equipment 
of  many  concerns. 

The  power  plants  found  at  country  elevators  are  usually  internal 
combustion  engines,  gasoline  predominating.  A  few  electrically 
operated  houses  are  found  in  Montana  and  possibly  exist  elsewhere. 
The  power  plants  are  frequently  located  in  a  building  separate  from 
the  elevator  on  account  of  fire  risk,  etc.,  and  the  office  is  often  in  the 
same  building. 

Some  elevators  handling  side  lines  have  additional  buildings  for 
this  purpose,'  such  as  coal  sheds  and  small  warehouses,  Avhere  such 
side  lines  are  stored. 

Section  2.  Average  capacity  of  elevators  and  warehouses. 

Results  of  tabulation. — Appendix  Table  3  shows  the  avemge 
capacity  of  different  types  of  elevators  and  Avarehouses  in  specified 
States  and  grand  divisions.  This  appendix  table  may  be  consulted 

for  the  details  of  capacity  by  types. 

Table  15  presents  the  aA^erage  edacity  of  elevators  and  Avarehouses 
of  all  types  reporting  in  specified  States  and  grand  divisions,  and  also 
the  average  capacity  for  all  the  elevators  and  Avarehouses  of  each  type. 

*  Owing  to  the  recent  development  of  motor  truck  delivery  of  grain  by  farmers,  the 
elevators  have  found  it  necessary  in  many  cases  to  enlarge  their  scales  and  pits,  build 
concrete  driveways,  etc. 


62 


COUNTRY  GRAIN  MARKETING. 


Table  15. — Average  capacity  of  elevators  and  imrehouses  in  the  United  States 

by  types  and  by  States  and  grand  divisions. 


States  and  grand  divisions.^ 

Average 

capacity. 

ELEVATORS. 

OlrlahniTto.  . . . . 

14,482 

15,068 

17,017 

17,119 

17,309 

20,048 

22,865 

24,006 

24,428 

25, 421 

26, 305 

29, 602- 

32,060 

33,046 

9, 968 
16, 858 
30, 109 

. . 

Afis«jnnri  . . . 

TT 54T1  .  . . 

ojiio  . < . 

NfvLrn'ilrn.  . . . 

Tnrtinnn.  . 

I  owa 

RmitVi  Tlnlfotn . . . 

Minnpsnta  . - . 

Mnntnnn. 

Tllinni.Q  . 

Mnrtli  . . . 

MiHHIa  a  tlcintip.  T^ivisiou . 

.Qmi+hprn  DiviQinTi  . . 

Mmmtoin  QTlfl  Pn.pifip  Divi5?ion . 

Average  elevator  capacity  all  States 

onrl  crronH  rlivisions  .  . . . 

25,527 

WAREHOUSES. 

MiHHIa  Atlontin  Divission  . 

7,500 
14,979 
19,479 
49, 403 

. . 

Mr>nn+ciin  oiir)  Pnp.ifin  Division . 

Average  warehouse  capac  ty  all  States 
and  divisions . . . 

34, 199 

Average  elevator  and  warehouse  capac¬ 
ity,  all  States  and  grand  divisions . . 

25, 867 

Type. 

Average  capacity. 

Eleva¬ 

tors. 

Ware¬ 

houses. 

Elevators 
and  ware¬ 
houses. 

LINE. 

Commercial . 

Cooperative . 

Mill . 

Maltster . 

26,202 
23,688 
25,290 
32, 647 

32,703 

50,625 

52,532 

26,376 

24,714 

28,296 

32,&47 

All  line . 

26,017 

42,336 

26, 695 

INDIVIDUAL. 

Cooperative . 

Independent . 

Mill . 

29,797 

22,342 

24,724 

70,000 

31,442 

26,887 

18,000 

29,822 

22,583 

24,587 

70,000 

All  individual . 

25,142 

27,042 

25,213 

/ 

All  types . 

25, 527 

34, 199 

25, 867 

1  For  States  included  in  these  grand  divisions  set-  Ch.  II,  sec.  5. 


Capacity  variations  of  elevators  and  warehouses. — The  average 
capacity  of  the  9,158  elevators  and  warehouses  of  all  types  in  the 
United  States  which  reported  their  capacity  is  25,867  bushels ;  of  all 
elevators,  25,527,  and  of  all  warehouses,  34,199. 

In  the  consideration  of  the  average  capacity  of  elevators  and  ware¬ 
houses  by  types,  those  operated  by  maltsters  may  be  disregarded  since, 
as  appears  in  appendix  Table  3,  they  are  too  insignificant  in  number 
eitner  seriously  to  affect  the  average  capacity  of  all  elevators  or  to  be 
of  any  significance  for  comparative  purposes.  The  average  capacity 
of  warehouses  in  the  United  States  is  greater  than  the  average  ca¬ 
pacity  of  elevators,  not  only  in  total  but  also  as  between  all  line  and 
all  individual  elevators  and  between  the  various  types  of  line  and  in¬ 
dividual  concerns  except  individual  mill  warehouses.  ^  ^ 

The  range  of  difference  between  the  average  capacities  of  different 
types  of  elevators  and  of  all  elevators  and  warehouses  combined,  how¬ 
ever,  is  not  very  great,  owing  to  the  relatively  small  number  of  ware¬ 
houses.  The  individual  cooperative  has  the  highest  average  elevator- 
warehouse  capacity  of  any  type  (excluding  malster  houses)  and  the 
independent  the  lowest,  the  average  capacity  of  the  former  being 
29,822  bushels  and  of  the  latter,  22,583  bushels.  The  average  capaci¬ 
ties  of  other  types  are  found  somewhere  between.  The  types  of  ele- 


CHARACTERISTICS  OF  COUNTRY  HOUSES. 


63 


vators  showing  respectively  the  highest  and  lowest  average  capacities 
are  the  same  as  the  above  and  the. differences  between  the  highest  and 
lowest  average  elevator  capacities  and  the  highest  and  lowest  average 
elevator-warehouse  capacities  are  very  slight. 

Section  3.  Type  variations  in  capacity. 

Elevators. — The  individual  cooperative  elevator,  with  a  capacity 
of  29,797,  shows  a  higher  average  capacity  than  any  other  type  of  ele¬ 
vator  (except  maltsters),  being  something  over  3,000  bushels  larger 
than  the  commercial  line  elevator,  which  has  the  second  largest  aver¬ 
age  capacity.  Mill  line  elevators,  individual  mill,  and  independent 
elevators  follow  in  the  order  named. 

Various  explanations  may  be  given  for  the  high  average  capacity 
of  cooperatives  and  the  low  capacity  of  independents.  In  the  first 
place  the  cooperative  elevator  expects  to  handle  the  greater  propor¬ 
tion  of  all  the  grain  at  the  station,  or  at  least  all  the  grain  grown  by 
its  own  stockholders.  As  stated  by  one  line  operator  in  the  North¬ 
west  “  They  figure  that  the  elevator  is  for  their  benefit  and  they  de¬ 
sire  to  have  it  big  enough  to  hold  all  their  grain  if  necessary.”  The 
application  of  the  cooperative  principle  tends  to  procure  a  large  cli¬ 
entele  and  steadier  patronage,  ayd  as  a  result  the  cooperatives  handle 
a  larger  volume  of  grain  than  the  other  types.  (Ch.  V,  sec.  8.) 

Since  the  independent  is  owned  as  a  rule  by  one  individual,  or 
at  most  by  a  few,  the  owner  frequently  does  not  possess  the  capital 
to  build  a  large  house,  and  also  has  on  the  whole  more  difficulty  in 
borrowing  funds  for  construction  purposes  than  does  the  coopera¬ 
tive  elevator.  Again,  in  contrast  to  the  cooperative,  the  independ¬ 
ent  has  no  assured  clientele  or  patronage.  It  must  compete  with 
every  other  type,  including  in  many  cases  the  cooperative,  and  in 
order  to  show  a  return  on  investment  it  endeavors  to  hold  down  its 
construction  costs  to  as  low  a  figure  as  possible. 

Similar  considerations  to  the  foregoing  probably  explain  why  the 
cooperative  also  shows  a  higher  average  capacity  than  does  the  com¬ 
mercial  line  house,  which,  as  previously  explained,  bears  a  good  deal 
•of  resemblance  to  the  independent.  The  reason  that  the  commercial 
line  house  shows  a  higher  average  capacity  than  the  independent 
may  perhaps  be  found  in  the  fact  that  it  does  not  labor  under  as 
great  limitations  with  reference  to  procuring  capital  as  does  the  in¬ 
dependent  elevator.  ♦  <*  -n 

A  possible  explanation  for  the  relatively  small  capacity  of  mdl- 
owned  elevators,  both  individual  and  line,  is  found  in  the  chara^^r 
of  the  business  of  a  mill  elevator.  As  previously  pointed  out,  the 
mill  elevator  is  as  a  rule  rim  primarily  as  an  adjunct  to  the  milling 
business  and  not  as  a  merchandising  undertaking.  The  mill  elevator, 
therefore,  in  the  large  proportion  of  cases  confines  itself  chiefly  to  the 
purchase  of  wheat,  the  grain  which  it  actually  mills  and  buys  but 
a  small  proportion  of  other  grain.  In  consequence  it  does  not  tend 
to  run  high  in  capacity.  (See  Gh.  V,  sec.  8.) 

Warehouses. — ^The  average  capacity  of  mill  warehouses  of  the 
commercial  line  type  is  52,000  bushels,  and  of  the  individual  type 
only  18,000  bushels.  The  latter  figure,  as  shown  in  Appendix  Table 
3,  is  based  on  returns  from  only  10  warehouses  and  is  of  little  statis¬ 
tical  significance. 


64 


COUNTRY  GRAIN  MARKETING. 


The  high  capacity  of  mill  line  warehouses  is  due  almost  entirely 
to  the  large  size  of  these  houses  in  the  Pacific  Northwest,  where  the 
average  capacity  of  this  type  of  w^arehouse  is  nearly  61,000  bushels 
as  compared  with  less  than  20,000  reported  by  the  Central  and  South¬ 
ern  divisions.  (Appendix  Table. 3.) 

As  is  indicated  by  the  last  preceding  table,  the  coast  warehouses 
of  all  types  show  an  average  capacity  of  approximatelj?^  50,000 
bushels,  while  the  average  capacity  of  warehouses  in  the  Middle 
Atlantic,  Southern,  and  Central  divisions  is  in  no  case  as  high  as 
20,000  bushels.  The  variations  in  capacity  of  different  types  of  wivre- 
houses  shown  in  Appendix  Table  3  are  due  chiefly  either  to  the  high 
capacities  of  the  coast  houses  as  compared  with  the  warehouses  in 
other  sections  or  else  to  the  scantiness  of  the  data.  Only  359  ware¬ 
houses  reported,  and  when  these  houses  are  distributed  bj^  tj^pes  the 
number  reporting  is  necessarily  small. 

Section  4.  Geographical  variations  in  capacity. 

Elevators. — There  is  a  decided  variation  in  the  average  capacity 
of  elevators  by  States.  In  four  States  the  average  capacity  is  above 
that  of  all  Sta'tes  and  grand  divisions,  namely.  North  Dakota  with  an 
average  of  33,046  bushels,  Illinois  with  32,060,  Montana  with  29,602, 
and  Minnesota  with  26,305.  The  average  capacities  of  the  other  10 
States  are  below  the  average  for  all  States  and  divisions.  The  ex¬ 
planation  of  these  variations  appears  to  be  found  in  the  differences 
in  the  type  of  elevators  located  within  the  various  States  and  the 
variations  in  average  capacities  by  types.  The  following  table  shows 
the  average  capacities  of  elevators  in  the  14  principal  grain-growing 
States  in  comparison  with  the  proportion  of  individual  cooperative, 
commercial  line,  mill,  and  independent  elevators. 

Table  16. — Average  elevator  capacity  m  specified  States  in  comparison  with 

the  proportions  of  specified  types  of  elevators. 


!■  i. , 


state. 

■Average 

elevator 

capacity. 

Individual 

cooperative 

elevators. 

Independ¬ 
ent  ele¬ 
vators. 

Commercial 

line 

elevators. 

All  mill  ? 
elevators. 

Olrlahnnia  . 

14,482 

4.57 

29.71 

20.57 

45. 15 
18. 47 
36.84 
21.05 
27. 51 
19.21 
3.52 
18. 76 
2.00 
6.72 

Minhipan  . 

15,068 

2.81 

51.41 

27.31 

Miasnnri  . 

17,017 

6. 14 

46.05 

10.96 

Wisennsin  . 

17, 119 

5.70 

49. 12 

13.60 

TTansas  . 

17,309 

21.30 

35.93 

9.38 

Ohio  . 

20,048 

7.63 

49.72 

21.75 

M  pLraslca  . 

22, 865 

26.30 

20.77 

48. 58 

TnrUn.na  ..  . . 

24,006 

5. 46 

44.18 

31.  59 

. 

24,428 

25. 84 

42. 45 

28. 96 

SoutH  Dakota . 

25, 421 

23.08 

25. 26 

43.37 

MiTinp-SOta  . 

26,305 

21.34 

19.08 

46. 42 

12.08 

.11.32 

5.86 

7.2-3 

Montana  . 

29,602 

23.90 

13.63 

49. 90 

Tllinnls  . 

32, 060 

14.47 

48.34 

29. 99 

North  Dakota . . . 

33,046 

23.71 

14.67 

54. 17 

Average  all  States  and  grand  divisions . 

25,527 

18. 42 

31.62 

36.01 

12. 51 

As  shown  by  Table  15,  the  independent  elevators  show  the  lowest  A 
average  capacity  per  house  and  the  cooperatives  the  highest  (exclud-  s 
ing  the  few  malster  elevators).  The  average  capacity  of  mill  ele-  9 
vators,  both  line  and  individual,  and  of  the  commercial  and  coop- 
erative  line  elevators  lies  between  these  two.  The  commercial  lines  ^ 


CHARACTERISTICS  OF  COUNTRY  HOUSES. 


65 


report  a  higher  average  capacity  than  either  type  of  mill  eleva¬ 
tors,  though  much  below  the  individual  cooperative,  and  the.  mills 
in  turn  show  a  considerably  greater  average  capacity  than  the  inde¬ 
pendent.  Altliough  there  is  by  no  means  an  exact  correlation  of 
capacity  variations  with  the  proportions  of  the  elevators  of  these 
four  types  appearing  in  the  individual  States,  there  is  yet  sufficient 
to  render  plausible  the  view  that  these  type  variations  in  capacity 
account  in  large  measure  for  the  geographical  variations.  The  fore¬ 
going  table  shows  that  all  the  10  States,  except  South  Dakota,  Ne¬ 
braska,  and  Oklahoma,  reporting  less  than  the  average  elevator  capac¬ 
ity  (25,527  bushels)  also  report  a  higher  proportion  of  independent 
elevators  than  the  average  of  independent  elevators  for  the  United 
States  as  a  whole,  and  with  the  exception  of  Nebraska,  Iowa,  and 
South  Dakota,  a  higher  proportion  of  mill  elevators.  Excepting  South 
Dakota  and  Nebraska,  each  of  the  same  10  States  shows  a  percentage 
of  commercial  line  elevators  which  is  considerably  below  the  average. 
In  the  four  States,  excepting  Illinois,  which  report  a  higher  than 
average  elevator  capacity,  and  in  South  Dakota,  which  is  approxi¬ 
mately  average,  the  reverse  of  the  foregoing  situation  obtains.  Min¬ 
nesota,  Montana,  and  North  and  South  Dakota  all  show  a  higher 
than  average  percentage  of  cooperatives,  a  very  much  higher  than 
average  percentage  of  commercial  lines,  and  a  lower  than  average 
percentage  of  independents  and  mills. 

Thus,  broadly  speaking,  the  average  capacity  of  elevators  tends 
to  be  highest  in  those  States  in  which  the  two  types  of  elevators  re¬ 
porting  the  highest  average  capacities — i.  e.,  individual  cooperative 
and  commercial  line — are  relatively  most  important,  and  lowest  ip 
those  States  in  which  the  two  types  reporting  the  lowest  average 
capacities — i.  e.,  independents  and  mills — are  relatively  most  im¬ 
portant. 

Warehouses. — Of  the  359  warehouses  reporting  their  capacities, 
considerably  more  than  half  were  located  in  the  Mountain  and  Pacific 
division,  the  balance  being  distributed  among  the  other  divisions. 
There  is  a  striking  difference  between  the  average  capacity  ol  the 
warehouses  in  the  first  division  and  those  in  other  sections.  These 
differences  between  sections  seem  to  be  due  primarily  to  differences 
in  the  method  of  handling  as  between  different  sections.  As  has 
already  been  indicated  (Ch.  II,  sec.  1),  the  Pacific  coast  warehouse 
is  first  of  all  a  storage  and  secondarily  a  merchandising  undertaking, 
the  warehouse  being  used  very  largely  for  storage  by  the  farmer, 
who  holds  his  grain  there  until  it  is  sold  to  the  converter  or  exporter. 
AVhere  houses  are  thus  used  chiefly  for  storage  they  must  be  larger 
than  in  those  sections  of  the  country  where  the  warehouse  is  pri¬ 
marily  engaged  merely  in  buying  and  selling  and  stores  only  inci¬ 
dentally.  Moreover,  the  coast  is  relatively  lacking  both  in  large 
organized  markets  and  terminal  storage  capacity,  and  much  more 
grain  is  held  in  the  country  warehouses  than  would  probably  be  the 
case  were  the  coast  markets  larger  and  terminal  storage  better 
developed. 

Section  5.  Average  number  of  bins  per  house. 

Type  variations  of  elevators. — Appendix  Table  4  presents  the 
average  number  of  bins  reported  by  different  types  of  elevators  or 

9964°— 20 - 5 


66 


COUNTRY  GRAIN  MARKETING. 


warehouses  in  specified  States  and  grand  divisions.  Since  ware¬ 
houses  are  either  not  binned  at  all  or  only  to  a  limited  extent,  eleva¬ 
tors  and  warehouses  are  separately  considered. 

The  average  number  of  bins  in  all  reporting  elevators  is  10.33  and 
the  average  capacity  of  bins  is  2,471  bushels.  This  latter  average 
was  computed  by  dividing  the  average  capacity  of  all  reporting  ele¬ 
vators  by  the  average  number  of  bins  reported,  including  both  stock 
and  work  bins,  the  former  of  which  are  usually  much  larger  than 
the  latter.  (Ch.  Ill,  sec.  1.) 

There  is  a  considerable  variation  in  the  average  number  of  bins 
reported  by  elevators  of  different  types,  and  the  average  of  different 
types  shows  some  tendency  on  the  whole  to  fluctuate  with  the  capac¬ 
ity  of  the  elevator.  The  following  table  compares  the  average 
capacity  of  each  of  the  five  principal  types  of  elevators  with  the 
average  number  of  bins  per  elevator  and  average  capacity  of  bins. 
The  averages  for  elevators  of  the  other  three  types  are  ignored  for  the 
reason  that  they  are  based  upon  too  limited  data  to  render  the  per¬ 
centages  of  any  significance. 

Table  17. — Comparison  of  average  eapacity  of  specified  types  of  elevators  with 
average  number  of  Mns  per  elevator  and  average  capacity  of  hins. 


Type  of  elevator. 

Average 

capacity. 

Average 
number  of 
bins. 

Average 
capacity 
of  bins. 

Bushels. 
29, 797 
26,202 
25,290 
24,724 
22,342 

11.62 
10. 45 
10.47 
10. 19 
9.49 

Bushels. 
2,564 
2. 507 
2,415 
2,426 
2,354 

25,527 

10.33 

t 

2,471 

1  Including  cooperative  line  and  maltsters,  both  line  and  individual. 


From  this  table  it  appears  not  only  that  the  average  number  of 
bins  tends  to  vary  more  or  less  directly  with  the  average  capacity 
of  the  type  but  also  that  the  average  bin  capacity  tends  to  vary 
directly  with  the  elevator  capacity  and  the  number  of  bins.  The 
variation  in  the  number  of  bins  and  bin  capacities  as  between  the 
different  types  may  probably  be  explained  on  the  same  grounds  as 
the  variations  in  capacity  as  between  types  discussed  in  section  3. 

Geographical  variations  or  elevators.— The  tendency  of  the  aver¬ 
age  number  of  bins  per  elevator  and  capacity  per  bin  to  vary  directly 
with  the  average  capacity  of  elevators  is  considerably  less  character¬ 
istic  of  the  figures  of  the  individual  States. 

In  the  following  table  the  average  capacities  of  elevators  in  the 
14  principal  producing  States  are  shown  in  comparison  with  the 
average  number  of  bins  per  elevator  and  the  average  capacity  per  bin. 


CHARACTERISTICS  OF  COUNTRY  HOUSES.  67 


Table  18. — Comparison  of  average  elevator  capacity  in  specified  States  with 
average  number  of  bins  per  elevator  and  average  bin  capacity. 


States. 

Elevator 

capacity. 

Average 
number 
bins  per 
elevator. 

Average 

bin 

capacity. 

Oklahoma . 

Bushels. 

14,482 

15,068 

17,017 

17,119 

17,309 

20,048 

22,865 

24,006 

24,428 

25,421 

7.18 
12. 13 
8.07 
10.60 
7.76 
8.52 
10.21 
9. 94 
9.87 
10.97 

Bushels. 
2,017 
1,242 
2, 109 
1,615 
2,231 
2,353 
2,239 
2,415 
2,475 
2,317 

Michigan . 

Missouri . 

Wisconsin . . . 

Kansas . 

Ohio . 

Nebraska . .• . 

Indiana . 

Iowa . 

South  Dakota . . 

Minnesota . . . 

26,305 

29,602 

32,060 

33,046 

11. 58 
11.87 
9.83 
12.69 

2,272 

2,494 

3,261 

2,604 

Montana . 

Illinois . 

North  Dakota . 

Average  all  States  and  divisions . 

25,527 

10.33 

2,471 

Warehouse  variations. — ^Warehouses  are  either  not  binned  at  all 
or  else  show  a  relatively  small  number  of  bins  as  compared  with 
elevators.  An  examination  of  the  figures  contained  in  Appendix 
Table  4  shows  that  the  average  number  of  bins  in  the  'Mountain  and 
Pacific  division  is  only  about  3|,  while  the  number  of  bins  in  the 
warehouses  of  the  other  three  divisions  is  a  little  over  5  in  the 
Southern  and  about  5f  in  both  the  Central  and  Middle  Atlantic 
divisions. 

In  the  Pacific  Northwest,  as  previously  explained,  sack  and  not 
bulk  handling  is  the  rule.  Where  grain  is  sacked  there  is  no  such 
possibility  of  its  becoming  mixed  Avith  other  grain  as  in  bulk  han¬ 
dling,  always,  of  course,  presuming  that  the  sacks  are  identified  as 
to  contents  and  are  separately  piled.  Such  being  the  case,  there 
exists  little  or  no  necessity  for  the  use  of  bins  in  warehouses  where 
the  method  of  sack  handling  prevails.  Sack-handling  warehouses, 
therefore,  as  a  rule  have  either  no  bins  at  all  or  else  merely  a  few 
partitions.  These  facts  presumably  account  for  the  small  number 
of  bins  reported  by  the  warehouses  in  the  Mountain  and  Pacific 
divisions. 

The  information  obtained  indicates  that  there  ds  no  sack  handling 
in  the  Central  division  and  very  little  in  the  Southern  and  Middle 
Atlantic  divisions.  In  these  areas  bulk  handling  largely  prevails 
and  the  warehouses  have  in  consequence  frequently  been  binned. 
The  average  number  of  such  bins  per  house,  however,  in  each  division 
is  considerably  below  the  average  number  of  bins  reported  by  ele¬ 
vators  in  the  corresponding  divisions.  (Appendix  Table  4.)  In 
the  case  of  the  Middle  Atlantic  and  Central  divisions  this  may  be 
due  to  the  lower  capacities  of  warehouses  in  these  sections  as  com¬ 
pared  with  elevators  (Table  15). 


68 


COUNTRY  GRAIN  MARKETING. 


Section  6.  Construction  materials  of  elevators  and  warehouses. 

Construction  in  general— The  great  majority  of  all  the  elevates 
and  warehouses  in  the  United  States  are  constructed  of  wood.  Of 
the  9,637  reporting  their  construction  7,447,  or  77.28  per  cent,  are 
built  of  this  material.  The  only  other  important  type  of  construc¬ 
tion  reported  is  wood  and  metal,  employed  by  1,519  elevators  and 
warehouses,  or  15.76  per  cent  of  the  total.  A.s  tabulated,  this  latter 
type  of  construction  included  all  “  iron-clad  ”  houses-—!,  e.,  those 
constructed  of  wood  but  covered  with  a  metal  sheathing  such^  as 
corrugated  iron  ^  wooden  elevators  with  metal  roofs  ^  those  haying 
wooden  houses  but  metal  tanks ;  and  all  other  similar  combinations. 
The  material  of  construction  employed  by  the  balance  of  the  country 
houses  reporting — 671,  or  6.91  per  cent  of  the  total  reporting  in¬ 
cludes  various  combinations  of  wood  with  other  materials,  such  as 
brick,  concrete,  stone,  etc.,  and  also  straight  concrete  and  steel  con¬ 
struction.  In  no  case  did  the  number  of  houses  reporting  any  one 
of  these  particular  kinds  of  construction  equal  2  per  cent  of  the  total 
answering  the  inquiry.  The  detailed  figures  of  the  construction 
material  of  elevators  and  warehouses  in  the  various  States  and  grand 

divisions  will  be  found  in  Appendix  Table  5.  i  •  i  i.-  i. 

Present  tendencies. — The  principal  reason  for  the  relatively  high 
proportion  of  wooden  elevators  and  warehouses  in  the  United  States 
has  been  apparently  the  lower  cost  of  such  construction.  This  is  the 
explanation  offered  by  the  majority  of  those  terminal  market  grain 
concerns  interested  in  the  operation  of  country  elevators  who  were 
questioned  in  regard  to  this  matter.  Until  comparatively  recently, 
it  is  said,  wood  was  the  cheapest  material  obtainable,  and  for  this 
reason  was  utilized  for  the  great  bulk  of  elevator  and  warehouse  con¬ 
struction.  Of  late,  however,  the  price  of  lumber  has  increased  to  such 
an  extent  as  to  bring  the  cost  of  this  material  more  in  line  with  the 
cost  of  other  materials  suitable  for  use  in  building  country  house^ 
The  tendency  of  elevator  construction  now  is  away  from  the  use  of 
wood  only  and  to  the  employment  of  other  materials  formerly  more 
expensive.  This  latter  trend  in  construction  is  indicated  by  the  sta¬ 
tistics  of  the  reported  period  of  elevator  construction  in  comparison 
with  the  materials  employed  in  four  States  selected  at  random  for 
the  purpose  of  testing  this  question,  two  (South  Dakota  and  Kansas) 
from  the  territory  west  and  two  (Illinois  and  Indiana)  from  the  ter¬ 
ritory  east  of  the  Mississippi  River.  These  four  States  contained 
1,490  elevators  reporting  both  materials  and  period  of  construction. 
As  only  4,372  elevators  reported  their  period  of  construction,  the 
1  490  elevators  located  in  these  four  States  were  deemed  to  be  a  large 
enough  number  and  sufficiently  well  distributed  fairly  to  represent 

the  tendency  in  construction.  ^ 

The  following  table  presents  the  results  of  this  tabulation  tor  the 

four  States  in  question: 


CHARACTERISTICS  OF  COUNTRY  HOUSES. 


69 


Table  19. — Materials  of  which  elevators  were  constructed  in  specified  periods. 


Period. 

Num¬ 

ber 

report¬ 

ing. 

Wood. 

Wood  and 
metal. 

Concrete. 

All  other 
materials. 

Num¬ 

ber. 

Per 

cent. 

Num¬ 

ber. 

Per 

cent. 

Num¬ 

ber. 

Per 

cent. 

Num¬ 

ber. 

Per 

cent. 

Prior  to  1880 . 

37 

32 

86. 49 

1 

2.70 

4 

10.81 

1880  to  1884 . 

31 

28 

90.32 

1 

3.23 

2 

6.45 

1885  to  1889 . 

72 

57 

79. 17 

8 

11. 11 

7 

9. 72 

1890  to  1894 . 

99 

76 

76.77 

20 

20.20 

3 

3.03 

1895  to  1899 . 

135 

112 

82. 96 

.  16 

11.85 

7 

5. 19 

1900  to  1904 . 

315 

240 

76. 19 

62 

19. 68 

13 

4.13 

1905  to  1909 . 

368 

284 

77. 17 

68 

18. 48 

1 

0.27 

15 

4.08 

1910  to  1914 . 

280 

128 

45.71 

113 

40. 36 

11 

3.93 

28 

10.00 

1915  to  1917 . 

153 

50 

32. 68 

72 

47.06 

10 

6.54 

21 

13.72 

Total . 

1,490 

1,007 

67. 58 

361 

24.23 

22 

1.48 

100 

6.71 

% 

As  is  apparent  from  the  table,  more  than  three- fourths  of  the 
reported  country  elevator  construction  in  each  period  prior  to  1910 
was  of  wood.  'Since  1910,  however,  according  to  the  above  figures, 
the  proportion  of  wooden  construction  has  declined  to  less  than  one- 
half  of  the  total,  while  the  proportion  of  wood  and  metal  in  combi¬ 
nation  has  increased  to  approximately  twice  its  importance  prior  to 
that  date,  and  concrete  has  developed  from  practically  nothing  to* 
over  6  per  cent  of  the  total.  The  use  of  other  materials,  including 
wood  in  combination  with  various  materials,  has  also  greatly  iii^ 
creased  as  compared  with  the  preceding  years. 

The  relative  increase  in  the  price  of  lumber  would  presumably 
affect  the  cost  of  elevator  construction  more  seriously  than  it  would 
the  cost  of  ordinary  building  construction,  owing  to  the  manner  in 
which  elevators  are  built.  As  elsewhere  indicated  (sec.  1),  the  ordi¬ 
nary  type  of  elevator  is  of  cribbed  construction ;  i.  e.,  built  by  laying 
2  by  4  inch  or  2  by  6  inch  lumber  flat  side  down.  This  method  of 
building,  therefore,  consumes  a  much  larger  number  of  board  feet 
in  a  structure  of  any  given  size  than  would  ordinary  wooden- 
building  construction.  For  this  reason  the  advance  that  has  taken 
place  in  the  price  of  lumber  has  probably  tended  to  increase  the 
cost  of  wooden-elevator  construction  in  comparison  with  other  mate¬ 
rials  more  than  ordinary  wooden  construction. 

An  examination  of  the  age  of  elevators  shows  that  approximately 
5  per  cent  of  the  elevators  which  replied  to  the  Commission’s  schedule 
regarding  this  matter  were  built  prior  to  1885,  over  9  per  cent  prior  to 
1890,  about  15  per  cent  prior  to  1895,  and  over  23  per  cent  prior  to 
1900.  (Cf.  Ch.  II,  sec.  11,  and  Table  9.)  As  regards  a  large  propor¬ 
tion  of  these  old  elevators,  there  can  be  little  or  no  doubt  that  wood 
was  used  in  their  construction,  because  it  was  relatively  very  cheap 
as  compared  with  other  materials. 

In  the  case  of  the  older  elevators  it  was  also  no  doubt  frequently 
employed,  because,  owing  to  the  comparative  lack  of  development  of 
the  country,  other  materials  were  neither  easily  nor  quickly  obtain¬ 
able,  but  had  to  be  transported  long  distances,  often  at  relatively  high 
freight  rates,  and  involved  perhaps  a  delay  of  weeks  or  months  in 
building.  In  fact,  one  large  line  operator  in  Minneapolis  stated  that 
his  concern  had  employed  lumber  principally  because  of  its  ready 
availability. 


COUNTRY  GRAIN  MARKETING. 


Another  Minneapolis  line  operator  expressed  the  opmion  that  the 
rapidity  of  construction  and  ease  with  which  wooden  hous^  can  be 
transferred  from  one  place  to  another  has  been  a  considerable  lactOT, 
explaining  the  importance  of  wooden  construction  at  least  in  the 
Northwestern  States.  As  the  northwestern  territoiy  developed  very  ; 
rapidly,  elevators  were  in  considerable  demand.  The  wooden  elevator 
can  be  easily  and  rapidly  erected,  with  the  result  that  this  type  ot 
construction  was  commonly  used.  Similarly,  wooden  elevators  are 
easily  and  quickly  enlarged,  torn  down,  or,  as  happens  in  certain  , 

instances,  knocked  down  and  moved  to  another  town.  In  inany  ; 

cases  a  wooden  elevator  can  be  knocked  down  in  sections,  loaded  on 
cars  transported  to  other  localities,  and  set  up  again  at  a  cost  con¬ 
siderably  less  than  that  of  constructing  a  new  elevator.^ 

Type  variations.— Table  20  presents  the  material  of  construction 
employed  by  the  different  types  of  elevators  and  warehouses  in  the 

United  States.  , 

Table  20.— Constructiem  materials  of  different  types  of  elevators  and  ware¬ 
houses  in  the  United  States. 


Type. 

Total. 

report¬ 

ing. 

Wood. 

Wood  and  metal. 

All  other  kinds. 

Number. 

Per  cent. 

Number. 

Per  cent. 

Number. 

Per  cent. 

LINE. 

Commercial . 

Cooperative . 

Mill . 

Maltster . 

3,348 

104 

743 

30 

2,957 

79 

576 

22 

88.32 

75.96 

77.52 

73.34 

291 

22 

85 

7 

8.69 

21.15 

11.44 

23.33 

100 

3 

82 

1 

2.99 
,  2.89 

11.04 
3.33 

All  line . 

4,225 

3,634 

86.01 

405 

9.59 

186 

4.40 

INDIVIDUAL. 

Cooperative . 

Independent . 

Mill . 

Maltster . 

1,751 

3,135 

521 

5 

1,289 

2,242 

280 

2 

73.61 

71.51 

53.74 

40.00 

371 

595 

146 

2 

21.19 

18.98 

28.02 

40.00 

91 

298 

95 

1 

5.20 

9.51 

18.24 

20.00 

All  individual . 

5, 412 

3,813 

70.46 

1,114 

20.58 

485 

8.96 

Grand  total . 

9,637 

7,447 

77.28 

1, 519 

15.76 

671 

6.96 

Slightly  over  86  per  cent  of  all  line  elevators  and  warehouses  in  the 
United  States  are  constructed  of  wood  as  compared  with  less  than 
71  per  cent  of  all  individual  elevators  and  warehouses  which  are  built 
of  this  material.  The  proportion  of  wooden  construction  among  all 
line  elevators  and  warehouses  is  also  considerably  above  the  average 
of  wooden  construction — 77.28  per  cent — which  is  reported  for  all 
elevators  and  warehouses  combined,  and  the  proportion  oi  such  con¬ 
struction  among  all  individual  elevators  and  warehouses  combined 
is  considerably  below  the  foregoing  general  average.  i  - 

An  examination  of  the  percentages  of  wooden  construction  by  types 
of  houses  in  the  above  table  indicates  that  the  high  proportion  of  cases 
in  which  lumber  is  used  by  all  line  types  combined  as  compared  with 
the  combined  individual  types  is  caused  chiefly  by  the  extremely  large 
amount  of  such  construction  by  the  commercial  lines.  Wood  con- 


a  A  number  of  elevators  in  North  Dakota,  for  example,  located  at  ponits 
was^a  surplus  of  elevators,  have  been  thus  knocked  down,  transported  m  sections  to 

Montana,  and  there  re-erected. 


f 


I 


] 


i 


CHARACTERISTICS  OF  COUNTRY  HOUSES. 


71 


struction  in  the  mill  line  type  is  only  a  fraction  of  1  per  cent  above  the 
average  proportion  of  wooden  construction  for  all  types,  while  neither 
of  the  other  two  line  types  employ  this  construction  to  an  extent  equal 
to  the  average. 

Commercial  line  construction. — As  previously  pointed  out,  the 
commercial  line  elevator  company  is  a  grain-merchandising  under¬ 
taking  operated  solely  for  the  purpose  of  deriving  a  profit  from  the 
differences  in  the  prices  at  which  it  buys  and  sells.  The  individual 
line  house  is  thus  merely  one  part,  and  it  may  be  a  very  small  part, 
of  a  larger  buying  and  selling  organization.  The  commercial  line 
company  having  presumably  no  local  interests  and  being  concerned 
solely  with  the  profit  and  loss  derived  from  the  operations  of  all  its 
houses,  apparently  considers  the  matter  of  elevator  construction 
solely  from  the  standpoint  of  costs  and  profits,  and  resorts  to  the 
cheapest  type  of  construction  as  the  one  most  likely,  everything  con¬ 
sidered,  to  yield  the  greatest  net  return  on  the  investment.  As  one 
Minneapolis  line  operator  put -it,  the  commercial  line  companies 
have  found  that  the  little  saved  in  the  cost  of  insurance  by  the  more 
expensive  types  of  construction  does  not  compensate  for  the  increased 
interest  on  the  increased  investment. 

It  is  also  probable  that  the  commercial  lines  have  in  a  good  many 
cases  felt  that  it  would  be  undesirable  to  construct  other  than  cheap 
houses  on  account  of  competition.  In  more  than  a  few  cases  com¬ 
petition  has  rendered  the  operation  of  particular  line  houses  un¬ 
profitable,  and  many  of  the  larger  commercial  line  companies  have 
had  the  experience  of  closing  numerous  elevators  owing  to  the  de¬ 
velopment  of  competition,  especially  of  the  cooperative  variety. 

Independent  construction. — It  is  not  easy  to  determine  why 
lumber  should  be  so  much  more  used  by  commercial  line  elevator  com¬ 
panies  than  by  independents,  since  the  independent  elevator  is  in 
essence  operating  in  much  the  same  manner  as  the  commercial  line 
and  for  the  same  purpose,  i.  e.,  to  derive  profit  from  the  purchase  and 
sale  of  grain. 

The  independent  house,  however,  is  almost  invariably  owned  and 
operated  by  local  people.  In  many  cases  a  large  proportion  of  the 
income  of  the  owners  is  derived  from  the  operation  of  this^  par¬ 
ticular  enterprise,  and  often  their  entire  capital  is  invested  in  it. 
It  is  the  business  in  which  they  are  regularly  engaged,  and  they 
expect  not  only  to  remain  in  it  but  to  do  so  at  the  place  where  they 
have  constructed  their  elevator.  An  elevator  of  this  type  is  not  like 
a  line  house — merely  one  of  several.  The  average  independent 
owner  can  not  discontinue  the  business  which  is  his  livelihood  and 
move  to  some  other  locality  with  the  same  facility  as  a  commercial 
line  company  can  discontinue  a  particular  house  whenever  the  profit 
from  that  house  becomes  too  narrow  and,  as  is  often  done,  transfer 
operations  to  another  and  more  profitable  locality.  The  independent 
operator  regards  his  business  as  a  permanent  affair;  the  line  com¬ 
pany,  operating  several  stations,  regards  it  as  subject  to  the  exigen¬ 
cies  of  competition,  etc.,  and  hence  to  be  continued  or  discontinued 
at  a  particular  point,  as  circumstances  justify^  and  always  more 
or  less  with  reference  to  the  profit  of  the  entire  business.  As  a 
result  the  independent  operators  tend  to  resort  to  somewhat  more 
substantial  types  of  construction,  building  houses  of  a  more  per- 


72 


COUNTRY  GRAIN  MARKETING. 


manent  character,  better  protected  against  fire,  and  carrying  a  lower  j 
insurance  rate  than  is  the  case  with  the  commercial  line  house. 

Cooperative  construction. — The  fact  that  the  cooperative  elevator  ! 
also  regards^  its  business  as  of  a  permanent  local  character  is  prob¬ 
ably  partially  responsible  for  its  low  percentage  of  wooden  construc¬ 
tion  as  compared  with  the  commercial  line,  as  well  as  the  recent 
development  of  the  cooperative  type  (Ch.  II,  sec.  11).  As  elsewhere 
indicated  (Ch.  V,  sec.  8),  however,  the  cooperative  elevators  handle 
more  grain  relative  to  their  size  than  any  other  type.  Other  things 
being  equal,  the  larger  the  volume  of  grain  handled  by  the  coun¬ 
try  elevator  the  lower  is  the  per  bushel  handling  expense  ^  and  the 
larger  the  possible  capital  expenditure  which  would  be  justified. 
Moreover,  on  account  of  their  plan  of  organization  and  operation 
these  elevators  are  in  a  large  proportion  of  cases  able  to  obtain  ample 
capital,  and  for  this  reason  are  in  a  position  to  build  comparatively 
expensive  elevators.  Finally,  there  is  also  to  be  considered  the  fact 
that  the  farmers  build  the  elevator  for  the  purpose  of  handling  their 
own  grain.  They  look  upon  it  more  or  less  as  a  permanent  institution 
and  in  many  cases  have  a  certain  amount  of  pride  in  having  a  sub-  -j 
stantial  elevator.  These  facts  also  undoubtedly  affect  the  cooperative 
line,  and  are,  perhaps,  responsible  for  the  lower  percentage  of  wooden 
construction  of  this  type  as  compared  with  the  commercial  line, 

though  the  number  reporting  is  very  small.  .. 

Individual  and  mill  line  construction. — Slightly  less  than  54 
per  cent  of  the  individual  mill  elevators  reported  wooden  construc¬ 
tion.  This  is  far  below  the  average  not  only  of  all  elevators  and  ; 
warehouses  in  the  United  States  (77.28  per  cent)  but  also  of  all 
individual  elevators  and  warehouses  (70.46  per  cent)  and  ot  either 
independents  or  individual  cooperatives.  This  percentage  is  in  great 
contrast,  moreover,  to  the  extent  of  such  construction  among  the  * 
mill-owned  lines,  over  77  per  cent  of  which  are  built  of  wood. 

The  principal  reason  for  this  appears  to  be  tlm  fact  that  in  a  great 
proportion  of  cases  the  individual  mill  elevator  is  a  part  of  mill  j 
structure  itself.  Wooden  construction  involves  in  case  of  fire  in 
such  an  elevator  the  possibility  not  only  of  the  loss  of  the  elevator  , 
property  but  also  of  the  mill  structure  as  well.  In  this  fact  alone  J 
there  is  good  reason  for  a  pronounced  tendency  to  pse^  some  form  3 
of  construction  less  inflammable  than  wood  for  the  individual  mill  9 
elevator.  Secondly,  mills  are  usually  constructed  with  the  expecta-  1 
tion  of  continuing  in  business  for  a  relatively  long  period  oi  time.  4 
So  long  as  the  mill  continues  operations  it  must  obtain  grain,  and  a  | 
mill  elevator  can,  conceivably,  continue  to  exist  and  operate  as  a 
storage  adjunct  to  the  mill  as  long  as  the  latter  is  operated,  even 
though  there  is  comparatively  little  grain  raised  in  the  immediately 
surrounding  territory.  These  two  factors  make  for  a  type  of  con¬ 
struction  of  considerable  permanence.  In  this  connection  it  is  inter-  J 
esting  to  note  that,  though  not  shown  in  the  tables  presented,  some-  3 
thing  over  6  per  cent  of  all  individual  mill  elevators  reporting  are  | 

constructed  of  either  concrete  or  steel.  J 

While  the  mill  line  elevators  show  a  much  higher  percentage  ot  J 
wooden  construction  than  the  individual  mill  type,  they  employ  S 
it  considerably  less  than  the  commercial  lines.  The  reason  probably  ■ 
lies  in  the  fact  that  each  mill  line  usually  has  at  least  one  house  1 


CHARACTERISTICS  OF  COUNTRY  HOUSES. 


73 


connected  with  the  mill.  This  house,  like  the  indivMual  mill  type 
and  for  the  same  reasons,  would  in  a  large  proportion  of  cases  be 
of  some  other  kind  of  construction  than  timber.  As  a  result,  the 
extent  of  wooden  construction  among  mill-owned  line  houses  is  less 
than  that  of  the  commercial  lines  though  greater  than  in  the  case 

of  the  individual  mills.  i  t  .  -u 

Geographical  variations. — Appendix  Table  5  shows  the  distribu¬ 
tion  of  elevators  in  the  different  States  and  grand  divisions  accord¬ 
ing  to  the  material  of  construction.  There  is  a  great  variation  be¬ 
tween  States  in  the  percentage  of  wooden  construction  reported,  the 
amount  ranging  from  50  per  cent  iii  Missouri  to  94  per  cent  in  North 
Dakota.  Broadly  speaking,  these  variations  are  probably  explain¬ 
able  in  terms  of  the  proportions  of  commercial  line  and  individual 
mill  elevators  operating  in  these  States.  The  following  table  shows 
the  percentages  of  wooden  construction  in  all  the  14  States,  sep¬ 
arately  tabulated,  in  comparison  with  the  proportion  of  commercial 
line  and  individual  mill  elevator  construction. 

T\ble  21. _ Proportion  of  co nwiorcicLl  line  and  individuod  mill  elevators  in 

specified  States  in  comparison  with  the  proportion  of  wooden  elevator 
construction. 


state. 

Percent¬ 
age  of 
com¬ 
mercial 
line  ele¬ 
vators. 

Percent¬ 
age  of 
indi¬ 
vidual 
mill  ele¬ 
vators. 

Percent¬ 
age  of 
wood 
construc¬ 
tion. 

54.17 

1.81 

94.76 

49.90 

4.61 

73.26 

48.58 

2.85 

80. 10 

46.42 

4.21 

89.82 

43.37 

2.48 

94.18 

31.59 

14.'96 

54.37 

29.99 

3.12 

67.37 

28.96 

1.75 

.  54 

27.31 

12. 45 

70.37 

21.75 

13. 56 

65.  80 

20.57 

6.86 

63.47 

13.60 

13.16 

'  76. 55 

10. 96 

26.75 

49.77 

9.38 

8.43 

56.37 

36.01 

5:54 

77.53 

All  otatGs  ana  grana  . . 

— - - - 

An  examination  of  this  table  shows  that  with  a  few  exceptions 
those  States  having  the  largest  proportion  of  commercial  line  ele¬ 
vators  tend  to  have  the  highest  percentages  of  wooden  construction 
and  those  having  the  largest  proportion  of  individual  mill  elevators 
the  lowest  percentages  of  wooden  elevators.  Since,  as  already  pointed 
out  the  commercial  lines  are  much  above  the  average  in  the  propor¬ 
tion  of  wooden  construction  and  the  individual  mills  much  below  the 
average,  the  distribution  of  these  two  types  of  elevators  probably 
explains,  in  the  main,  the  State  variations.  In  the  case  of  Montana 
the  less  than  average  percentage  of  this  construction  reported  is  m  al 
probability  due  to  the  comparatively  recent  development  ot  this  btatc 

as  a  large  producing  area. 


Chapter  TV. 


DEVELOPMENT  OF  COUNTRY  ELEVATORS  AND  COUNTRY 

MARKETING. 

Section  1.  Character  of  the  discussion. 

In  Chapter  III  there  has  been  set  forth  the  development  of  the 
different  types  of  country  elevators  in  the  different  States  as  indi¬ 
cated  by  the  figures  of  construction  reported  at  different  periods.  In 
this  chapter  there  will  be  summarized  briefly  such  other  historical 
data  as  have  been  collected  by  the  Commission.  No  attempt  will  be 
made  to  present  a  comprehensive  history  of  country  marketing  for 
several  reasons.  In  the  first  place,  readily  available  information  in 
print  is  comparatively  limited.  Although  a  thorough  study  of  all 
possible  sources  might  have  yielded  in  addition  considerable  informa¬ 
tion,  such  an  examination  would  have  involved  an  amount  of  research 
and  expense  which,  considering  the  reasons  for  and  scope  of  the 
investigation,  would  not  have  been  justified.  Moreover,  the  grain 
business  is  so  old  that  outside  of  Minneapolis  and  the  Pacific  coast 
territory  there  are  comparatively  few  men  in  the  grain  trade  who 
are  able  to  supply  much  information  as  to  the  characteristics  of 
country  marketing  in  the  early  days,  and  the  information  which 
could  be  obtained  from  this  source  is  in  consequence  not  great.  Un¬ 
doubtedly  the  information  obtained  from  the  older  Minneapolis 
grain  men  as  to  conditions  in  that  area  could  have  been  somewhat, 
supplemented  in  other  sections,  but,  again,  only  at  an  expenditure 
which  it  was  not  felt  would  be  justified.  The  following  brief  re-, 
cital,  therefore,  is  based  upon  easily  available  published  sources 
and  such  historical  information  as  was  incidentally  acquired  in  the 
course  of  the  investigation.  In  the  case  of  the  Northwest  territory, 
this  latter  information  is  more  complete  than  for  other  sections, 
owing  primarily  to  facts  supplied  by  Minneapolis  line  elevator  oper-_ 
ators,  some  of  whom  practically  grew  up  with  the  grain  business  in 
that  area.  , 

Section  2.  General  characteristics  of  early  grain  marketing. 

Chicago  territory. — In  the  very  early  days  a  large  percentage  of 
the  grain  was  consumed  locally.  At  that  time  urban  centers  were  not 
large  and  a  highly  concentrated  consuming  demand  was  not  as  yet  in 
existence,  except  in  a  few  cases.  Water-power  gristmills  were  then 
quite  common  throughout  the  country  districts  and  the  farmer  took 
much  of  his  grain  to  these  mills,  where  it  was  converted  into  flour 
and  other  grain  products.  In  those  days  the  grain  fields  were  usually 
either  adjacent  to  river  courses  or  relatively  close  to  the  larger  towns, 
and  surplus  grain  was  either  hauled  by  wagon  directly  to  the  towns 
or  shipped  to  them  by  boat  on  the  rivers  or  canals. 

74 


DEVELOPMENT  OF  COUNTRY  HOUSES. 


75 


Thus  in  the  early  days,  before  the  advent  of  railroads,  grain  was 
hauled  to  Chicago  by  the  farmers  from  as  far  as  100  miles  inland 
and  sold  by  them  on  the  streets  to  local  buyers.  When,  on  account 
of  the  extension  of  railroads  to  the  West  and  South,  the  receipts  be¬ 
came  so  large  that  this  method  of  selling  was  no  longer  practicable, 
a  Board  of  Trade  was  formed  where  buyers  and  sellers  could  meet 
together  and  handle  the  grain  more  expeditious^  and  economically. 
After  the  railroads  were  built  grain  men  on  the  Board  of  Trade  fur¬ 
nished  capital  to  put  up  elevators  at  country  stations.  The  farmers 
then  sold  their  grain  at  their  nearest  station  instead  of  hauling  it  to 
Chicago,  and  as  the  railroads  continued  to  branch  out  the  number  of 
elevators  located  at  country  stations  multiplied.^ 

The  Northwest. — Flour  was  first  produced  in  commercial  quan¬ 
tities  at  the  Falls  of  St.  Anthony,  now  Minneapolis,  about  1853. 
While  the  mill  capacity  at  this  early  period  was  quite  small,  it  was 
larger  than  the  supply  of  grain  locally,  and  hence  grain  was  brought 
by  barges  down  the  Mississippi  River  and  up  from  Iowa,  Illinois, 
and  Wisconsin.2  Writing  in  1913,  the  chief  grain  inspector  of  the 
Minnesota  Railroad  and  Warehouse  Commission  stated  that  even  as 
late  as  30  years  previously  the  raising  of  wheat  was  confined  largely 
to  that  area  of  Minnesota  tributary  to  the  Mississippi  and  that  the 
markets  along  this  river,  including  Winona,  AVabasha,  Red  Wing, 
and  Hastings,  were  among  the  most  important  in  the  world.  Mil¬ 
lions  of  bushels  of  wheat  were  marketed  by  farmers  at  these  land¬ 
ings  and  taken  down  the  river. ^ 

What  is  said  to  have  been  the  pioneer  elevator  of  the  upper  Mis¬ 
sissippi  was  probably  that*erected  at  Prairie  du  Chien,  AVis.,  some 
60  years  ago^  and  which  became  one  of  the  objectives  of  grain  ship¬ 
ping  from  Minnesota  in  the  prerailroad  days.  It  had  a  capacity  of 
nearly  300,000  bushels  and  was  built  standing  in  the  water  so  that, 
even  at  a  low  stage  of  the  river,  steamers  and  barges  could  tie  up  at 
its  doors  and  load  and  unload.  Before  1857  there  was  no  railroad  to 
the  Mississippi  north  of  Dubuque,  and  all  the  produce  of  the  country 
north  of  this  point  had  to  be  brought  to  market  on  steamboats.  St. 
Louis  was  the  great  market,  although  Gralena  and  Dunleith,  Ill., 

received  a  small  share  of  the  business.^  ^  ^ 

The  Milwaukee  &  Mississippi  Railroad  was  completed  to  Prairie 
du  Chien  in  the  spring  of  1857  and  that  fall  the  first  Minnesota 
grain  was  shipped  over  the  line  from  Prairie  du  Chien  to  Milwaukee. 
Within  two  years  100  carloads  a  day  were  going  over  the  same  route 
and  the  traffic  continued  to  increase  until  Milwaukee  was  a  success¬ 
ful  rival  of  St.  Louis  for  the  grain  of  Minnesota  and  northern  Iowa. ' 
In  1861  the  railroad  company  had  a  fleet  of  packets,  five  running 
■  north  from  Prairie  du  Chien  to  St.  Paul,  two  to  Eau  Claire  and 
points  on  the  Chippewa,  and  three  to  Lansing,  Iowa,  and  Browns¬ 
ville,  Minn.  Besides  these  there  were  the  weekly  packets  operating 
between  St.  Paul  and  St.  Louis,  which  unloaded  much  gram  and 
other  produce  at  Prairie  du  Chien,  while  in  winter  Iowa  and  Minne- 


1  Tn  the  matter  of  the  relations  of  Common  Carriers  subject  to  the  Act  to  Regulate 
Commerce  to  the  ownership  and  operation  of  elevators  and  the  buying  and  selling  and 
forwarding  of  grain,  see  Sen.  Doc.  278,  59th  Cong.,  2d  ses^,  p.  30. 

2  Tohn  S  Pillsbury,  in,  pamphlet;  Minneapiolis  Golden  Jubilee,  p.  36.  _  ,  „ 

*  Annual  ’ Report,  Chief  Inspector  of  Grain,  Minnesota  Railroad  and  Warehouse  Com¬ 
mission,  1013.  , 

*  Minneapolis  Journal,  Feb.  22,  1920. 

8  Ibid. 


76 


COUNTRY  GRAIN  MARKETING. 


\ 


sota  farmers  teamed  to  this  point  over  the  snow  from  200  miles  away 
in  Iowa  and  Minnesota.® 

The  Southwest. — With  the  extension  of  the  grain-producinff  area 
to  the  Southwest  across  the  Mississippi,  the  importance  of  St.  Louis 
as  a  country  marketing  center  was  greatly  increased.  In  the  earlier 
days  when  the  Mississippi  and  Missouri  River  courses  were  used  to 
carry  the  traffic  of  that  great  interior  tributary  section,  St.  Louis, 
on  account  of  its  location,  became  the  center  of  exchange  for  this 
traffic,  and  thus  naturally  attained  importance  even  then  as  a  coun¬ 
try  grain  market.  Chicago’s  importance  as  a  grain-trading  center 
was  also  much  increased  by  this  southwestern  extension  of  the  grain 
area.  AVhen  this  area  was  further  extended  beyond  the  Missouri 
River,  Kansas  City  and  Omaha  rapidly  developed  as  important  local 
grain-marketing  centers. 

Pacific  coast. — While  some  grain  was  grown  in  the  Pacific  coast 
section  in  the  first  half  of  the  last  century,  which  was  mostly  con¬ 
sumed  by  local  mills,  it  was  not  until  the  last  quarter  of  that  century 
that  grain  was  produced  there  in  sufficient  quantities  to  be  of  notice¬ 
able  importance.  By  that  time  a  large  surplus  was  being  marketed 
by  boats  from  territory  adjacent  to  the  Sacramento  and  San  Joa¬ 
quin  Rivers  in  California  and  the  Columbia,  Willamette,  and  Snake 
Rivers  in  Oregon,  Washington,  and  Idaho.  San  Francisco,  Portland, . 
and  Spokane  apparently  first  became  important  as  grain  distributing 
and  milling  centers.  With  the  completion  of  the  transcontinental 
railroads  to  Tacoma  and  Seattle  and  the  establishment  of  regular 
trans-Pacific  service  from  these  points,  these  also  became  important 
marketing  points  for  grain,  especially 'that  produced  in  the  State 
of  Washington. 

Section  3.  Methods  of  handling  grain. 

The  first  type  of  grain  handling  prior  to  about  the  time  of  the 
Civil  War  appears  to  have  been  through  a  flat  warehouse  with  a 
scale  and  a  wheelbarrow.  This  was  prior  to  the  advent  of  the  rail¬ 
ways  in  certain  sections,  and  where  this  was  the  case  the  flat  houses 
were  usually,  though  not  always,  river  houses. 

Although  Josept  Dart  began  at  Buffalo  in  1842  the  erection  of 
probably  the  first  steam  transfer  and  storage  elevator  employing 
buckets  attached  to  a  belt  revolving  over  two  pulleys,^  this  method 
of  handling  even  at  terminal  points  does  not  seem  to  have  been 
rapidly  adopted  and  in  the  country  appears  to  have  come  into  use 
even  more  slowly. 

In  the  Northwest,  at  least,  the  flat  warehouses  continued  to  be  the 
principal  means  of  handling  grain  until  at  least  about  the  late 
sixties,  when  the  first  type  of  elevator  came  into  use.  Flat  ware¬ 
houses,  however,  continued  to  be  built  for  some  time.  In  fact,  in 
the  Northwest  they  continued  to  be  constructed  to  some  extent  until 
the  early  eighties. 

One  of  the  first  types  of  elevators  in  the  Northwest  Tvas  the  David¬ 
son  high  bridge,  gravity  elevator,  developed  by  one  Commodore 
Davidson.  Teams  were  driven  up  oir  this  bridge  and  the  grain 
dumped  from  the  wagons  flowed  by  gravity  into  bins  and  cars.®  The 

®  Minneapolis  Journal,  Feb.  22,  1920. 

’  Joseph  Dart,  Grain  Elevators  of  Buffalo,  Publication  of  the  Buffalo  Historical  Society, 
Vol.  I  (1879),  pp.  400-401. 

®  At  least  one  of  these  high  bridge  elevators  is  reported  to  be  in  operation  to-day  in  the 
State  of  Illinois. 


DEVELOPMENT  OF  COUNTRY  HOUSES. 


77 


driveways  were  finally  done  away  with  in  the  early  seventies  when 
steam  be^an  to  be  used  for  hoisting  purposes.  The  steam-power 
liouse,  however,  was  quickly  succeeded  by  the  horse-power  elevator 
around  1880.  This  elevator  was  operated  by  a  sweep,  the  horse 
bein^  driven  around  and  around  in  a  circle.  This  type  of  elevator 
is  said  to  have  resulted  in  a  decrease  in  size  and  greater  economy 
in  operation.  Horse  power  was  in  turn  followed,  about  1885,  by 
the  application  of  gasoline  i^ower  to  hoisting  machinery,  and  gaso¬ 
line  and  other  types  of  internal-combustion  engines  are  still  the 
principal  sources  of  power  for  operating  country  elevators,  although 
of  recent  years  a  few  electrically  operated  houses  have  been  built 
and  put  in  operation. 

Section  4.  Commercial  line  elevators. 

While  there  are  many  commercial  line  elevators  in  States  other  than 
the  northwest  group,  this  last  area  may  properly  be  termed  the  great 
stronghold  of  this  type  of  house,  and  the  indications  are  that  the  first 
large  commercial  line  companies  developed  in  this  territory.  In  the 
early  days  the  buying  of  grain  in  this  territory  Tvas  apparently  largely 
dominated  by  the  line  organizations.  Even  in  the  sixties  the  flat 
warehouses,  it  is  stated,  were  generally  small  lines  of  5  and  10  stations. 

The  pioneer  large  commercial  line  elevator  company  in  the  North-  — 
west  appears  to  have  been  the  Pillsbury  &  Hurlbert,  organized  in 
the  late  seventies.  Another  of  the  early  commercial  lines  was  the 
Alinnesota  &  Dakota,  which,  according  to  one  of  the  older  line 
elevator  men,  absorbed  the  Davidson  houses.  It  is  also  stated  that 
this  line  later  became  the  Farmers’  Union. 

Aj^parently  the  railroads  went  into  the  elevator  business  at  first 
in  some  degree.  The  Soo  Kailroad  is  reported  by  several  grain  men 
to  have  built  a  few  elevators,  and  other  roads  reported  either  to  have 
built  or  purchased  elevators  are  the  Chicago  &  North  Western  and 
the  Northern  Pacific.  The  railroads,  however,  failed  to  make  a 
success  of  the  operation  of  these  houses,  and  later  sold  them  out. 

About  1879  or  1880  the  Northern  Pacific  Line  Elevator  Co.  was 
started  by  one  G.  S.  Barnes  and  a  partner,  and  the  Northwestern 
Elevator  Co.  (a  line  now  in  operation)  began  operations  in  the  early 
eighties. 

The  old  Davidson  system  of  elevators  bought  no  grain,  but- simply 
issued  storage  tickets,  which  were  sold  by  the  farmers.® 

The  Minneapolis  Millers’  Association  kept  buyers  at  all  points  at 
which  the  Davidson  houses  were  located  and  the  farmers  sold  their 
storage  tickets  to  these  agents  or  to  representatives  of  David  Dowes, 
a  large  New  York  grain  concern.  Mr.  Marshall,  of  the  National 
Elevator  Co.,  a  large  Minneapolis  line,  states,  quoting  the  report  of 
the  interview  with  him,  “The  elevator  man  shipped  the  grain  on 
orders  from  these  firms  on  a  fixed  charge  that  either  the  Millers’ 
Association  or  Dowes  paid  on  the  surrender  of  the  storage  tickets 
for  shipment  together  with  any  storage  charges,  if  storage  had  been 
earned.  I  believe,  but  do  not  know,  that  the  fixed  charge  was 
agreed  upon  between  the  elevators  and  the  buyers.  I  am  not  certain 
about  tl^is,  evenjdiough  I  was  operating  one  of  the  Davidson 
elevators.’’ 

»  According  to  best  information  obtainable  there  were  some  40  or  50  of  these  Davidson 
elevators  located  ou  the  old  St.  Paul  &  Pacific  Railway. 


78 


COUNTRY  GRAIN  MARKETING. 


With  the  advent  of  the  commercial  lines  in  the  Northwest,  succeed¬ 
ing  the  Davidson  type  of  elevators,  the  method  of  handling  appears 
to  have  changed  from  a  storage  to  a  merchandising  basis,  and  this 
destroyed  the  business  of  the  Millers’  Association  buyers  who  were 
*  purchasing  storage  tickets  from  the  farmers  in  the  country.  Accord¬ 
ing  to  Mr.  Magnuson,  of  the  Northwestern  Elevator  Co.  line,  the 
early  commercial  lines  actually  bought  the  grain  and  sold  it  to  the 
Millers’  Association  on  the  basis  of  a  fixed  commission  over  the  coun¬ 
try  price,  amounting  to  a  few  cents  per  bushel.  According  to  Mr. 
Magnuson’s  recollection  the  mills  financed  the  purchases  of  the  lines, 
loaning  the  money  to  buy  the  grain,  and  also  paying  the  freight. 

The  commercial  line  development  of  the  Northwest  may  be  attrib¬ 
uted  largely  to  the  scarcity  of  local  capital  resulting  from  the  rapid 
development  of  this  area  as  a  grain-producing  territory. 

Agriculture  in  the  Northwest  developed  extensively  rather  than  in¬ 
tensively.  Land  was  cheap  and  fertile  and  this  situation  lent  itself 
to  large  farms  and  the  extensive  cultivation  of  one  or  two  crops.  The 
territory  was  sparsely  settled,  there  was  little  or  no  local  capital 
available,  and  as  a  result  lines  of  elevators  were  built  by  organiza¬ 
tions  located  at  Minneapolis  and  other  points  possessing  the  resources 
and  initiative  to  undertake  such  operations.  (Ch.  II,  sec.  8.) 

Section  5.  Mill  line  elevators. 

The  Northwest. — In  the  late  seventies  or  early  eighties  Hurlbert 
is  reported  to  have  sold  out  his  interest  in  the  Pillsbury-Hurlbert 
line,  and  this  organization  became  the  Minneapolis  &  Northern. 
Sometime  in  the  early  eighties  the  Minneapolis  &  Northern  ap¬ 
parently  passed  into  the  control  of  the  Pillsbury- Washburn  inter¬ 
ests.  According  to  Mr.  Marshall’s  recollection  this  change  in  control 
marks  the  beginning  of  the  mill  line  in  the  Northwest,  and  this  line 
may  be  regarded  as  the  pioneer  mill  lipe.^® 

The  control  of  the  Minneapolis  &  Northern  does  not  appear  to 
liave  amounted  to  ownership,  and  the  relationship  appears  to  have 
been  rather  one  of  affiliation. 

The  St.  Anthony  &  Dakota  (a  line  company  affiliated  with  Wash- 
burn-Crosby  interests)  began  operations  about  1885,  and  the  Western 
Elevator  Co.,  of  Winona,  also  more  or  less  related  to  the  milling  in¬ 
terests,  about  the  same  date.  The  most  plausible  reason  assigned  for 
the  development  of  the  mill  line  in  the  Northwest  is  that  the  milling 
interests  in  Minneapolis  were  developing  so  rapidly  that  they  found 
considerable  difficulty  in  obtaining  sufficient  grain,  more  especially 
as  Milwaukee  and  other  markets  began  to  draw  from  their  territory. 
As  a  result,  the  mills  either  began  the  establishment  of  their  own  ele¬ 
vators  or  else  affiliated  themselves  with  existing  elevator  lines. 

Mill  elevators  and  character  of  wheat  production. — The  mill 
line  elevator  is  relatively  even  more  important  in  the  Southwest 
than  in  the  Northwest  territory.  Thus,  mill  line  elevators  consti¬ 
tute  about  19  per  cent  of  the  total  elevators  reporting  from  the 
State  of  Kansas,  38  per  cent  of  those  of  Oklahoma,  and  10  per  cent 
of  those  in  Missouri.  Eelatively,  therefore,  these  three  States  are 

- - - - - ^ 

10  There  is  some  divergence  between  Mr,  Magnuson  ^ahd  Mr.  Marshall  on  certain  of 
these  points.  Both  agree  that  the  Minneapolis  Northern  was  the  pioneer  mill  line. 
Mr.  Magnuson  is  authority  for  the  statement  that  it  was  controlled  by  the  Pillsbury- 
Washburn  interests.  Mr.  Magnuson,  however,  states  that  the-  Minne^olis  &  !^rthern 
constructed  all  of  its  elevators  instead  of  being  the  successor  to  the  Pillsbury-Hurlbert 
line,  as  stated  by  Mr.  Marshall. 


DEVELOPMENT  OF  COUNTRY  HOUSES. 


79 


the  most  important  mill  line  States.  In  the  number  of  these  houses 
reporting,  Kansas  ranks  first,  Oklahoma  fourth,  and  Missouri  eighth. 
An  examination  of  the  figures  of  reporting  elevators  reveals  the 
fact  that  in  Kansas,  Oklahoma,  and  each  of  the  four  Northwestern 
States,  the  proportion  of  mill  line  elevators  is  very  much  greater 
than  the  proportion  of  the  individual  mill  elevators,  while  in  Ne¬ 
braska,  Iowa,  and  Missouri  and  each  of  the  States  east  of  the  Mis¬ 
sissippi  the  reverse  of  this  situation  obtains.  The  former  of  these 
two  areas  is  chiefly  a  hard-wheat  producing  section  and  the  latter 
raises  principally  soft  wheat.  This  clearly  appears  in  the  following 
table,  which  shows  the  proportions  of  mill  line  and  individual  mill  ele¬ 
vators  in  the  14  principal  grain-producing  States  in  comparison  with 
the  proportion  of  total  wheat  production  represented  by  hard  wheat. 

Table  22. — Distribution  of  mill  elevators  by  specified  States  in  comparison  loith 

hard  wheat  production. 


- - - — 

u 

^  State. 

Proportion 
of  indi¬ 
vidual  mill 
elevators. 

Proportion 
of  mill 
line 

elevators. 

Proportion 
of  hard 
wheat  pro¬ 
duction  to 
total  wheat 
produc¬ 
tion.! 

\ffi5<:miri  . . . . . . . . . . . 

Per  cent. 
26.75 

Per  cent. 
10. 09 

Per  cent. 

6 

. . . . . . 

14. 96 

3. 80 

6 

13.56 

5. 65 

6 

Wicpnn«:in  . . . . . . . 

13.16 

7. 89 

88 

Miphipan  . . . . . . . . .i. 

12. 45 

6.02 

15 

Tllinnic  . . . . . . 

3. 12 

2. 74 

24 

. . . . . . 

2. 85 

.67 

96 

1.75 

.25 

82 

• 

8.43 

19.08 

85 

6. 86 

38.29 

84 

4.61 

6.71 

92 

4.21 

7.87 

99 

2.48 

4.24 

100 

1.81 

5.42 

100 

1  Figures  are  from  Commission’s  Report  on  Commercial  Flour  Milling,  as  supplied  by  the  Office  of  Cereal 
Investigation,  Department  of  Agriculture. 


In  the  five  States  of  Missouri,  Indiana,  Ohio,  Michigan,  and  Illinois 
the  proportion  of  hard  wheat  produced  is  relatively  small,  while  in 
Kansas,  Oklahoma,  and  the  four  Northwestern  States  practically  all 
the  wheat  production  is  of  the  hard  varieties.  In  the  former  area 
the  proportion  of  individual  mill  elevators  is  relatively  high  as  com¬ 
pared  with  the  mill  lines ;  in  the  latter  area  the  reverse  is  true.^^ 
Relation  of  hard  wheat  to  mill  line  development. — Historically, 
these  differences  in  the  character  of  wheat  production  have  probably 
had  a  very  important  bearing  upon  the  development  of  mill  line  and 
individual  mill  elevators.  In  the  two  decades  prior  to  1870  the  great 
bulk  of  the  flour-milling  industry  was  located  east  of  the  Mississippi 


Nebraska,  Iowa,  and  Wisconsin  are  the  only  hard-wheat  States  with  a  higher  pro¬ 
portion  of  individual  mill  than  of  mill-line  elevators.  Only  16  mill  elevators  of  both  types 
reported  from  Iowa  and  only  21  from  Nebraska.  In  both  cases  this  is  less  than  half  the 
number  reporting  from  any  other  of  the  14  States.  On  account  of  the  small  number 
involved,  therefore,  the  percentages  of  the  two  types  in  these  States  are  probably  not 
significant.  In  Wisconsin  the  high  proportion  of  individual  mills  as  compared  with  mill 
lines,  though  hard  wheat  production  predominates,  may  probably  be  attributed  to  the 
early  development  of  local  milling  in  this  area  before  the  great  development  of  the 
hard  wheat  area  farther  west  and  its  persistence  down  to  the  present  time.  According 
to  the  census  of  1870,  Wisconsin  was  the  seventh  State  in  fiour  production.  In  that 
year  it  produced  between  two  and  three  times  as  much  as  the  State  of  Minnesota, 
though  by  1890  the  reverse  was  true. 


COUNTRY  GRAIN  MARKETING. 


go  COUNTRY  GRAIN  MARKETING. 

and  the  flour  production  was  chiefly  from  soft  wheat.  The  introduc¬ 
tion  of  the  Hungarian  process  of  roller  milling  at  Minneapolis  about 
1870  marked  an  epoch  in  the  production  of  flour  in  the  United  btates, 
and  from  this  time  on  hard- wheat  milling  developed  rapidly  and 
hard-wheat  flour  gradually  became  commercially  the  predominant 
type  of  flour.  The  first  hard- wheat  territory  to  be  developed  exten¬ 
sively  was  in  the'  Northwest.  Kansas  some  20  years  later  began 
to  be  an  extensive  producer  of  hard  wheat  and  was  followed  by 

Owino*  to  the  commercial  demand  for  hard-wheat  flours,  the  milling 
industry  in  the  Northwest  and  in  Kansas  and  Oklahoma  tended  to  a 
larger  and  larger  scale  production,  with  the  consequent  demand 
larger  and  larger  quantity  of  wheat.  In  the  Northwest,  as  already 
indicated,  this  resulted,  apparently,  in  the  development  of  mill  lines 
at  a  very  early  date,  for  the  purpose  of  insuring  an  adequate  supply 
of  wheat.  In  the  Southwest  an  apparently  similar  situation  has  de¬ 
veloped  But  such  information  as  is  available  would  indicate  that 
flour  production  in  the  southwestern  area  is  considerably  more  decen¬ 
tralized  than  is  the  case  in  the  Northwest.  The  water-power  facilities 
of  Minneapolis,  combined  with  the  momentum  of  its  very  early  de¬ 
velopment  as  a  wheat  flour  milling  center  and  the  extensive  sample 
market,  have  resulted  apparently  in  a  higher  degree  of  centralizaUon 
of  flour  milling  in  the  Northwest  than  obtains  in  the  Southwest.  I  he 
great  bulk  of  the  northwestern  production  is  at  Minneapolis.  Obtain¬ 
able  figures  would  indicate  that  relatively  a  much  larger  proportion  of 
the  southwestern  flour  production  is  to  be  found  scattered  through  the 
heart  of  the  grain-producing  territory  than  is  the  case  in  the  North¬ 
west  where  flour  production  is  centralized  so  largely  at  Minneapolis. 
While  mills  located  at  points  like  Kansas  City,  where  there  is  a  con¬ 
siderable  elevator  capacity,  are  able  to  get  along  without  the  opera¬ 
tion  of  line  elevators,  there  appears  to  be  a  tendency  for  the  larger 
southwestern  mills  situated  at  various  local  points  to  operate  a  string 
of  elevators,  presumably  in  order  to  insure  a  supply  of  wheat  of  the 
requisite  quality  and  grade.^^ 

Section  6.  Individual  mill  elevators. 

Before  the  extension  of  the  wheat-producing  area  much  beyond  the 
Mississippi,  the  milling  industry,  as  stated,  was  confined  largely  to 
the  production  of  soft-wheat  flour  raised  in  the-  East,  and  Illinois, 
Ohio,  Missouri,  and  Indiana,  all  important  soft- wheat  States,  were 

among  the  most  important  milling  States.^^  •  .  -n 

In  the  early  days  flour  production  was  on  a  small  scale,  gristmills 
were  relatively  important  as  compared  with  to-day,  and  even  the 
merchant  mills  were  very  small  affairs  measured  by  present-day 
standards.  Chiefly  by  reason  of  these  facts  the  demand  for  wheat 
for  milling  purposes  was  largely  of  a  local  character,  the  size  qi 
establishments  not  being  sufficient  to  require  a  large  volume  of  gram 
to  maintain  the  mill  in  operation.  As  a  result  the  individual  mill 

12  ThP  Kansas  Flour  Mills  Co.,  operating  6  mills  in  Kansas,  1  in  Missour^  and  2  in 
Oklahoma^  a^sfopir'^^tes  be^^^^^^^^  and  150  country  houses  Min''&  Ele' 

rornoration,  the  Rea-Patterson  and  Arkansas  City  Cos.,  the  MUl  &  E  e 

orator  Co  and  the  Hunter  Milling  Co.  are  among  those  also  operating  line  elevaUir^ 

isTTven  as  late  as  1870  Illinois  was  the  principal  milling*  State,  measured  in  terms  of 
harrll  floubproduced  by  m  mills  and  New  York,  Missouri,  Ohio,  Pennsylvania, 

Indiana  were  second,  third,  fourth,  fifth,  and  sixth,  respectively,  in  importance. 
Ninth  Census  of  United  States  (1870),  Vol.  Ill,  Manufactures,  Table  X,  p.  599. 


DEVELOPMENT  OF  COUNTRY  HOUSES. 


81 


elevator  developed  at  first  in  the  East  rather  than  the  mill  line.  Sub¬ 
sequently  the  great  commercial  demand  for  hard-wheat  flour,  with 
the  accompanying  rapid  increase  in  the  scale  and  volume  of  produc¬ 
tion  to  the  west  of  the  Mississippi,  tended  to  restrict  the  development 
of  soft-wheat  flour  milling  on  anything  like  a  corresponding  scale. 
The  demand  for  the  older  soft-wheat  flour  declined,  and  as  a  result 
the  eastern  mills  tended,  if  milling  exclusively  soft  wheat,  to  remain 
of  small  size,  or  if  they  embarked  in  large-scale  operations,  to  obtain 
some  hard  wheat  from  the  West.^^ 

Since  the  tendency  to  the  establishment  of  mill  lines  probably  re¬ 
sults  from  an  increased  demand  for  wheat  to  supply  mill  require¬ 
ments,  there  has  been  less  tendency  for  the  mill  line  to  develop  in  the 
so  ft- wheat  area  than  in  the  hard- wheat  territory.  Large-scale  mill¬ 
ing  has  not  so  extensively  developed  in  the  former  as  in  the  latter 
area,  and  so  far  as  large-scale  operations  have  developed  in  the  East 
they  have  tended  to  draw  their  increased  grain  supply  from  the  hard- 
wheat  fields  of  the  West. 

Section  7.  Independent  elevators. 

An  examination  of  the  tables  of  period  of  construction  by  types 
and  States  (Ch.  II,  secs.  8  and  11)  reveals  the  fact  that  of  the  133  ele¬ 
vators  and  warehouses  reported  as  constructed  prior  to  1880,  83,  or 
about  62  per  cent,  were  of  the  independent  type.  This  may  be  taken, 
probably,  as  indicative  of  the  early  importance  of  the  independent 
as  a  factor  in  the  grain  trade.  As  has  been  repeatedly  indicated,  the 
independent  house  is  relatively  most  important  in  the  States  east  of 
the  Mississippi  and  in  Missouri  and  Iowa.  In  the  Northwest  the 
rapid  development  of  large  scale  grain  production,  combined  with 
the  relative  scarcity  of  local  capital,  produced  the  commercial  line 
as  one  of  the  first  types  of  elevators,  while  the  development  of  large- 
scale  milling  at  Minneapolis  resulted  in  an  almost  simultaneous 
growth  of  the  mill  line.  For  a  time  at  least  these  two  types  largely 
monopolized  the  field,  and  it  was  not,  apparently,  until  about  1885 
or  1890  that  independent  elevators  began  to  be  important  in  this  area. 
By  this  time  considerable  local  capital  had  been  accumulated,  and 
since  then  this  type  is  reported  to  have  increased  steadily  in  number, 
though  rather  slowly  in  this  area.  A  number  of  the  so-called  farmers’ 
houses  of  this  period  were  nothing  more  in  fact  than  independents, 
the  companies  operating  them  being  composed  largely  of  local  busi¬ 
ness  men  with  a  few  farmers  to  give  them  the  name.  Frequently 
the  independents  Tvere  operated  by  local  merchants  as  adjuncts  to 
their  stores. 

The  importance  of  the  independent  as  well  as  the  relative  unim¬ 
portance  of  commercial  line  elevators  in  eastern  territory  may  prob¬ 
ably  be  attributed  to  the  larger  amount  of  local  capital  available  in 
this  area  as  compared  with  the  Northwest,  and  the  probability  that  in 
the  former  area  farming  has  almost  from  the  outset  been  of  a  more 
diversified  and  intensive  character.  As  compared  with  the  develop¬ 
ment  of  the  Northwest  area  Missouri  and  the  grain  States  east  of  the 
Mississippi  had  a  much  earlier  and  slower  growth,  and  probably 

The  Commission’s  Report  on  Commercial  Flour  Milling  (Exhibit  V)  shows  that  20 
mills  east  of  the  Mississippi  are  using  49  per  cent  hard  wheat  and  51  per  cent  soft  wheat. 
Only  two  of  these  mills  were  using  soft  wheat  exclusively,  while  four  were  using  hard 
wheat  exclusively.  These  mills  in  1916-17  produced  on  an  average  about  60,000  barrels 
each. 


9964°— 20 - 6 


82 


COUNTRY  GRAIN  MARKETING. 


larger  amounts  of  local  capital  were  accumulated.  In  the  very  early 
days  the  farming  industry  in  this  territory  was  also  of  a  diversified 
rather  than  a  large-scale  character,  because,  owing  to  the  lack  of 
transportation  facilities,  considerable  mixed  farming  was  necessary 
in  order  to  sustain  the  local  population.  When  they  did  not  sell  to 
the  mills  the  farmers  disposed  of  their  grain  to  merchants  or  others 
in  near-by  towns,  taking  in  exchange  therefor  the  necessities  which 
the  farm  did  not  produce.  Purchasers  required  storage  space  for 
this  grain,  and  from  this  stage  it  was  but  a  step  to  the  independent 
elevator  or  warehouse. 

In  the  grain  States  west  of  the  Mississippi  the  development  of 
independent  elevators  has  depended  upon  local  capital  accumulations 
and  the  competition  of  other  types  of  houses.  The  early  development 
of  the  lines,  however,  tended  at  first  to  retard  the  growth  of  inde¬ 
pendent  houses,  and  later  the  extensive  cooperative  movement  in  this 
area  prevented  it  from  becoming  a  fertile  field  for  the  independents. 

Section  8.  Early  cooperative  development. 

Origins. — The  exact  genesis  of  the  farmers^  or  cooperative,  elevator 
movement  is  exceedingly  difficult  to  determine.  It  has  been  stated 
that  the  real  initiation  of  the  farmers’  elevator  movement  dates 
from  the  granger  movement  of  the  seventies.^®  Hibbard,  writing  in 
the  Cyclopedia  of  American  Agriculture,  says :  “  It  is  reported  on 
fairly  good  authority  that  over  half  of  the  elevators  of  Iowa  were 
once  in  the  hands  of  the  grange  cooperators.” 

According  to  another  writer,  a  number  of  farmers’  elevators  or¬ 
ganized  by  the  Farmers’  Alliance  movement  in  the  eighties  are  still 

in  operation.^^ 

Weld  states  that  in  Minnesota  the  farmers’  elevator  movement  may 
be  said  to  have  started  about  1890,  though  a  few  companies  had  been 
formed  before  that  date,  most  of  which  had  failed.^®  Of  204  farm¬ 
ers’  elevators  in  Minnesota  in  1916,  however,  one  dated  back  to  1876 
and  another  to  1884,  though  the  total  number  reported  prior  to  1900 

was  only  30.^^  . 

In  Illinois  it  is  also  reported  that  farmer  elevator  companies,  which 
were  outgrowths  of  grange  teachings  or  of  the  F.  M.  B.  A.^®  move¬ 
ment,  were  organized,  some  as  stock  corporations,  others  as  voluntary 
associations,^^  prior  to  1896. 

What  has  frequently  been  termed  the  first  cooperative  elevator  ap¬ 
pears  to  have  been  established  at  Kockwell,  Iowa.  The  belief  of  the 
farmer  that  ‘‘he  was  being  robbed  of  his  just  profits  through  the  ex¬ 
actions  of  the  grain  trust,  the  lumber  trust,  the  coal  trust,  and  other 
combinations  with  which  he  had  to  transact  business  *  * 

prompted  about  100  farmers  in  the  little  town  of  Rockwell,  Iowa,  in 
March,  1889,  to  meet  and  discuss  their  troubles.  The  result  of  this 
meeting  was  to  organize  a  company  and  raise  sufficient  money  to 


IS  Erdman,  H.  E.,  Farmers  Elevator  Movement  in  Ohio,  in  Ohio  Experiment  Station 

Hibbari’  B.  H.?' Cooperation  in  the  Grain  Elevator  Business,  Cyclopedia  of  American 
Agriculture,  Vol.  IV,  p.  207. 

18  W^ld,^L.  °h’.  D.’  Farmers’  Elevators  in  Minnesota,  University  of  Minnesota  Agricul¬ 
tural  Experiment  Station  Bulletin  152,  p.  5.  tt  •  t 

10  Durand  &  Jensen,  Farmers’  Elevators  in  Minnesota,  1914-lo,  University  of  Minne¬ 
sota  Agricultural  Experiment  Station  Bulletin  164,  p.  9. 

20  Probably  Farmers  Mutual  Benevolent  Association.  ,  , 

21  Thomas  Lamb,  jr.,  History  of  the  Farmers  Elevator  Movement  in  Illinois,  American 

Cooperative  Journal,  Sept.,  1907,  Vol.  Ill,  No.  1,  p.  23. 


DEVELOPMENT  OF  COUNTRY  HOUSES.  83 

purchase  or  erect  their  own  elevator.  This  was  soon  accomplished 
and  the  company  be^an  business.” 

Whether  any  of  these  early  farmers’  elevators  were  cooperative  in 
the  true  sense  of  the  word  or  only  in  the  sense  that  they  were  owned 
by  farmers  has  not  been  ascertained,  none  of  the  available  informa¬ 
tion  making  this  point  at  all  certain. 

The  penalty  clause.-— Regardless  of  whether  the  Rockwell  ele¬ 
vator  was  truly  cooperative  or  not,  it  was  unique  in  one  respect.  It 
appears  to  be  undisputed  that  it  was  the  first  elevator  to  employ  and 
enforce  the  so-called  penalty  clause.  In  substance  this  clause  usually 
provided  that  any  member  of  the  cooperative  concern  who  sold 
grain  to  any  other  dealer  in  the  to^m  than  the  elevator  OAvned  by 
his  organization  should  pay  into  the  treasury  of  the  company  a  cer¬ 
tain  amount  per  bushel — usually  one-half  cent  to  1  cent  per  bushel — 
for  its  support  and  maintenance.^^  This  clause  was  destined  to  play 
an  important  part  in  the  subsequent  history  of  the  development  of 
the  cooperative  elevator. 

Section  9.  Reasons  for  cooperative  development. 

Lack  of  competition. — While  there  seems  little  reason  to  doubt 
that  there  was  originally  considerable  competition  between  the  older 
types  of  elevators,  i.  e.,  the  mills,  commercial  lines,  and  independ¬ 
ents,  this  competition  gradually  led  to  various  agreements  among 
elevators,  especially  in  the  territory  west  of  the  Mississippi,  with 
reference  to  prices,  the  pooling  of  purchases  at  particular  stations, 
and  other  practices  all  more  or  less  designed  to  decrease  or  eliminate  - 
competition.  In  the  late  nineties  and  early  years  of  the  present  cen¬ 
tury  such  arrangements  were  quite  generally  characteristic  of  coun¬ 
try  marketing  conditions.  In  the  Northwest  these  practices  ap¬ 
pear  to  have  been  especially  prevalent  among  the  commercial  line 
comiianies,^^  Avhich  were  so  largely  developed  in  this  area.  Most  of 
these  companies  had  their  headquarters  in  the  terminal  market,  and 
it  was  therefore  a  comparatively  simple  and  easy  thing  to  perfect 
arrangements  as  to  competition  between  the  houses  of  these  com¬ 
panies  at  local  stations.  Farther  to  the  south  and  east,  in  Nebraska, 
Iowa,  and  Illinois,  where  the  independents  were  relatively  more  im¬ 
portant  than  the  lines,  both  types  of  houses  Avere  involved  and  the 
restriction  of  competition  vms  accomplished  through  the  various 
State  associations  of  grain  dealers,  to  which  associations  both  the 
independent  and  line  houses  quite  generally  belonged. 

Situation  in  the  Northavest. — ^The  situation  which  existed  in  the 
Northwest  territory,  tributary  to  Minneapolis,  even  as  late  as  1905, 
may  be  illustrated  by  the  following  quotations  from  the  testimony 
of  Mr.  A.  J.  Hoskins  before  the  Interstate  Commerce  Commission, 
November  22,  1906.^® 

Mr.  Marble.  Have  you  at  the  present  time  charge  of  any  arrangement  for 
pooling  the  grain  or  dividing  the  business  at  country  stations? 


Danforth,  H.  W.,  Farmers’  Elevator  Movement  in  the  United  States,  Third  National 
Conference  on  Marketing  and  Farm  Credits,  pp.  251-252. 

28  Testimony  of  AV.  M.  Stickney,  I.  C.  C.,  in,  the  matter  of  relation  of  common  car¬ 
riers  to  the  grain  trade,  59th  Cong.,  2d  sess..  Doc.  278.  p.  16. 

2*  From  available  information  it  is  impossible  to  determine  to  what  extent  independent 
elevators  in  this  territory  may  have  been  parties  to  similar  arrangements  to  those  in 
which  the  line  companies  were  involved.  No  indication  has  been  found  that  State 
grain  dealers’  associations  ever 'played  such  a  part  in  these  arrangements  in  the  four 
northwestern  States  as  they  did  farther  to  the  south. 

2®  A.  J.  Hoskins,  op.  cit.,  S.  Doc.  278,  pp.  931,  932,  940-942.  Italics,  the  Federal  Trade 
Commission’s. 


84 


COUNTRY  GRAIN  MARKETING. 


Mr.  Hoskins.  No,  sir. 

Mr.  Marble.  You  have  had  in  years  past,  have  you  not? 

Mr.  Hoskins.  Yes.  sir. 

Mr  Marble.  But  as  to  some  of  these  arrangements  in  August,  1905,  were 
there  agreements  to  pay  penalties  on  excess  grain  purchased? 

Mr.  Marble.^ How  many  such  agreements  would  you  say  there  were  in  August, 
1905  ? 

Mr.  Hoskins.  Do  you  call  each  station  an  agreement? 

Mr!  Marble.  Yes;  how  many  points?  ^  , 

Mr  Hoskins.  I  do  not  know ;  perhaps  a  couple  of  hundred. 

Mr  Marble.  In  what  States  were  those  stations  located? 

Mr!  Hoskins.  Well,  Minnesota,  South  Dakota,  and  North  Dakota. 

*  *  *  *  * 

Mr.  Makble.  I  will  ask  you  first,  Were  these  agreements  of  the  same  general 

nature  and  form  at  these  200  points? 

Mr.  Hoskins.  Yes,  sir;  I  think  so.  ^  ^  ,4.0 

Mr.  Marble.  What  was  the  form  and  nature  of  that  agreement? 

Mr  Hoskins.  Well,  it  was  to  figure  a  penalty  on— of  course,  first  it  was 
decided  what  percentage  each  company  was  entitled  to,  and  then  those  that  got 
more  than  their  share  there  was  a  penalty  figured  and  those  that  got  less  than 
their  share  received  the  penalty. 

Mr.  Marble.  What  was  that  penalty  generally?  • 

Mr.  Hoskins.  Two  and  a  half  cents  on  wheat,  and  in  some  cases  2  cents  on 

barlev  and  rye,  and  flax  was  3f  and  oats  were  2  cents.^  4-r.Tvion+- 

Mr!^  Marble.  Each  of  the  buying  elevator  companies  rendered  a  statement 

to  you? 

Mr.  Hoskins.  Of  their  receipts ;  yes,  sir. 

Mr.  Marble.  You  figured  who  had  the  excess  and  the  amount  due  from  the 

ones  getting  the  excess? 

Mr.  Hoskins.  Yes,  sir. 

Mr.  Marble.  And  also  to  whom  that  money  was  to  go . 

Mr.  Hoskins.  Yes,  sir.  ,  i, 

Mr.  Marble.  You  had  the  clearing  house,  as  it  were,  for  this  business. 

Mr.  Hoskins.  Yes,  sir. 

Mr  Marble.  Who  paid  you  for  that  service?  _ 

Mr  Hoskins  Why,  I  do  not  know  that  anybody  did.  I  made  an  assessment 
to^covS  the  expense  of  my  office,  based  on  the  number  of  elevators  that  each 
company  had,  and  I  sort  of  did  this  other  service  for  nothing. 

.  u,  *  *  *  * 

*  *  *  ^ 

Mr.  Mabble.  Now,  did  all  the  people  haying  these  arrangements— they  also  . 

got  prices  from  you,  did  they  not? 

Mr!  Marble.  Was*it  any  part  of  the  contract  that  they  should  pay  the  card 
prices? 

Mr.  Hoskins.  No.  .  ^  ,,  ^ 

Mr.  Marble.  Simply  a  division  of  the  grain  at  the  point,  with  a  penalty  to  be 

paid  on  the  excess? 

Mr.  Hoskins.  Yes,  sir.  , .  ,  .  a.  « 

Mr.  Marble.  And  a  share  for  the  one  not  getting  his  proportion . 

Mr.  Hoskins.  Yes,  sir.  .4.0 

Mr.  Marble.  Was  there  any  other  feature  in  the  contract  I 

Mr.  Hoskins.  No. 

Mr.  Marble.  Were  those  written  contracts? 

Mr.  Hoskins.  No,  sir. 

Mr.  Marble.  Oral? 

Mr.  Hoskins.  Yes,  sir. 

IMr.  Marble.  How  often  did  you  render  statements? 

Mr.  Hoskins.  Once  a  month,  generally. 

Mr.  Marble.  Those  statements  took  the  form  of  “  So-and-so  elevator  company 

to  Hoskins,  debtor  ”  ?  ^  „ 

Mr.  Hoskins.  No  ;  we  ran  them  by  numbers,  because  it  was  easier  and  shorter 

to  write  than  the  name  of  the  company. 

Mr.  Marble.  And  you  made  a  statement  of  the  amount  due  them  and  the 

amount  due  from  each  one? 


DEVELOPMENT  OF  COUNTRY  HOUSES. 


85 


Mr.  Hoskins.  No  ;  if  they  had  a  debit,  I  showed  that,  and  if  they  had  a  credit 
I  showed  that. 

Mr.  Marble.  Not  as  to  any  person  in  particular? 

Mr.  Hoskins,  No. 

Mr.  Marble.  To  whom  was  the  money  paid? 

Mr.  Hoskins.  To  me. 

Mr.  Marble.  To  you? 

Mr.  Hoskins.  Yes,  sir. 

Mr.  Marble.  And  by  you  distributed  to  the  parties  entitled  to  it  under  the 
arrangement? 

Mr.  Hoskins.  Yes,  sir. 

Commissioner  Lane.  What  was  the  total  number  of  elevators  in  that  arrange¬ 
ment? 

Mr.  Hoskins.  I  should  say  40 — oh,  elevators? 

Commissioner  Lane.  Yes,  sir. 

Mr.  Hoskins.  I  really  could  not  say. 

Mr.  IMarble.  Perhaps  40  companies ?[*®] 

*♦♦*♦♦* 

Mr.  Marble.  Did  you  have  charge  of  such  arrangements  as  this  from  the  be¬ 
ginning  of  the  time  you  sent  out  the  prices? 

Mr.  Hoskins.  Yes,  sir;  I  think  so. 

Mr.  Marble.  And  you  testified  that  that  was  about  11  years  ago  you  began? 

Mr.  Hoskins.  Yes,  sir ;  11  years  ago  the  1st  of  August  last. 

Mr.  Marble.  That  would  be  the  1st  of  August,  1895? 

Mr.  Hoskins.  No — well,  I  guess  it  would — why,  no. 

Mr.  Marble.  The  time  you  began  sending  out  these  prices. 

Mr.  Hoskins.  Eleven  years  ago  the  1st  of  last  August  I  commenced. 

Mr.  Marble.  What  date  would  that  be — 1895,  would  it  not? 

Mr.  Hoskins.  I  guess  so ;  yes,  sir. 

Mr.  Marble.  And  you  have  ever  since  continued  this  furnishing  of  prices? 

Mr.  Hoskins.  Yes,  sir. 

Mr.  Marble.  And  you  had  charge  of  such  arrangements  for  paying  penalties 
on  surplus  grain  purchased  and  dividing  the  grain  for  approximately  10  years — 
no,  11  years? 

Mr.  Hoskins.  No  ;  10 ;  not  more  than  that. 

Mr.  Marble.  Yes ;  10 ;  that  is  right. 

Commissioner  Lane.  Mr.  Taylor  informs  me  that  there  were  about  950  eleva¬ 
tors,  according  to  your  statement,  in  this  pool.  Would  that  be  approximately  it? 

Mr.  Hoskins.  Why,  approximately;  yes,  sir. 

Chicago  territory. — In  the  Chicago  territory  Nebraska  may  be 
taken  as  more  or  less  typical  of  the  situation.  According  to  findings 
of  fact  of  the  referee  in  State  v.  Omaha  Elevator  Co. : 

Some  time  prior  to  the  year  1899  an  association  known  as  the  Nebraska  Grain 
Dealers’  Association  was  organized  in  this  State,  which  adopted  a  constitution 
and  by-laws  under  which  it  operated.  Its  officers  consisted  of  a  president, 
vice  president,  secretary,  treasurer,  and  a  governing  board,  consisting  of  the 
president,  secretary,  and  three  other  members  of  the  association. 

♦  ♦♦**** 

There  were  about  1,200  grain  dealers,  all  told,  in  the  State  on  April  1,  1905, 
of  whom  about  770  belonged  to  said  Nebraska  Grain  Dealers’  Association,  and 
about  200  more  were  in  sympathy  with  such  association.  To  accomplish  the 
objects  of  said  association,  *  *  *  various  expedients  were  resorted  to  by  it, 

some  of  which  were  as  follows:  (a)  A  price  committee,  consisting  of  persons 


“According  to  Hoskins  the  following  companies  had  stations  which  were  involved 
In  these  agreements  :  Andrews  &  Gage  ;  Great  Western  Elevator  Co. ;  Exchange  Grain  Co. ; 
Pacific  Elevator  Co. ;  A.  O.  Cornwell ;  Security  Elevator  Co. ;  Winter  &  Ames  Co. ;  State 
Elevator  Co. ;  Federal  Elevator  Co.  ;  McCaull-Webster  Elevator  Co. ;  Hawkeye  Elevator 
Co. ;  Interstate  Grain  Co. ;  National  Elevator  Co. ;  Osborne-McMillan  Elevator  Co. ; 
Empire  Elevator  Co. ;  Northland  Elevator  Co. ;  Columbia  Elevator  Co. ;  Woodworth 
Elevator  Co. ;  Monarch  Elevator  Co. ;  Duluth  Elevator  Co. ;  St.  Anthony  and  Dakota  Ele¬ 
vator  Co.  ;  Imperial  Elevator  Co. ;  Powers  Elevator  Co. ;  Geo.  C.  Bagley  Elevator  Co. ; 
Atlantic  Elevator  Co. ;  Royal  Elevator  Co. ;  Northwestern  Elevator  Co. ;  Heising  Elevator 
Co. ;  Miller  Elevator  Co.  ;  Acme  Grain  Co. ;  N.  J.  Olsen  ;  Minnesota  and  Western  Grain  Co. ; 
Anchor  Grain  Co. ;  Victoria  Elevator  Co.  ;  C.  G.  Ireys  ;  Reliance  Elevator  Co. ;  Minneapolis 
&  Northern  Elevator  Co. ;  Thorpe  Elevator  Co. ;  Car^ll  Elevator  Co. — Op.  cit.,  Sen.  Doc. 
278,  pp.  932-940. 

«75  Nebraska,  655;  110  N.  W.,  874. 


86 


COUNTRY  GRAIN  MARKETING. 


chosen  from  five  of  the  leading  corporation  members  of  said  association,  was 
formed,  whose  business  it  was  to  fix  the  prices  which  should  be  paid  for  grain 
by  the  various  members  of  said  association  throughout  the  State,  and  the  other 
regular  dealers  who  worked  in  harmony  with  said  association.  All  such  mem¬ 
bers  and  Iversons  were  notified  by  card  what  such  prices  w’ere,  and  as  members 
of  such  association  and  regular  dealers  they  were  expected  and  required  to  fix 
their  bids  for  grain  on  the  basis  of  the  prices  sent  to  them  on  the  caids,  and  thej 
were  not  to  pay  any  more  for  grain  than  other  regular  dealers  in  the  same 
locality.  For  the  purpose  of  facilitating  the  business,  the  State  \vas  divided  into 
13  districts,  and  it  was  the  duty  of  some  member  of  the  association,  selected 
for  that  purpose  on  account  of  his  or  its  superior  location  and  facilities  for  that 
purpose,  to  send  cards  to  all  the  regular  dealers  in  his  district.  The  prices  were 
changed  as  often  as  the  fluctuations  of  the  market  made  it  necessary;  some¬ 
times  every  day  and  sometimes  less  often.  The  new  prices  always  went  into 
elfect  on  the  morning  of  the  day  succeeding  the  issuance  of  the  cards  and  never 
on  the  same  day.  In  said  manner  and  by  said  method  uniformity  of  prices 
was  maintained  amongst  the  members  of  said  association  and  other  regular 
dealers  over  the  State.  Regular  dealers  were  those  who  were  in  harmony  with 
the  purpose  and  objects  of  said  association.28 

Agreements  and  price  fixing  of  the  above  character  together  with 
the  wide  margins  frequently  exacted  led  the  farmer  to  believe  that 
there  was  little  or  no  competition,  and  that  he  did  not  receive  as  much 
as  he  should  for  his  grain.  This  situation  may  be  said  to  be  pri¬ 
marily  responsible  for  the  considerable  and  rapid  increase  of  the  co¬ 
operatives  after  the  middle  or  late  nineties.  Many  grain  men  have 
informed  the  agents  of  the  Commission  that  this  development  has 
been  due  largely  to  cooperative  promoters  and  propaganda.  These 
arguments,  however,  are  not  impressive.  There  is,  of  course,  little 
or  no  doubt  that  agitation  and  propaganda  played  an  important  part 
in  the  growth  of  the  cooperative.  This  alone,  however,  would  not 
account  for  the  development.  Cooperative  agitation  and  propaganda 
found  a  foothold  because  of  the  facts  already  set  out — that  there  was 
a  lack  of  competition  in  the  country  grain  business,  and  as  a  result 
that  the  prices  paid  the  farmer  were  not  as  high  as  they  should 
have  been.  In  fact  some  grain  men,  at  least,  have  admitted  that  in 
the  earlier  days  many  of  the  older  types  of  elevators  exacted  alto¬ 
gether  too  large  a  margin,  and  many  witnesses  before  the  Interstate 
Commerce  Commission  in  1906  testified  to  the  fact  that  the  result  of 
the  organization  of  a  farmers’  company  was  to  raise  the  price  of  grain 
in  the  locality  from  1  to  3  cents  a  bushel.  It  is  certainly  highly  prob¬ 
able,  in  view  of  the  widespread  existence  of  pooling  and  price  agree¬ 
ments  among  the  older  elevators,  that  such  results  were  actually 

obtained. 

Section  10.  Opposition  to  cooperatives. 

Of  the  development  of  the  cooperative  movement  during  the  nine¬ 
ties  very  little  is  apparently  known,  though  a  great  deal  of  informal 
tion  is  available  as  to  the  situation  immediately  subsequent  to  1900. 
The  Commission’s  figures  of  construction  (Ch.  II,  sec.  11)^  would 
indicate  that  the  movement  made  considerable  progress  during  the 
decade  1890  to  1900,  the  number  of  cooperatives  reporting  date  of 
their  construction  increasing  from  39  constructed  prior  to  1890  to  133 
constructed  prior  to  1900. 

About  1900,  or  a  little  earlier,  the  farmers’  elevator  movement  be¬ 
gan  to  meet  with  determined  opposition  from  the  older  types  of 

28  Cf.  also  testimony  of  G.  A.  Wells  as  to  the  fixing  of  prices  in  Iowa,  op.  cit.,  S.  Doc. 
278,  pp.  G58ff. 


/ 


DEVELOPMENT  OF  COUNTRY  HOUSES. 


87 


t 


’  houses.  In  part  at  least  this  opposition  was  due  to  the  employment 
by  many  of  these  houses  of  the  penalty  clause  plan  first  employed 
by  the  Rockwell  Co.  Before  the  introduction  of  this  plan  it  had  often 
happened  that  when  a  farmers’  company,  was  organized  the  older 
competing  elevators  paid  more  than  the  market  would  warrant  for 
the  purpose  of  breaking  down  the  farmers’  company  by  making  the 
farmers  dissatisfied  with  the  business  upon  which  they  had  em¬ 
barked.^® 

As  the  penalty  clause  required  the  farmer  to  pay  a  cash  penalty  if 
he  hauled  elsewhere  than  to  the  farmer’s  house,  it  had  two  effects.  It 
tended  in  the  first  place  to  divert  all  of  the  business  of  member 
farmers  to  the  farmer’s  house,  and  in  the  second  place  to  render 
nugatory  efforts  of  competitor  companies  to  destroy  the  farmers’ 
organization  by  the  method  of  local  price  raising.  This  kind  of 
competition,  said  G.  E.  Marcy  before  the  Interstate  Commerce  Com¬ 
mission,  “  is  mighty  hard  competition  to  go  up  against.  Whenever 
I  hear  of  a  farmers’  elevator  starting  in  I  always  try  to  sell  them  our 
elevator.” 

The  warfare  against  the  cooperatives  assumed  the  most  serious  pro¬ 
portions  in  the  Chicago  territory.  Outside  this  area  little  indication 
has  been  discovered  of  any  organized  attack  upon  this  type  of  house. 
In  North  and  South  Dakota"  and  Minnesota  the  opposition  to  the 
cooperative  came  chiefly,  of  course,  from  the  old  line  companies,  there 
being  comparatively  few  of  the  independents  in  this  territory.  The 
grain  dealers’  associations  apparently  did  not  develop  there  to  such 
an  extent,  nor  did  they  exercise  as  much  influence  as  in  the  area 
farther  south.  Moreover,  the  Northwest  territory  was  younger  and 
w  as  rapidly  developing.  It  was  not  so  well  supplied  with  elevators 
as  were  the  older  States,  and  there  was  probably  more  room  for  new 
elevators  than  in  the  older  territory. 

Section  11.  Irregular  dealers. 

In  the  Chicago  territory  the  attack  on  the  cooperatives  assumed 
about  the  same  form  as  similar  wars  conducted  in  various  other  in¬ 
dustries  and  trades  against  so-called  irregular  dealers,  and  in  Iowa, 
'  Nebraska,  and  Illinois  the  State  associations  of  grain  dealers,  com¬ 
posed  largely  of  commercial  line  and  independent  elevator  operators, 
refused  recognition  to  cooperative  or  farmers’  elevators  as  well  as 

scoop  shovelers.  ‘  .  ^  t  rn  • 

The  following  is  a  portion  of  a  bulletin  of  the  Iowa  Gram 

Dealers’  Association  from  the  files  of  the  Interstate  Commerce  Com¬ 
mission,  which  indicates  the  attitude  of  the  association  and  its  refusal 
to  recognize  cooperatives : 

[Bulletin  No.  1.] 

^  Iowa  Grain  Dealers’  Association 

1  ■  Secretary’s  Office, 

Des  MoineSy  Iowa,  Aug.  10,  1902. 

To  menihers: 

The  Iowa  Grain  Dealers’  Association  does  not  recognize  scoop-shovel  ship¬ 
pers,  farmer  elevator  companies  that  are  organized  to  agitate  markets,  or 
dealers  (shippers,  bidders,  or  receivers)  who  refuse  to  arbitrate  differences 


2»Cf.  Vincent,  testimony,  op.  cit.,  S.  Doc.  278,  p.  498. 

WG.  E.  Marcy,  testimony,  op.  cit.,  S.  Doc.  278,  P-1'75.  rnr* 

^  In  the  matter  of  the  Relations  of  Common  Carriers  to  the  Gram  Trade,  1.  G.  G., 

Doc.  875,  Vol.  II. 


88 


COUNTRY  GRAIN  MARKETING 


as  between  buyers  and  sellers.  We  give  below  a  list  of  such  located  in  Iowa ; 
also  show  changes  in  firms. 


Firms  not  r«cognized. 


Stations. 


Firms  named  to  be  recognized. 


C.  &  N.  W.  EY. 


Allan  Smith . 

J.  M.  Wolf . 

D.  L.  Boyd . 

W.  A.  Smith . 

Hemmerson  Bros . 

A.  S.  Evans . . . 

Barrett  &  Cariton . 

W.  E.  Mereness . 

Jos.  Whyte . 

L.  H.  Noyes . 

Pepin  &  DeA*in . 

F.  L.  Howe  &  Co . 

W.  H.  Campbell . 

Ralph  Dodge . 

Geo.  Harris . 

L.  J.  MigheJ . 

J.  A.  Winkle  &  Co . 

M.  Allineaux  &  Wright 


Boone . 

Grand  Mound. 
Mount  Vernon 
California  Jc... 

Rutland . 

Earley . 

Earley . 

Earley . 

Blencoe . 

Mondatnin.... 

Salix . 

Radclifife . 

Goldfield . 

Paulina . 

Paulina . 

Lake  City . 

Irvington . 

Tilton . 


American  Grain  Co 


Doon 


C.  M.  &  ST.  P.  RY. 


Lawler  Grain  &  Live  Stock  Ass’n. 

Farmers  Elevator  Co . 

Dunbar  Grain  &  Stock  Co . 

J.  B.  Haas  (farmers) . 

C.  M.  Goudy . 

W.  W.  Topf&Co . 

W.  W.  Topf&Co . 

W.  W.  Topf&Co . 

W.  W.  Tonf&Co . 

Fanner’s  Inc.  Society . 

Canton  Grain  Co . 


Lawler . 

Rudd . 

Dunbar . 

Hartley . 

Britt . 

Buck  Grove. 
Kenwood. . . 
Charter  Oak 

Rodney . 

Ruthven. . . . 
Hull . 


C.  R.  I.  &  P.  RY. 


J.  B.  Haas  (farmers) . 

J.  A.  Campbell,  or  Atlantic  Mill  Co . 

Mat  Johnson . 

To  be  recognized . 

F.  D.  Campbell . 

Smith  &  Damann . 

Moved  house  onto  C.  &  G.  W.  Ry. 


Hartley.. 
Atlantic. . 
Audubon. 

Plato _ 

Winterset 

Tipton... 

Rowan... 


S  cooper. 

S  cooper. 

S  cooper. 

S  cooper. 

S  cooper. 

Scooper. 

S  cooper. 

Scooper. 

Scooper. 

Scooper. 

Scooper. 

Refused  to  arbitrate. 

Not  recognized. 

Scooper. 

Scooper. 

Succeeded  by  Wells  Horde  Gr.  Co. 
Succeeded  by  Bedell  Bros. 
Succeeded  by  H.  B.  Hidy  (Belle 
Plaine). 

Succeeded  by  W.  S.  Kaufman. 


Not  recognized. 

Not  recognized. 

Not  recognized. 

Not  recognized. 

Refused  to  arbitrate. 

Succeeded  by  Atlas  Gr.  Co.  Chi. 
Succeeded  by  Atlas  Gr.  Co.  Chi. 
Succeeded  by  Atlas  Gr.  Co.  Chi. 
Succeeded  by  Neola  Elevator  Co. 
Not  recognized. 

Succeeded  by  South  Dakota  Grain 
Co.  (Parkston,  S.  D.) 


Not  recognized. 

Refused  to  arbitrate. 

Refused  to  arbitrate. 

Blattner  &  Baldwin. 

Succeeded  by  A.  L.  Springle. 
Succeeded  by  Clinton  Gram  Co. 
Shaner  &  Fowler. 


B.  C.  R.  &  N.  RY. 


John  Dammarm  &  Son 

T.  L.  Eggum . 

Fred  Hite . . . 

Geo.  Neissen . 

Oscar  Casey . 

Flemming  Bros . 


Dixon. . . . 
Thompson 
Shellsburg . 
Wellsburg. 
Dysart.... 
Armstrong 


Farmer’s  Exchange  Society .  Rockford 

Farmer’s  Elevator  Co . .  —  Kensett . . 


Scooping  at  other  stations. 
Scooper. 

Scooper. 

Scooper. 

Refused  to  arbitrate. 

Ignored  request  to  arbitrate  2 
cases. 

Not  recognized. 

Not  recognized. 


A.  Milligan . 

To  be  recognized 


ILL.  CENTRAL  RY. 

Tara  and  Ft.  Dodge . 

Smithland . 


Scooper. 

G.  J.  Wickey. 


L.  F.  Hull . 

J.  C.  Phelps . 

A.  Emmert . 

A.  J.  Mabie . 

Farmer’s  Cooperative  Ass’n 

Farmer’s  Elevator  Co . 

Farmer’s  Elevator  Co . 

Moore  Bros.  &  Felthouse. . . 
A.  Emmert . 


Manly  Grain  Co.  (farmers) 
D.  M.  Smith . 


IOWA  CENTRAL  RY. 

Taintor . 

Taintor . 

Newburg . 

St.  Anthony . 

Rockwell . 

Freeman . 

Kensett . 

Hampton . 

Kilduli  &  Newburg . 

C.  &  Q.  W.  RY. 

Manly . 

Manly . 


Scooper. 

Scooper. 

Scooper. 

Scooper. 

Not  recognized. 

Not  recognized. 

Not  recognized. 

Succeeded  by  Moore  Bros. 
Scooper. 


Not  recognized. 
Not  recognized. 


DEVELOPMENT  OF  COUNTRY  HOUSES. 


89 


Having  refused  the  cooperatives  recognition^^  as  regular  dealers, 
the  State  associations  and  also  various  individual  members  brought 
pressure  to  bear  upon  terminal  market  receivers  and  bidders  in  an 
effort  to  prevent  them  from  handling  cooperative  grain.  This  pres¬ 
sure  took  the  form  of  threats  of  boycott  and  of  actual  boycott  by 
the  association  and  its  members  of  those  terminal  concerns  failing  to 
confine  their  operations  to  the  so-called  regular  dealers  belonging 
to  the  association.  The  following  letters  sufficiently  illustrate  these 
operations : 

Secretary’s  Office:,®® 

Nebraska  Grain  Dealer’s  Association, 

Board  of  Trade  Building, 

„  „  m  Omaha,  Ve&r.,  Nov.  23,  1903. 

H.  G.  Miller,  Sec'y-Treas. 

The  Kemper  Grain  Co., 

Kansas  City,  Mo. 

Gentlemen  :  I  am  advised  that  you  are  receiving  wheat  shipments  from  the 
Axtell  Farmers  Company  at  Axtell,  Nebr.  If  this  is  a  fact,  beg  to  advise  that 
this  is  a  farmers  organization  which  has  in  its  constitution  a  penalty  clause, 
penalizing  its  members  for  selling  grain  to  other  than  its  own  Company.  This 
is  a  restraint  of  trade,  contrary  to  good  business  principles,  and  I  believe,  con¬ 
trary  to  the  statutes  of  Nebraska. 

I  give  you  this  information,  believing  that  you  are  not  aware  of  the  condi¬ 
tions.  You  will  not  I  trust,  think  there  is  anything  arbitrarily  intended  by  my 
calling  your  attention  to  this  matter.  As  I  will  be  expected  to  make  report  to 
those  interested,  would  you  kindly  favor  me  with  a  prompt  reply. 

Yours  truly, 

H.  G.  Miller,  Se&y. 


Iowa  Grain  Dealers’  Ass’n,®* 

Geo.  a.  Wells,  Secretary  &  Treasurer,  Des  Moines,  Iowa, 

Des  Moines,  Iowa,  February  17,  1903. 

Eschenberg  &  Dalton, 

Chicago,  III. 

Gei?tlemen  :  We  desire  to  advise  you  that  the  Iowa  Grain  Dealers’  Associa¬ 
tion  does  not  recognize  Farmers  Elevator  Companies  organized  for  the  purpose 
of  agitating  local  markets  or  that  work  on  the  assessment  plan. 

We  shall  use  all  legitimate  means  possible  to  protect  our  members  from  such 
competition,  a  competition  that  if  successful,  means  that  the  grain  dealer  who 
should  earn  a  legitimate  profit  must  go  out  of  business. 

We  state  our  position  plainly  in  this  matter  in  order  that  you  may  decide 
upon  such  a  policy  in  regard  to  doing  business  with  these  Farmers  Elevator 
Companies  as  you  may  consider  for  your  own  best  interests,  and  hope  that  you 
will  continue  to  work  in  harmony  with  us. 

The  Farmers  Elevators  Co’s  that  we  do  not  recognize  are  as  follows : 


Farmer’s  Incorporated  Society - Ruthven,  Iowa. 

Farmer’s  Co-operative  Association - Rockwell,  Iowa. 

Farmers  Elevator  Company - - Gowrie,  Iowa. 

Farmer’s  Elevator  Co _ Garden  City,  Iowa. 

Farmer’s  Elevator  Company - Badger,  Iowa. 

Manly  Grain  Company - Manly,  Iowa. 

Farmer’s  Elevator  Company - Kensett,  Iowa. 

Dunbar  Grain  &  Stock  Company - Dunbar,  Iowa. 

Lawler  Grain  &  Live  Stock  Ass’n - Lawler,  Iowa. 


You  will  understand  that  it  is  my  duty  as  Secretary  of  this  Association  to 
keep  the  members  informed  in  regard  to  the  disposition  and  conduct  of  bidders 
and  receivers. 

Yours  truly.  Geo.  A.  Wells,  Secretary. 


“There  are  indications  that  occasionally  a  cooperative  was  a  member  of  a  State 
oif  the  relations  of  common  carriers  to  the  grain  trade.  (I.  C.  C.  Doc. 

875,  Vol.  II.) 

« Ibid. 


90 


COUNTRY  GRAIN  MARKETING. 


To  Members: 


Itjlinois  Grain  Dealers  Association, 

Office  of  the  Secretary, 

Decatur,  III.,  Feb.  2^th,  190Jf. 


Enclosed  you  will  find  report  of  the  Advisory  Committee  of  the  National 
Association,  on  terminal  conditions  at  Memphis,  Tennessee.  Please  read  it 
carefully.  It  should  be  of  interest  to  every  shipper  of  grain  whether  he  ships 
to  Memphis  or  not.  You  will  notice  that  in  selling  to  Memphis  firms,  you  must 
depend  entirely  upon  the  facilities  and  responsibility  of  the  firm  to  whom  you 
sell.  The  letter  from  Secretary  Greaves  of  the  Merchants  Exchange  shows  the 
benefits  to  be  derived  from  Association  work,  and  every  dealer  should  give  it 
their  moral  and  financial  support. 

For  your  information  I  will  state  that  a  few  receivers  of  grain  are  said  to  be 
soliciting  business  from  irregular  dealers,  scoopers,  and  Co-operative  companies. 
We  do  not  question  their  right  to  do  this,  but  as  such  companies  and  combines, 
are  generally  understood  to  be  organized  to  eliminate  the  regular  dealer,  (or 
so-called  middle  man),  persons  who  accept  their  business  are  supposed  to  be  in 
sympathy  with  their  views.  If  this  is  correct  they  cannot  be  in  sympathy  with 
you,  or  your  business.  You  must  be  the  judge  of  this  yourself. 

.1  give  you  below  the  names  of  parties  supposed  to  be  receiving  such  business : 


H.  H.  Carr _ _ _ Chicago,  Ill. 

.Tohn  West  &  Co _ _ 

Lowell  Hoit  &  Co _  __ 

M.  E.  Cook - - - 

Mills  Bros _ _ — , - Peoria,  Ill. 

Quinn  &  Co _  — 

Suffern,  Hunt  &  Co _ , - ' - Decatur,  Ill. 

J.  W.  Hastings  Com.  Co _ _ New  Orleans,  La. 

W.  A.  Randall  &  Co _ _ _ Toledo,  O. 


Yours  truly. 


Geo.  Beyer,  Secretary. 


Section  12.  Effects  of  opposition  to  cooperatives. 

The  foregoing  policy  undoubtedly  rendered  it  difficult  for  the 
cooperatives  to  find  a  market  for  their  grain  and  resulted  in  serious 
injury  to  the  business  of  certain  terminal  market  concerns  who 
insisted  on  dealing  with  the  cooperatives.  This  latter  point  is  well 
illustrated  by  the  following  sworn  statement  of  J ames  R .  Dalton : 


Eschenberg  &  Dalton,  Commission  Merchants, 

Chicago,  Nov.  3,  1906. 


BY  JAMES  R.  DALTON  OF  ESCHENBERG  &  DALTON,  COMMISSION  MERCHANTS,  803 

ROYAL  INS.  BLDG.,  CHICAGO,  ILLS. 

My  first  experience  in  the  grain  business  was  Manager  of  a  Farmers’  Eleva¬ 
tor  Co.  in  South  Dakota  nearly  twenty  years  ago.  At  that  time  I  had  frequent 
calls  from  traveling  men  who  represented  commission  firms  in  Chicago,  Mil¬ 
waukee,  and  Minneapolis.  Any  firm  in  any  terminal  market  would  have  been 
pleased  to  get  the  account. 

Later  I  represented  Rosenbaum  Bros,  of  Chicago  as  a  solicitor  for  four  years. 
I  traveled  in  Iowa,  Minnesota,  South  Dakota,  and  made  several  trips  into  Wis¬ 
consin  and  Illinois.  I  called  on  all  sorts  of  grain  dealers  indiscriminately.  Line 
Houses,  Independent  Dealers,  and  Farmer  Elevator  Companies.  I  resigned  my 
position  with  Rosenbaum  Bros,  and  shortly  afterwards  made  a  contract  with 
Gerstenberg  and  Kroeschell  also  of  Chicago.  I  remained  with  this  firm  three 
years  or  until  the  firm  of  Eschenberg  &  Dalton  started  doing  business,  July  1, 
1897. 

While  with  Gerstenberg  and  Kroeschell  I  covered  about  the  same  territory.  I 
had  covered  for  Rosenbaum  Bros,  and  was  getting  considerable  business  from 
the  Farmer  Elevator  Companies.  For  my  own  firm  (Eschenberg  &  Dalton)  I 
traveled  five  years  steadily  and  always  called  on  the  Managers  of  the  Farmer 
Elevator  Companies  wherever  found  in  my  territory.  We  always  enjoyed  a 
nice  business  from  this  class  of  customers  as  well  as  from  Independent  Dealers 
and  Line  Firms.  '  I  am  quite  positive  that  I  received  business  every  year  for 


”-5  In  the  matter  of  the  relations  of  common  carriers  to  the  grain  trade,  I.  C.  C.  Doc. 
Doc.  875,  Vol.  II. 


DEVELOPMENT  OF  COUNTRY  HOUSES. 


91 


fourteen  years  from  the  Farmers’  Organization  at  Rockwell,  Iowa.  This  latter 
concern  is  considered  the  parent  company  in  Iowa  and  is  the  one  which  most  of 
the  new  Companies  h}*ve  patterned  after. 

The  documentary  evidence  which  we  have  given  the  Commission  will  show 
that  in  August,  1904,  the  Iowa  Grain  Dealers’  Association  through  their  Secre¬ 
tary,  George  A.  Wells,  Des  Moines,  la.  began  a  bull  dozing,  boycotting,  and 
black  listing  fight  upon  us  for  the  reason  that  we  refused  to  stop  handling  ship¬ 
ments  of  grain  and  seed  from  the  Farmer  Elevator  Companies  which  he  named. 
As  a  result  nearly  all  the  so-called  regular  shippers  we  had  in  Iowa  stopped 
sending  us  business  at  once.  Well’s  influence  even  reached  outside  of  Iowa  into 
Minnesota  and  South  Dakota,  and  he  certainly  can  flatter  himself  in  the  fact 
that  he  accomplished  his  purpose. 

Prior  to  the  Fall  of  1904  my  firm  had  a  fine  business  coming  from  Iowa,  I 
venture  to  say  as  good  a  strictly  commission  business  as  any  firm  on  the  Chi¬ 
cago  Board  of  Trade.  At  that  time  there  were  very  few  Farmer  Elevators 
in  Northern  Iowa  (The  section  of  the  State  which  we  covered)  so  consequently 
the  great,  great  bulk  of  our  business  came  from  Independent  Dealers.  My  firm 
was  not  then  known  in  Illinois,  only  at  a  few  points,  and  I  will  state  posi¬ 
tively  that  if  it  had  not  been  for  the  quick  organizing  of  Farmer  Elevator  Com¬ 
panies  in  Iowa  the  firm  of  Eschenberg  and  Dalton  would  not  have  made  ex¬ 
penses  and  would  probably  been  driven  out  of  the  trade. 

I  do  hereby  certify  that  the  foregoing  statement  is  correct  and  true  in  every 
respect. 

[In  ink.]  (Signed)  James  R.  Dalton. 

Subscribed  and  sworn  to  before  me  this  3d  day  of  November,  1906. 

(Signed)  Wm.  Edgar  Baker, 

Notary  Public. 

The  direct  results  of  this  boycotting  of  commission  houses  handling 
cooperative  or  farmers’  elevator  grain  were  not  entirely  satisfactory, 
however,  since  the  policy  caused  one  or  two  such  commission  concerns 
to  do  everything  possible  to  foster  the  farmers’  elevator  movement. 
A  good  illustration  of  this  is  found  in  the  case  of  the  foregoing  con¬ 
cern,  Eschenberg  &  Dalton,  now  Brennan  &  Carden.^^  When  the 
“regular”  shippers  boycotted  this  organization  the  firm  met  the 
emergency  by  sending  one  of  their  solicitors,  Mr.  E.  G.  Drum,  into 
the  field  to  organize  farmers’  elevators.  “Drum  was  said  to  be,” 
quoting  from  the  interview  with  Mr.  Brennan,  “a  whirlwind,  a 
flame.”  He  organized  on  the  average  8  elevator  companies  in  every 
10  towns  visited.  In  this  manner  the  trade  of  the  farmers’  houses 
was  turned  to  this  firm,  and  it  has  been  well  maintained  ever  since. 

While  the  efforts  of  the  regular  country  grain  dealers  against  the 
cooperatives  were  undoubtedly  a  temporary  handicap  to  the  latter, 
the  foregoing  policy  of  interference  was  from  every  angle  a  short¬ 
sighted  and  mistaken  one.  In  fact  there  is  every  reason  to  believe 
that  it  very  greatly  stimulated  the  development  of  the  cooperatives, 
for  in  the  action  taken  by  the  regular  elevators  to  suppress  the.moye- 
ment  the  farmers  undoubtedly  saw  the  confirmation  of  all,  and  in 
fact  much  more  than  all,  that  they  had  believed  as  to  the  prices  they 
were  paid  for  grain  by  the  existing  elevator  concerns,  and  as  to  their 
methods  and  practices  in  general. 

In  1902  the  first  State  farmers’  grain  dealers’  association  was  or¬ 
ganized  in  Illinois  and  was  followed  by  the  Iowa  Association  in 
1904,®^  and  there  are  now  several  of  these  State  associations. 

Since  1905  the  cooperative  or  farmers’  elevator  movement  has 
steadily  advanced  until,  as  indicated  in  a  preceding  chapter  (Ch.  II), 


“  At  one  time  this  concern  and  Lowell  Holt  &  Co.  were  the  only  Chicago  receivers 
who  would  handle  cooperative  grain.  C'.*G.  Mcsserole,  Testimony,  op.  cit..  Sen.  Uoc.  J7o, 
p.  646. 

Erdman,  op.  cit.,  Bulletin  331,  p.  140. 


92 


COUNTRY  GRAIN  MARKETING. 


there  is  a  considerable  number  of  these  elevators  in  nearly  every 
important  grain-producing  State.  Furthermore,  as  indicated  by 
the  figures  of  construction,  this  type  is  increasing  relatively  more  rap¬ 
idly  than  is  any  other  (Ch.  II,  sec.  11). 

Section  13.  Patronage  dividend  cooperatives. 

Proportion  or  cooperatives  paying  patronage  dividends. — 
Although  a  serious  attempt  was  made  to  do  so,  it  has  not  been  pos¬ 
sible  to  ascertain  anything  definite  with  reference  to  the  genesis  of  the 
truly  cooperative  or  patronage  dividend  elevator,  i.  e.,  the  elevator 
distributing  its  profits  either  in  whole  or  in  part  upon  the  basis  of  the 
patronage  afforded  to  it  by  its  customers.  Possibly  the  Rockwell  ele¬ 
vator  was  of  this  type.  Information  obtained  chiefly  from  the  North¬ 
west  territory,  where  this  type  of  cooperative,  or  farmers’  house,  is  rela¬ 
tively  important,  indicates  that  the  patronage  dividend  movement  was 
a  later  development  of  the  general  farmers’  elevator  movement. 

Of  some  1,800  cooperative  elevators  and  warehouses  reporting, 
1,208  answered  the  inquiry  as  to  the  payment  of  patronage  divi¬ 
dends  (Appendix  2,  inquiry  9).  These  1,208  replies  indicate  that 
nearly  70  per  cent  of  the  elevators  reporting  themselves  as  coop¬ 
eratives  pay  patronage  dividends  on  some  one  or  another  basis.  The 
number  and  percentage  of  houses  paying  patronage  dividends  in 
the  various  States  and  grand  divisions  appear  in  Table  23. 


Table  23. — Numbers  and  percentages  of  cooperative  elevators  and  warehouses 
paying  and  not  paying  patronage  dividends  in  specified  States  and  grand 
divisions. 


state  or  division. 

Total  ele¬ 
vators  and 
warehouses 
reporting. 

Paying  patronage 
dividends. 

Not  paying  patronage 
dividends. 

Number. 

Per  cent. 

Number. 

Per  cent. 

ELEVATORS. 

Illinois. . 

93 

27 

29.03 

66 

70.97 

Iowa . 

142 

50 

35.21 

92 

64. 79 

Wisconsin . 

10 

5 

50.00 

5 

50.00 

Indiana . 

19 

10 

52.63 

9 

47.37 

Missouri . . . . . 

9 

5 

55. 56 

4 

44, 44 

Minnesota . . 

164 

92 

56. 10 

72 

43.90 

Michigan . 

7 

4 

57.14 

3 

42.86 

Ohio . 

27 

19 

70. 37 

8 

29.63 

Nebraska . 

132 

101 

76.52 

31 

23.48 

South  Dakota . 

140 

109 

77.86 

31 

22.14 

North  Dakota . 

178 

145 

81.  46 

33 

18. 54 

Montana . 

66 

54 

81.82 

12 

18. 18 

Kansas . 

153 

141 

92  16 

12 

7.84 

6 

6 

100. 00 

Middle  Atlantic  Division . . 

3 

1 

33.33 

2 

66.67 

Southern  Division . 

2 

1 

50.00 

1 

50.00 

Mountain  and  Pacific  Division . 

32 

30 

93.75 

2 

6.25 

All  elevators . 

1,183 

800 

67.62 

383 

32. 38 

WAREHOUSES, 

.•SniTtVipm  Division  . . 

1 

1 

100.00 

Mountain  and  Pacific  Division . 

16 

6 

37.50 

10 

62.50 

Central  Division . 

8 

5 

62.  50 

3 

37.50 

All  warehouses . . 

25 

11 

44.00 

14 

56.00 

All  elevators  and  warehouses . 

1,208 

811 

67.14 

397 

32. 86 

Although  the  number  of  elevators  reporting  from  certain  of  the 
States  on  patronage  dividends  is  extremely  small — i.  e.,  in  Wisconsin, 
Indiana,  Missouri,  Ohio,  and  Oklahcfma  particularly — an  examina- 


# 


DEVELOPMENT  OF  COUNTRY  HOUSES. 


93 


tion  of  Appendix  Table  2  shows  that  these  States  in  general  also 
reported  a  very  small  number  of  cooperatives.  For  this  reason,  there¬ 
fore,  the  small  number  reporting  on  patronage  dividends  in  these 
States  is  not  probably  as  inaccurate  an  index  of  the  situation  in  such 
States  as  might  at  first  appear  to  be  the  case.  At  the  same  time  the* 
smallness  of  the  sample  should  be  held  in  mind  in  considering  the 
following  discussion. 

Variations  in  geographical  distribution  of  patronage  dividend 
COOPERATIVES. — A  careful  examination  of  Table  23  will  show  that  the 
States  having  the  highest  proportion  of  patronage  dividend  cooper¬ 
atives  tend  to  be  located,  with  the  exception  of  Ohio,  west  of  the 
Mississippi  Kiver,  and  that  the  lowest  percentages  of  such  elevators 
tend  to  be  reported  in  the  States  east  of  the  Mississippi  River.  In 
other  words,  the  patronage  dividend  cooperatives  are  chiefly  located 
in  the  western  and  more  recent  grain-growing  territory  and  com¬ 
paratively  few  are  found  in  the  eastern  and  older  grain  territory. 
As  reported  to  the  Commission,  less  than  14  per  cent  of  all  individual 
cooperative  elevators  and  warehouses  in  the  United  States,  in  1917—18, 
were  constructed  prior  to  1900,  as  compared  with  slightly  over  86 
per  cent  which  have  been  built  since  that  date.^®  (Ch.  II,  sec.  11.) 

As  already  indicated,  the  general  farmers’  or  cooperative  move¬ 
ment  did  not  probably  assume  very  substantial  proportions  until  at 
least  the  late  nineties,  and  it  spread  apparently  most  rapidly  in  the 
area  west  of  the  Mississippi,  which  was  less  well  supplied  with  ele¬ 
vators  than  the  East.  The  patronage  dividend  movement  coming 
at  a  still  later  date  tended  still  further  to  concentrate  itself  in  those 
States  within  this  area,  which  were  relatively  recent  grain-producing 
areas  and  the  least  supplied  with  elevators  in  1900.  This  is  roughly 
indicated  by  the  following  statement,  which  presents  the  proportion 
of  cooperative  elevators  which  pay  patronage  dividends  in  the  14 
grain-producing  States  of  the  Central  West  in  comparison  with  the 
proportion  of  existing  elevators  constructed  prior  to  1900. 


State. 

Percentage 

of 

elevator 
construc¬ 
tion 
prior  to 
1900. 

Percentage 

of 

cooperative 

elevators 

paying 

patronage 

dividends. 

'WiQnnncjin  _ _ _ 

48.80 

50.00 

Ohijn  _ _ ........ 

39.20 

70.37 

\fi-nno.cint.a. . . ....... 

37.02 

56.10 

\UpVii<yQTl  ...... _ ........ 

37.00 

57.14 

TlUnnis  _ _ 

36.59 

29.03 

Mia'hrQflVa.  _ _ ........ 

29.77 

76.52 

29.07 

52.63 

T  nwa.  . 

25.93 

35.21 

• 

State. 

Percentage 

of 

elevator 
construc¬ 
tion 
prior  to 
1900. 

Percentage 

of 

cooperative 

elevators 

paying 

patronage 

dividends. 

Missnnri  . 

21.63 

55.56 

Rnnt.h  Dakota . 

20.87 

77.86 

Trarisa.S.  . . 

14.17 

92.16 

'N' ortVi  Da.kota. . . . 

7.07 

81.46 

Oklahoma. . . 

2.13 

100.00 

Moot,  aria _ _ _ 

.86 

81.82 

All  States  and  grand  di¬ 
visions . 

23.65 

67.62 

While  the  correlation  is  not  very  close,  it  appears  that  all  those 

States  reporting  a  less  than  average  construction  prior  to  1900  also 
sliow  with  the  exception  of  Missouri,  a  higher  than  average  propor¬ 
tion  of  patronage  dividend  cooperatives,  while  those  States  showing 
a  higher  than  average  percentage  of  construction  prior  to  1900,  with 
the  exception  of  Ohio  and  Nebraska,  have  a  lower  average  propor¬ 
tion  of  this  type  of  cooperatives.  _ _ 


38  Cooperative  lines  are  not^  considered,  as  their  number  is  relatively  insignificant  and 
would  only  slightly  alter  the  percentages  given. 


Chapter  V. 


THE  PURCHASE  AND  STORAGE  OF  GRAIN. 

Section  1.  Methods  of  sale  by  the  farmer. 

In  marketing  his  grain  any  one  or  more  of  at  least  four  different 
methods  are  usually  available  to  the  farmer.  He  may  dispose  of  it 

(1)  by  outright  sale  either  to  the  country  house  or  other  local  buyer, 

(2)  by  sale  after  storage  in  the  local  elevator  or  warehouse  either  to 
the  house  or  others,  (3)  by  sale  on  contract  before  actual  delivery,  or 
(4)  by  sale  on  his  own  account  in  the  terminal  market. 

The  relative  importance  of  these  methods  varies  as  between  dif¬ 
ferent  sections  and  different  States.  The  first  method,  for  example, 
is  the  most  important  in  the  Northwest  and  probably  all  ^rain- 
producing  States  in  the  Central  West,  and  the  second  in  the  Pacific 
coast  area. 

•  An  outright  sale  is,  of  course,  the  result  of  bargaining  between  the 
farmer  and  the  local  elevator  or  warehouse  agent  or  other  buyer,  and 
the  grade,  dockage,  and  price  are  usually  settled  at  the  time  of  deliv¬ 
ery.  In  many  cases,  however,  the  farmer  does  not  desire  to  sell  his 
grain  immediately,  either  because  he  believes  that  the  price  will  be 
higher  at  a  later  date  or  because  of  other  reasons.  AVhere  this  is  the 
case  the  farmer  may  deliver  the  grain  to  the  elevator  to  be  stored 
until  such  time  as  he  may  decide  to  sell.  Under  these  circumstances  ^ 
the  grade,  dockage,  and  storage  charges  on  the  grain  are  fixed  at 
the  time  of  delivery  at  the  elevator.  The  matter  of  price  is  left  oj^en, 
of  course,  until  such  time  as  the  farmer  decides  to  sell,  although  he 
may  seek  to  obtain  the  promise  of  a  premium. 

Contracts  for  the  sale  of  grain  in  advance  of  delivery  are  likewise 
sometimes  made  by  the  farmer  with  the  elevator  or  warehouse. 
Most  often,  perhaps,  they  are  due  to  either  one  or  the  other  of  two 
conditions.  Either  the  farmer  finds  himself  in  need  of  funds  before 
he  can  make  delivery  of  the  grain  or  else  he  believes  that  prices  are 
such  as  to  warrant  the  sale,  although  he  may  be  either  unwilling  or, 
if  in  advance  of  the  harvest,  unable  to  make  delivery  at  the  time. 
In  other  words,  the  farmer  usually  contracts  with  the  idea  of  obtain¬ 
ing  funds,  as  is  probably  most  frequently  the  case' in  the  Northwest, 
or  else  because  he  believes  that  prices  will  either  be  lower  at  the  time 
of  delivery  or  else  will  not  have  advanced.  On  the  other  hand,  the 
elevator  usually  contracts  with  the  idea  of  securing  tonnage. 

Grain  contracts  between  the  farmer  and  the  elevator  may  or  may 
not  specify  the  price.  If  the  price  is  stated,  the  matters  of  grade 
and  dockage  only  are  left  to  be  determined  upon  the  delivery  of  the 
grain  at  the  elevator.  Should  the  grain  delivered,  however,  fail  to 
meet  the  specifications  of  the  grade  contracted  for,  the  matter  of 

^  Except  in  the  case  of  special  bin  storage  subsequently  discussed, 

94 


PURCHASE  AND  STORAGE  OF  GRAIN. 


95 


price  is  determined  by  the  extent  of  the  differential  between  the 
grades  at  the  time  of  delivery,  though  some  contracts  specify  the 
differentials  to  be  employed. 

In  some  cases  the  farmer  may  elect  not  to  dispose  of  his  grain 
locally,  but  instead  to  sell  it  in  the  terminal  market.  In  such  cases 
it  is  obvious  that  no  local  marketing  transaction  is  involved.  In 
consequence  this  method  is  discussed  in  the  chapter  dealing  with 
loading  and  elevation  by  elevators  (Ch.  VII),  since  when  the  farmer 
himself  sells  in  the  terminal  market  he  frequently,  if  not  usually, 
employs  the  elevator  for  the  purpose  of  loading. 

Section  2.  Local  purchasing  factors  other  than  elevators  and  warehouses. 

General  characteristics. — Besides  the  elevators  and  warehouses 
there  are  operating  in  the  country,  interior  brokers,  track  buyers, 
scoop  shovelers,  solicitors  for  terminal  dealers,  feeders,  retailers, 
country  mills  and  other  converters,  or  their  agents.  Thp  number 
and  importance  of  these  buyers  vary  according  to  a  variety  of  con¬ 
ditions.  At  various  points  and  at  different  times  one  or  more  of 
these  buyers  may  be  found  in  more  or  less  direct  competition  with  the 
local  elevators  or  warehouses  in  purchasing  from  the  farmer.  For 
this  reason  they  must  be  considered  in  any  discussion  of  the  country 
marketing,  even  though  their  operations  are  in  many  sections  either 
negligible  or  of  minor  importance  as  compared  with  those  of  ele¬ 
vators  and  warehouses.  Sometimes  these  purchasers  buy  from  the 
farmer  and  sometimes  from  the  elevator.  But  since  such  buyers 
usually  lack  local  warehouse  facilities  the  grain  which  they  purchase 
is  most  often  bought  outright,  regardless  of  whether  the  seller  is  the 
producer  or  the  local  house,  or  whether  the  farmer  is  selling  grain 
which  he  has  just  hauled  in  or  grain  which  he  has  stored  in  the  local 
house.  In  so  far  as  these  local  purchasers  buy  from  elevators  or  other 
buyers,  these  transactions  are,  of  course,  between  middlemen. 

Interior  brokers.— Interior  brokers  operating  in  the  country  grain 
territory  most  often  make  their  headquarters  in  one  of  the  larger 
local  towns  affording  transportation  facilities  in  various  directions. 
They  purchase  grain  on  a  brokerage  basis  from  practically  all  factors 
in  the  country  market  for  anyone  who  may  desire  it,  including  ter¬ 
minal  market  dealers.  The  bulk  of  the  purchases  made  by  such 
brokers  is  from  country  houses  in  carload  lots.  Comparatively  little 
grain  is  bought  by  such  dealers  directly  from  farmers,  and  of  the  grain 
so  purchased  practically  all  is  in  carload  quantities. 

Track  BUYERS.-^'ountry  track  buyers  are  usually  located  at  points 
in  the  country  from  which  it  is  convenient  to  keep  in  touch  with  a 
considerable  number  of  country  stations.  These  buyers  purchase 
grain  in  cars  ‘‘  on-track  ”  at  the  elevator  and  also  buy  in  carlots  from 
farmers,  reselling  to  whatever  purchaser  offers  the  best  price,  a  ter¬ 
minal  market  factor,  miller,  jobber,  feeder,  or  converter,  etc.  In  this 
tvpe  of  transaction  the  seller  guarantees  that  the  weight  and  grade 
of  the  grain  are  in  accordance  with  his  agreement  with  the  purchaser, 
but  aslt  is  often  difficult  for  country  track  buyers  to  obtain  official 
weio-hts  and  inspection,  disputes  not  infrequently  occur.  Track  buy- 
ers^ike  interior  brokers,  are  perhaps  most  often  found  at  points  so 
located  as  to  afford  transportation  facilities  in  a  number  of  directions, 
thus  enabling  shipment  to  numerous  consumption  points. 


96 


COTTimiY  GRAIN  MARKETING. 


Scoop  shovelers. — The  “  scoop  shoveler,”  or  “  scooper,”  buys  grain  .  j' 
entirely  from  farmers  and  loads  it  directly  into  cars  from  the  wagons 
The  usual  method  of  loading  is  to  shovel  the  grain  into  the  cars  by  ' 
means  of  scoop  shovels ;  hence  the  name  of  this  class  of  grain  buyers.  I 
At  times  the  “  scoopers  ”  employ  contrivances  known  as  track  loaders,  i 
or  portable  elevators.  This  equipment  consists  of  a  frame  carrying  j 
a  series  of  buckets  on  a  belt  which  is  often  operated  by  a  small  gas  ' 
engine.  It  is  placed  alongside  the  railroad  track  beside  the  car  to  be  ' 
loaded,  one  end  of  the  machine  extending  through  the  car  door.  The 
grain  is  fed  into  a  hopper  at  the  other  end  of  the  machine  from  the  ' 
farmer’s  wagon,  the  buckets  fill  themselves,  and  are  carried  into  the 
car  and  dumped  as  the  belt  turns. 

Scoop  shovelers  are  usually  transient,  although  there  are  some  men 
who  engage  in  the  business  regularly  at  the  same  place.  Whether 
transient  or  not,  the  scoop  shoveler  is  not  common  in  the  northwestern  ; 
grain  States.  No  scoopers  were  reported  at  any  of  the  stations  in  j 
four  northwestern  grain  States  which  were  visited,  although  one  >f 
elevator  stated  that  it  had  experienced  competition  from  such  a  buyer, 
though  not  since  1915.  In  the  Southwest,  particularly  Texas  and 
parts  of  Oklahoma,^  such  grain  buyers  apparently  operate  more  fre-  , 
quently. 

Occasionally  unscrupulous  men  have  been  attracted  to  the  business 
of  buying  grain  in  the  manner  followed  by  scoopers.  The  capital  re¬ 
quired  is  small.  Many  of  these  men  have  offered  prices  greatly  in 
excess  of  the  value  of  the  grain,  considering  freight  rates  and  pre¬ 
vailing  terminal  market  prices.  Attracted  by  these  high  prices, 
farmers  have  sometimes  sold  their  grain  to  them  and  agreed  to  await 
payment  until  they  had  received  their  remittances  from  the  terminal 
market.  Such  farmers  have  frequently  found  when  attempting  to 
collect  their  money  that  the  scooper  has  disappeared. 

Scoop  shovelers  are  a  thorn  in  the  side  of  the  regular  grain  dealers. 
Each  load  of  grain  bought  by  the  scoopers  is  lost  to  the  elevators. 

In  addition,  the  scoopers  often,  if  not  generally,  offer  higher  prices 
than  the  elevators®  are  paying,  and  to  secure  grain  it  is  necessary 
to  meet  these  prices. 

At  times  an  elevator  company  in  a  new  territory  before  com¬ 
pleting  its  elevator  may  engage  in  buying  grain  in  the  manner  fol¬ 
lowed  by  scoop  shovelers.  Any  type  of  company  may  follow  this 
practice,  but  it  is  particularly  prevalent  with  cooperatives,  because 
the  organizers  of  cooperatives  are  usually  anxious  to  begin  business 
at  once. 

Terminal  dealers. — ^The  purchase  of  grain  from  farmers  by  rep¬ 
resentatives  of  terminal  market  grain  dealers  is  usually  spasmodic. 
Frequently  their  purchases  are  made  from  farmers  who,  dissatisfied 
with  the  prices  offered  at  the  station,  have  loaded  their  grain  with 
the  intention  of  consigning  it  or  selling  it  “  on-track.”  Purchases  by 
this  type  of  buyer  are  usually  in  carload  lots,  although  at  times 
grain  has  been  bought  from  farmers  in  wagonload  quantities.  This 
last  is  particularly  true  of  new  territory  where  elevators  have  not 
been  extensively  established.  At  times  portable  elevators  have  also 

3  Cf.  Livingstone  and  Seeds,  Marketing  Grain  at  Country  Points,  Department  ot 
Agriculture  Bulletin  No.  558. 

3  They  can,  of  course,  afford  to  do  this,  since  they  have  no  fixed  operating  expenses 
comparable  with  those  of  the  elevator. 


PURCHASE  AND  STORAGE  OF  GRAIN.  97 

been  used  by  these  solicitors  for  loading  grain  directly  from  wagons 
into  cars. 

The  bulk  of  the  grain  purchased  by  solicitors  of  terminal  market 
concerns,  however,  is  froni  elevators,  warehouses,  and  scoopers 
rather  than  farmers. 

As  solicitors  of  terminal  concerns  are  also  frequently  attempting 
to  secure  the  consignment  business  of  local  elevators,  purchases  of 
grain  from  farmers  are  avoided  at  stations  where  a  local  elevator  is 
a  customer  of  the  house  by  which  the  solicitor  is  employed.  Were  a 
solicitor  to  buy  grain  from  a  farmer  under  such  circumstances,  the 
elevator’s  volume  of  business  would  be  decreased  and  its  account 
almost  certainly  lost  to  the  solicitor’s  house.  For  example,  a  farmer 
at  Broadview,  Mont.,  had  loaded  a  car  of  flaxseed  which  a  solicitor 
of  a  line  elevator  company  attempted  to  persuade  him  to  consign  to 
his  firm.  The  farmer  wanted  to  sell  outright,  however,  and  the 
solicitor  refused  to  make  him  a  bid  because  the  agent  of  another 
local  elevator  company  objected. 

Other  factors. — Agents  of  the  mills  and  other  converters  at  times 
go  from  place  to  place,  depending  upon  local  prices  and  other  con¬ 
ditions,  purchase  grain  in  carload  or  wagon  lots  from  farmers,  and 
then  ship  it  to  the  miller  or  other  consumer. 

Feeders  are  stock  raisers  or  liverymen,  and  the  grains  they  pur¬ 
chase — usually  corn  and  oats — are  used  for  feeding  their  stock. 
They  also  buy  grain  from  farmers  in  both  wagonload  and  carload 
quantities,  in  the  former  event  loading  it  from  the  wagon  into  cars 
for  shipment. 

The  operation  of  the  retailer  is  local  in  character.  He  buys  grain 
from  the  farmer,  usually  in  wagonload  lots,  and  then  sells  it  to  his 
customers  as  feed.  Very  often  the  grain  is  paid  for  by  merchan- 

dise.  .  -Ill 

Scope  and  extent  of  operations. — In  spite  of  the  considerable 

number  of  purchasers  besides  elevators  and  warehouses  which  are 
operating  in  the  country  market,  the  great  bulk  of  the  initial  buy¬ 
ing  from  farmers  is  done  by  the  country  houses.  The  operations 
of  all  other  classes  of  purchasers  discussed  in  the  preceding  para¬ 
graphs  are  more  limited  in  character,  and  it  is  doubtful  if  their 
total  amounts  to  more  than  a  small  fraction  of  the  total  sales  made 
by  the  producer.  In  a  rough  fashion,  the  importance  of  all  these 
other  factors  as  purchasers  of  the  farmers’  grain  is  indicated  by 
the  replies  to  the  Commission’s  inquiry  of  elevators  and  warehouses 
as  to  the  direct  loading  by  other  buyers  in  their  respective  localities 
(Appendix  2,  inquiry  19).  Since  most  of  the  buyers  froin  farmers 
in  the  country  other  than  elevators,  warehouses,  and  retailers  load 
directly  into  cars  for  shipment,  the  extent  of  direct  loading  is  roughly 
indicative  of  the  extent  to  which  other  purchasers  compete  with 
the  elevators  and  warehouses  for  the  farmers’  grain. 

The  replies  to  the  inquiry  on  direct  loading  by  buyers  were  tabu¬ 
lated  for  reporting  elevators  in  nine  States  selected  at  random, 
i.  e.,  Michigan,  Montana,  Missouri,  Oklahoma,  Illinois,  Wisconsin, 
and’ North  and  South  Dakota.  From  these  States  3,553  elevators 
reported  as  to  the  existence  or  nonexistence  of  direct  loading  and 
845  as  to  its  extent.  The  replies  were  tabulated  together  for  all 
types  of  elevators  and  without  reference  to  the  number  of  elevators 

9964®— 20 - 7 


I 


98 


COUNTRY  GRAIN  MARKETING. 


reporting  at  a  station,  and  Table  24  presents  the  results  of  this 
inquiry : 

Table  24. — Number  and  percentage  of  elevators  in  fipecifved  Statefi  reporting 
direct  loading  by  buyers  in  their  vicinity  and  extent  of  such  loading  reported. 


state. 


Michigan . 

Wisconsin.... 

Illinois . 

South  Dakota 
Minnesota.. . . 

Montana . 

Oklahoma. . . . 
North  Dakota 
Missouri . 

Total... 


State. 


Michigan . 

Montana _ _ 

Missouri . 

Oklahoma-... 

Illinois . 

Wisconsin.... 
Minnesota .... 
North  Dakota 
South  Dakota 

4 

Total... 


Direct  loading. 

No  direct  loading. 

Total 

elevators 

reporting. 

Number. 

Per  cent 
of  total. 

Number. 

Per  cent 
of  total. 

207 

24 

11.59 

'183 

8a.  41 

.  188 

26 

13.83 

162 

86.17 

688 

136 

19. 77 

552 

80.23 

513 

105 

20. 47 

408 

79.53 

700 

144 

20.57 

556 

79.43 

192 

40 

20.83 

152 

79. 17 

135 

46 

34.07 

89 

65.93 

766 

318 

41.51 

448 

58.49 

164 

85 

51.83 

79 

48.17 

3,553 

924 

26.01 

2,629 

73.99 

Occasional.! 

Considerable.! 

Total 

elevators 

reporting. 

Number. 

Per  cerlt 
of  total. 

Number. 

Per  cent 
of  total. 

18 

9 

50.00 

9 

50.00 

35 

19 

54.29 

16 

45. 71 

66 

39 

59.09 

27 

40.91 

35 

.  24 

68. 57 

11 

31.43 

122 

93 

76.23 

29 

23.77 

22 

19 

86.36 

3 

13.64 

136 

127 

93.38 

9 

6.62 

314 

294 

93.63 

20 

6.37 

97 

91 

93.81 

6 

6.19 

845 

715 

84.62 

130 

15.38 

1  Where  returned  as  a  percentage,  replies  less  than  5  per  cent  were  classed  as  “occasional  and  5  per  cent 
and  over  as  “considerable.”  Expressions  such  as  “once  in  a  while,”  “seldom,”  “aboirt  one-fourth,  a 
great  deal,”  “  a  large  amount,”  etc.,  were,  of  course,  classified  readily  under  the  one  or  the  other  head.  A 
few  schedules,  where  the  replies  were  too  vague  to  be  thus  definitely  classified,  were  rejected  and  are  not 
here  included.* 


Of  the  3,553  elevators  replying  to  this  inquiry  only  924  houses,  or 
slightly  over  one- fourth,  reported  direct  loading  by  buyers  in  their 
locality.  Even  these  figures,  however,  considered  by  themselves, 
give  a  misleading  impression  of  the  importance  of  this  practice,  for 
the  reason  that  they  give  no  indication  of  the  extent  of  such  direct 
loading  in  the  vicinity  of  the  houses  reporting  it.  Of  the  924  houses 
reporting  affirmatively,  845  also  reported,  in  one  fashion  or  another, 
as  to  prevalence  of  the  practice.  The  answers  returned  to  this  por¬ 
tion  of  the  Commission’s  schedule  (Appendix  2,  inquiry  19)  were  in  all 
kinds  of  phraseology  and  included  a  certain  number  of  replies  in  per¬ 
centages.  All  returns  were  carefully  classified  under  the  headings  of 
“  occasional  ”  or  “  considerable,”  the  most  of  the  replies  being  so 
worded  as  to  render  such  a  classification  reasonably  accurate.  Per¬ 
centage  returns  above  5  per  cent  were  classified  under  the  heading 
“considerable,”  those  less  than  5  per  cent  under  the  heading  “oc¬ 
casional.”  Of  these  845  houses,  84.62  per  cent  report  that  direct  load¬ 
ing  in  their  vicinity  is  occasional  and  15.38  per  cent  that  it  is  con¬ 
siderable. 

As  measured  by  direct  loading  reports,  therefore,  a  considerable 
proportion  of  elevators  are  in  competition  wdth  the  other  types  of 
buyers  discussed  in  this  section  in  purchasing  the  farmers’  grain. 


PURCHASE  AND  STORAGE  OF  GRATN. 


99 


This  competition  in  the  great  majority  of  cases,  however,  is  of  minor 
importance.  ' 


Section  3.  Outright  sales  by  farmer  to  the  elevator. 

Delivery. — In  the  great  grain- producing  States  of  the  Central 
West  grain  is  practically  always  delivered  in  bulk  to  country  ele¬ 
vators  and  warehouses.  For  this  purpose  farmers  employ  “grain 
tight  ”  ^  wagon  boxes  or  tanks  having  a  capacity  of  from  50  to  100 
bushels.  Upon  his  arrival  at  the  local  station  the  farmer  may  drive 
his  grain  around,  if  there  is  more  than  one  elevator  or  buyer  at  the 
point,  until  he  has  ascertained  where  he  can  obtain  the  best  returns 
for  his  load.  In  determining  the  total  returns  of  the  farmer  from 
the  sale,  grade,  dockage,  and  weight  all  play  a  part  and  will  be 
considered  in  the  order  mentioned. 

Giii^DiNG.* * — In  determining  the  grade  of  a  load  of  grain  the  elevator 
agent  usually  scans  the  load  and  examines  several  handfuls  therefrom 
for  shrunken  kernels,  admixture  with  other  grains,  dirt,  smut  balls, 
etc.  If  a  careful  agent,  he  will  also  plunge  his  hands  far  into  the 
load  for  the  purpose  of  discovering  any  signs  of  heating.  If  the 
.grain  has  been  bin  burnt®  or  contains  smut  or  garlic,  etc.,  this  can 
usually  be  detected  by  smelling  samples  of  the  grain,  any  such 
contamination  giving  rise  to  strong,  disagreeable  odors. 

F ollowing  this  examination  the  test  weight  is  taken,  the  weight  of 
the  grain  being  an  important  element  in  determining  the  grade.  F or 
this  purpose  a  device  knowm  as  a  “  hand  tester  ”  or  “  test  kettle  ”  is 
employed.  It  consists  of  a  cup  or  kettle  (usually  of  a  pint  or  1  or  2 
quarts  capacity)  attached  to  a  hand  beam  scale.  The  beam  balances 
at  zero  Avhen  the  kettle  is  empty  and  is  so  graduated  that  when  in 
balance  with  the  kettle  filled  it  will  record  the  number  of  pounds  the 
grain  content  of  the  kettle  will  weigh  to  the  bushel.  This  result  is 
the  test  weight  per  bushel. 

Taking  into  consideration  all  of  the  above  tests  and  giving  due 
weight  to  each,  the  agent  decides  the  grade  that  he  is  willing  to  give 
the  grain. 

During  the  season  of  heavy  deliveries  at  country  points  many 
agents  do  not  even  attempt  to  grade  each  load.  At  that  time  this 
often  becomes  a  practical  impossibility  on  account  of  the  time  Avhich 
this  process  necessarily  consumes.  Instead,  several  handfuls  of  grain 
are  taken  from  the  stream  as  the  grain  is  dumped  from  the  farmer’s 
wagon  into  the  unloading  pit  and  these  are  placed  in  a  box  or  other 
container.  The  samples  from  each  farmer’s  grain  thus  taken  are 
kept  separate,  and  when  a  farmer  has  finished  hauling  for  the  day 
the  combined  samples  of  his  grain  are  thoroughly  mixed  and  then 
graded,  the  result  being  the  grade  for  all  loads  delivered. 

The  process  of  obtaining  samples  from  the  stream  is  also  often  fol¬ 
lowed  in  grading  individual  loads.  Samples  obtained  in  this  manner 
are  more  representative  of  the  load  than  are  those  obtained  from  the 
wagon  box  on  account  of  the  fact  that  certain  light  foreign  material, 
such  as  seeds,  etc.,  for  which  dockage  is  taken  are  forced  to  the  top 
of  the  load  by  the  motion  of  the  wagon,  Avhile  other  and  heavier 
forei<m  matter  settles  to  the  bottom  on  account  of  its  weight.  A  few 


♦  Built  to  prevent  all  leakage  during  hauling.  ^  .  ...... 

*  This  discussion  is  based  upon  the  practice  in  the  ISorthwest  prior  to  the  introduction 

of  Federal  grades.  .  .  .  _ 

®  Biu-bumt  grain  is  that  which  has  heated  in  the  bin  because  of  wet  condition. 


100 


COUNTRY  GRAIN  MARKETING. 


agents  in  the  Northwest  grade  the  first  few  loads  of  a  farmer’s  grain  | 
and  thereafter  give  the  same  grade  to  the  rest  of  his  grain,  loads  that  I 
are  of  such  quality  as  to  be  obviously  different  from  the  general  run  I 
being  graded  separately  as  they  occur.  J 

Competition  prevents  accurate  grading.  In  instances  farmers  be-  ® 
lieve  their  grain  to  be  of  the  highest  quality,  and  as  a  result  will  | 
often  sell  to  an  elevator  that  offers  them  a  better  grade  than  the  I 
quality  of  the  grain  actually  justifies,  even  though  in  such  cases  the 
elevator  may  make  up  for  the  overgrading  by  taking  excess  dockage.  , 
All  of  the  above  and  other  factors  tend  to  prevent  the  accurate 
grading  of  grain,  and  this  remains  true  even  though  many  country  ; 
agents  from  long  experience  in  the  constant  handling  of  grain  are 
very  proficient  in  sight  grading.  Evidence  of  overgrading  by  coun¬ 
try  agents,  at  least  in  the  Northwest,  is  frequently  found,  and  subse¬ 
quently  there  is  presented  in  this  volume  certain  statistical  evidence  ^ 
in  support  of  this  conclusion  (Ch.  VIII,  sec.  10  ff).  ^  I 

Interviews  with  country  agents  on  grading. — Fifty-four  out  of 
the  88  elevators  visited  by  the  agents  of  the  Department  of  Agricul¬ 
ture  in  Iowa  and  Illinois  claimed  that  their  purchases  from  farmers  I 
were  based  upon  actual  grades  delivered,  while  33  reported  them  on  j 
the  basis  of  average  receipts.  Of  the  hundred  and  odd  agents  ®  inter-  f 
viewed  in  the  Northwest  that  made  replies  as  to  grading,  about  two-  | 
thirds  claimed  that  it  was  their  intention  to  buy  strictly  on  grade.  I 
The  other  third  admitted  that  they  were  lenient  on  grades — a  major-  I 
ity  of  them  on  close  tests  only,  the  balance  as  a  general  rule.  | 

Several  of  the  parties  interviewed  were  very  frank  in  stating  that  | 
the  grades  given  were  the  result  of  guesswork.  Others  said  the  grain  * 
was  bought  on  its  merits  regardless  of  grades,  one  of  the  mills  report¬ 
ing  being  guided  more  by  the  millable  value  of  the  wheat  than  by  the  s 
grades.  One  manager  interviewed  stated  that  he  graded  very  closely,  i 
as  he  had  been  suspended  and  the  elevator  closed  by  the  State  be¬ 
cause  he  had  been  declared  incompetent  to  buy  grain.  He  was  finally  1 
allowed  to  resume  buying  and  has  given  satisfaction  ever  since.  J 
Of  those  admitting  they  were  lenient  on  close  tests,  the  usual  leeway  | 
given  was  up  to  one-half  a  pound  on  test  weight,  although  one  con-  J 
cern  allowed  up  to  three-fourths  of  a  pound  and  another  gave  thel 
farmer  the  advantage  whenever  possible.  J 

A  majority' of  the  northwestern  elevator  managers  reported  that  it| 
was  their  intention  to  grade  each  load  delivered,  but  about  one-fifth 
bought  grain  on  average  receipts  and  a  few  stated  that  each  load 
was  graded  when  it  was  possible  to  do  so.  One  party  interviewed 
said  he  graded  each  load  unless  the  farmer’s  grain  appeared  to  run , 
about  the  same  and  then  it  was  bought  on  the  average  grade. 

When  large  deliveries  from  one  customer  were  being  made,  one  1 
concern  graded  the  grain  on  average  receipts  provided  the  variation  ] 
between  the  best  and  poorest  grain  made  a  good  average.  Another 
buyer  stated  that  although  he  endeavored  to  grade  each  load  he  occa-  | 
sionally  missed  one,  and  in  such  cases  he  graded  the  load  as  though  | 
it  were  the  usual  run  of  the  farmer’s  grain.  Another  country  eleva-  ^ 
tor  agent  tests  the  first  three  or  four  loads  a  farmer  hauls  to  get  a 
line  on  his  grain,  and  then  grades  the  rest  of  the  farmer’s  grain  the 
same.  One  buyer  graded  on  average  receipts,  although  he  graded 
separately  any  load  that  looked  poorer  than  the  average. 


*  Line  agents  not  included. 


PURCHASE  AND  STORAGE  OF  GRAIN. 


101 


Dockage.” — Dockage  may  be  defined  as  the  number  of  pounds 
deducted  from  the  gross  weight  of  the  grain  by  way  of  allowance 
for  the  foreign  material  contained  therein,  in  order  to  determine 
the  net  weight  of  the  grain.  To  find  the  amount  of  dockage  an 
average  sample  of  the  farmer’s  grain  is  obtained  from  the  load 
and  subjected  to  siftings  through  a  series  of  sieves  shaken  by  hand. 
The  meshes  of  the  sieves  employed  in  this  process  are  of  graduated 
sizes  similar  to  those  prescribed  by  law  for  use  by  the  terminal 
market  inspection  departments.  The  sample  of  grain  is  subjected 
to  successive  siftings,  each  through  a  sieve  of  a  smaller  mesh  than 
the  one  preceding,  until  all  the  refuse  has  been  sifted  out,  leaving 
only  the  grain. 

In  determining  dockage  there  is  employed,  in  addition  to  the  sieves 
mentioned,  in  those  cases  where  the  grain  contains  a  mixture  of  oats, 
a  machine  known  as  a  “  kicker.”  This  contrivance  consists  of  a 
series  of  slanting  screens,  one  below  the  other,  within  a  wooden  frame, 
so  arranged  that  they  can  be  violently  agitated  by  the  turning  of  a 
crank.  The  sample  is  fed  into  the  top  of  the  machine,  the  crank  is 
turned,  and  the  grain  in  sliding  over  the  screens  is  separated,  the  oats 
being  spouted  off  into  one  pan  and  the  other  grain  flowing  from 
another  spout  into  another  pan. 

In  computing  the  dockage  on  a  load  of  grain,  the  simplest  method 
is  probably  to  fill  the  test- weight  kettle  with  a  representative  sample 
of  the  load  (or  use  the  sample  employed  to  determine  the  test  weight) 
and  suljject  this  sample  to  the  sifting  processes  described.  The 
refuse  is  then  returned  to  the  test- weight  kettle,  the  scale  beam  of 
which,  as  already  indicated,  is  so  graduated  as  to  record  the  number 
of  pounds  that  the  contents  of  the  kettle  will  weigh  to  the  bushel. 
The  result  will  be  the  number  of  pounds  dockage  to  the  bushel,  and 
this  result  multiplied  by  the  gross  bushels  in  the  load  gives  the  total 
pounds  dockage  on  the  load. 

Correct  dockage  is  not  always  taken  by  the  country  house  an^  more 
than  accurate  grades  are  always  given.  The  dockage  taken  is  fre¬ 
quently  estimated  by  the  agent,  and  on  account  of  competition  or 
other  factors  its  amount  is  often  far  from  correct.  According  to  the 
information  obtained  by  the  Commission,  however,  it  seems  prob¬ 
able,  though  not  certain,  that  the  farmer  is  less  often  favored  by 
underdocking  on  the  part  of  the  agent  than  he  is  by  overgrading.® 
In  fact,  the  charge  has  been  made  by  farmers  that  the  country  ele¬ 
vators  have  taken  a  heavy  toll  from  them  by  way  of  excessive  dock¬ 
age.  This  allegation  is  subjected  to  some  statistical  analysis  in 
another  section  of  this  volume.  (Ch.  VIII,  secs.  10  ff.) 

Interviews  with  country  agents  on  dockage. — While  most  of  the 
elevator  agents  interviewed  by  the  Commission  reported  that  they 
“took  full  dockage  ”  or  were  “  strict  on  dockage,”  there  were  several 
who  stated  that  less  than  the  full  dockage  was  taken.  In  one  instance 
this  latter  practice,  so  the  manager  stated,  was  due  to  orders  of 
the  board  of  directors  because  of  “  rows  ”  with  the  farmers.  There 
were  also  a  few  agents  who  admitted  that  they  were  “  heavy  on  dock- 

7  Dockage  on  all  grains,  if  containing  foreign  material,  was  taken  by  practically  all 
the  country  elevators  in  Minnesota,  Montana,  and  the  Dakotas  before  the  introduction 
of  Fede-rar grades.  In  the  other  States  it  was  much  less  prevalent.  For  example,  of  88 
elevators  visited  by  the  agents  of  the  Department  of  Agriculture  in  Iowa  and  Illinois, 
onlv  12  reported  taking  dockage — 6  in  Illinois  and  6  in  Iowa.  ,  ^  . 

■  *  This  applies  to  elevators  other  than  line.  Statistics  demonstrate  that  the  lines  favor 
the  farmer  much  less  on  dockage  than  on  grades. 


102 


COUNTRY  GRAIN  MARKETING. 


age,”  i.  e.,  took  excessive  dockage.  Three  of  these  latter  elevators 
stated  that  the  heavy  dockage  was  taken  to  make  up  for  liberal  grad¬ 
ing.  One  agent  reported  that  he  used  to  guess  at  the  dockage  and 
another  that  he  took  more  dockage  on  low-test  than  on  high-test 
grain.  Allowances  made  in  price  or  otherwise  to  the  farmer  for 
dockage  contained  in  the  grain  usually  will  depend  upon  whether 
or  not  the  foreign  material  has  any  market  value.  Thus,  one  elevator 
in  Chester,  Mont.,  reported  that  no  allowance  was  made  because  the 
dockage  was  without  value.  If  the  dockage,  on  the  other  hand,  has 
value  for  feed  or  other  purposes,  the  elevator  Avill  be  able  to  obtain 
something  for  the  screenings  either  by  cleaning  wdth  its  own  facilities 
(if  equipped  to  do  so)  or  by  having  the  grain  cleaned  at  the  terminal 
market.  In  consequence  the  elevator  can  often  afford  to,  and  some¬ 
times  does,  allow  something  for  the  screenings  in  the  price  which  it 
offers.  Thus  one  elevator  reported  that  it  paid  the  farmers’  market 
prices  for  the  screenings  obtained  from  their  grain ;  another  that  it 
allowed  1  cent  per  bushel;  another  that  it  took  full  dockage  but 
allowed  for  it  in  price,  etc.  If  equipped  with  cleaning  machinery 
the  elevator  may  make  no  allowance  in  price  but  may  instead  return 
the  screenings  to  the  farmer.  In  the  latter  event  a  cleaning  fee  is 
usually  charged.®  This  practice  was  reported  by  a  few  elevators. 

During  the  busy  season  some  elevators  do  not  allow  for  dockage 
and  take  it  all,  but  in  the  slack  season,  when  they  have  time  to  clean 
the  grain,  the  dockage  is  returned  to  the  farmers,  if  requested,  and  a 
charge  made  for  the  cleaning  (see  also  Ch.  VII,  secs.  8-13). 

Two  or  three  elevators  reported  that  the  farmer  is  givp  the  option 
of  taking  back  his  dockage  upon  payment  of  the  cleaning  fee  or  of  ’ 
selling  it  to  the  elevator,  whichever  he  may  prefer. 

Dockage  up  to  a  certain  point  is  retained  without  allowance  by  some 
elevators,  the  rest  being  allowed  for  in  buying.  One  elevator  in 
Montana  reported  no  allowance  up  to  3  pounds,  but  that  the  dock¬ 
age  over  this  amount  is  returned  to  the  farmer  or  bought  by  the 
elevator,  as  the  farmer  desires.  Another  concern  took  all  dockage 
up  to  10  per  cent,  and  another  one  took  all  dockage  unless  it  was 
exceedingly  heavy,  and  then  the  grain  was  cleaned  and  an  allowance 
was  made. 

Weighing  in. — After  the  wagon  has  been  driven  on  the  scale  it  is 
weighed  and  the  weight  noted  by  the  agent.  The  weight  taken  is 
usually  to  the  nearest  10  pounds.  This  is  done  as  a  means  of  saving 
time,  and  since  the  error  on  a  single  load  can  not  by  this  method  be 
more  than  5  pounds,  greater  accuracy  is  regarded  as  unnecessary. 
The  cover  of  the  unloading  pit  is  then  lifted,  and  if  the  elevator  is 
equipped  with  a  damp  scale  the  grain  is  unloaded  by  elevating  the 
front  end  of  the  wagon  and  alloAving  the  grain  to  run  out  of  the  rear 
end  into  the  pit.  If  the  scales  are  of  the  usual  platform  style,  the 
end  gate  of  the  wagon  is  removed  and  the  grain  is  shoveled  and  swept 
out  of  the  wagon  box  into  the  pit.  When  the  wagon  is  empty  it  is 
again  Aveighed,  and  the  dilference  between  this  result  and  the  weight 
of  the  loaded  wagon  gives  the  gross  weight  of  the  grain. 

In  determining  the  number  of  bushels  for  Avhich  the  farmer  is  to 
be  paid,  arbitrary  weights  approximating  the  AA^eight  of  the  grain 
per  bushel  are  used  for  computation  purposes — for  example,  in  the 

9  If  grain  is  cleaned  the  price  paid  by  some  elevators  is  based  on  the  cleaned  grain  ; 
in  other  cases  on  the  uncleaned. 


103 


PURCHASE  AND  STORAGE  OF  GRAIN. 

t 


Northwest  territory  60  ’pounds  in  the  case  of  wheat,  32  pounds  in 
the  case  of  oats,  etc.  The  gross  weight  of  the  grain  divided  by  the 
fixed  arbitrary  gives  the  number  of  gross  bushels  of  grain  contained  in 
the  farmer’s  load.  This  result,  as  previously  stated,  is  then  multiplied 
by  the  pounds  of  dockage,  as  determined  by  the  agent,  to  obtain  the 
total  dockage  on  the  load.  This  total  dockage  is  then  deducted  from 
the  gross  w'eight  and  the  result  is  the  total  net  pounds  of  grain  in 
the  load.  To  convert  pounds  to  bushels  the  net  weight  is  again 
divided  by  the  fixed  arbitraries  previously  used  and  the  result  is 
the  number  of  bushels  for  which  the  farmer  is  paid.^® 

Payment  for  grain. — The  price  per  bushel  having  been  arrived 
at,  the  agent  draws  a  check  or  draft  to  the  farmer  baiJiia^-r^n,  pro¬ 
vided  the  transaction  is  an  outright  purchase  Local  elevator  com¬ 
panies  usually  have  accounts  with  banks  in  the  locality  and  issue 
checks.  In  the  case  of  the  line  companies  the  agent  usually  draws 
on  the  line  company,  most  of  which  have  arrangements  with  the  local 
banks  at  their  various  stations  for  cashing  such  drafts.  When  there 
is  no  bank  at  the  station,  arrangements  are  made  with  one  or  more 

local  merchants.  .  ,  ,  .  i-  i  i 

In  some  States  the  laws  require  that  elevators  issue  for  every  load 

delivered  by  the  farmer  a  memorandum  of  the  quantity  of  grain  de¬ 
livered.  In  some  cases  this  law  is  complied  with  by  the  issuance  of 
scale  tickets  similar  to  Form  1 : 

FORM  1.— SCALE  TICKET. 


I 

I 


No.  502.  19 

Station 

Delivered  by 

% 

Owner 

Grade 

Grain 

Dock,  per  bu. 

Load  pounds 

W^on  pounds 

Weight  pounds 

Gross  bus. 

Dockage  bus. 

Net  bus. 

% 

Storage  ticket  No. 

Cash  check  No. 


^oThus,  If  the  gross  weight  of  the  fanner’s  ^ere  5,400  pounds  and  the 
bushel  44  pounds  and  the  gram  in  question  was  w^^^at  5,400  woi^d  i  e  u^^  ou 

to  obtain'  the  total  bushels  in  the  load,  which  ’n?40?  nounds  Deducing 

pounds  of  dockage  per  bushel  gives  a  total  <3ockage_of  the  load  of  40.i  pounds  ^et  wS 

ra9T‘^'’u‘nSL  bushels  by  dividing 

by  00  gives  83  bushels  and  15  pounds  for  which  the  farmer  is  paid. 


104 


.  COUNTRY  GRAIN  MARKETING. 


Such  a  ticket  is  merely  a  memorandum  showing  the  weights  and 
dockage  of  each  load  and  is  not  negotiable.  Some  companies  comply 
with  the  law  by  the  issuance  of  storage  tickets  instead  of  scale  tickets. 

Regardless  of  the  requirements  of  the  State  laws  a  number  of  line 
companies  as  a  matter  of  practice  issue  a  storage  ticket  (Form  2,  p. 
108)  for  every  load  or  lot  of  grain  delivered  to  the  elevator,  whether  the 
grain  thus  delivered  has  been  purchased  or  is  merely  put  in  storage  by 
the  farmer.  If  the  transaction  is  an  outright  sale,  the  storage  ticket 
is  not  retained  by  the  farmer,  but  is  indorsed  by  him  and  returned  to 
the  elevator  agent,  who  thereupon  draws  a  check  or  draft  to  the 
farmer,  closing  the  transaction.  This  method,  however,  is  not  com¬ 
mon,  and  is  used  apparently  only  by  line  companies.  Should  the 
farmer  lose  the  check  or  draft,  a  duplicate  can  be  had  upon  applica¬ 
tion  to  the  elevator  company  and  the  filing  of  a  bond. 

The  elevating  operation. — After  the  grain  has  been  dumped  from 
the  farmer’s  wagon  into  the  unloading  pit  it  must  be  removed  to  make 
room  for  other  incoming  loads.  The  bottom  of  the  unloading  pit 
slopes  down  into  what  is  known  as  a  “boot.”  This  is  a  metal  con¬ 
tainer  at  the  lower  end  of  that  part  of  the  grain  elevating  machinery 
known  as  the  “  elevating  leg.”  This  leg  consists  of  a  series  of  buckets 
or  scoops  attached  to  an  endless  chain  or  belt  operating  on  rollers, 
one  of  which  is  at  the  top  and  one  at  the  bottom  of  the  house,  the  belt 
or  chain  running  up  through  the  house  in  an  inclosed  chamber.  This 
cup  or  scoop  belt  turns  at  its  lower  end  in  the  boot  and  the  cups  scoop 
up  the  grain.  At  the  top  of  the  leg  the  belt  is  deflected  as  it  passes 
over  the  top  roller  so  as  to  permit  the  filled  cups  to  empty  into  a  spout. 
This  spout  can  be  directed  to  any  of  the  various  bins.  The  agent  sets 
this  spout  for  the  proper  bin,  the  leg  is  set  in  motion,  and  the  grain  is 
elevated  and  spouted  into  the  bin. 

Section  4.  The  storage  function  and  the  sale  of  grain  after  storage. 

Conditions  affecting  storage. — Not  all  the  grain  grown  in  a  com¬ 
munity  finds  it  way  to  the  terminal  market  or  other  destination  as  ^ 
soon  as  harvested.  Some  of  it  may  be  held  back  temporarily  awaiting 
an  increase  in  price,  or  permanently  for  use  as  seed  grain  at  the  next 
planting  season. 

As  a  general  rule,  the  farmer  withholds  sufficient  grain  from  each 
crop  to  supply  his  requirements  for  seed  the  following  year.  There 
are,  of  course,  exceptions,  as  when  he  decides  to  grow  a  new  grade  or 
variety  and,  in  consequence,  markets  his  entire  crop,  retaining  nothing 
for  seed  and  later  purchasing  seed  of  the  new  type.  In  the  great  pro¬ 
portion  of  cases,  however,  the  farmer  retains  at  least  the  quantity  of 
grain  needed  for  planting  the  coming  year.  AVhere  this  is  the  case 
he  ordinarily  does  not  employ  the  local  house  for  storage  on  account 
of  the  expense  involved,  though  he  may  do  so  in  occasional  instances. 

The  quantity  of  grain  stored  by  a  farmer  for  other  than  seeding 
purposes  depends  in  a  large  degree  upon  his  financial  situation.  If 
he  is  compelled  to  borrow  money  to  grow  or  harvest  his  crops,  thus  in 
effect  mortgaging  them  in  advance,  he  is  generally  compelled  to  sell 
his  grain  as  soon  as  it  is  harvested.  One  instance  of  such  a  condition 
is  where  a  general  crop  failure  has  occurred  the  previous  year  in  any 
section  which  has  left  the  farmer  in  such  a  financial  position  that  he 
is  compelled  to  sell  immediately  whatever  grain  he  may  harvest  in 
order  to  pay  his  debts. 


PURCHASE  AXD  STORAGE  OF  GRAIN. 


105 


Tn  many  cases,  however,  the  financial  condition  of  the  farmer  is 
such  that  it  is  necessary  for  him  to  sell  only  a  small  part  of  his  crop, 
or  none  at  all,  to  pay  his  debts  or  necessary  expenses.  In  either 
event,  if  the  price  of  grain  is  relatively  low  the  farmer  will  fre¬ 
quently  hold  all  or  the  balance  remaining,  after  the  payment  of  debts 
and  expenses,  for  a  higher  price.  In  some  cases  farmers  pursuing  this 
practice  sell  their  poor  quality  grain  when  harvested  and  hold  their 
better  grades. 

Summary  of  interviews  regarding  storage. — One  of  the  inquiries 
made  by  agents  of  the  Commission  in  the  Northwest  and  of  the  De¬ 
partment  of  Agriculture  in  Illinois  and  Iowa  in  their  interviews 
with  country  elevator  agents  was  whether  the  tendency  for  the 
farmers  to  hold  grain,  either  on  the  farm  or  at  the  elevator,  for  an 
increase  in  price,  Avas  increasing  or  decreasing  as  compared  with 
former  years.  Of  the  elevator  agents  interAuewed  by  the  Commis¬ 
sion  in  the  four  Northwestern  States,  30  gav^e  information  on  this 
subject,  and  of  this  number  9  reported  that  the  present  tendency  to 
hold  or  store  grain  was  greater  than  five  years  previously Avhile 
10  said  there  Avas  no  change  and  11  that  the  tendency  Avas  less.  The 
replies  made  by  elevator  agents  in  Iowa  and  Illinois  to  the  Depart¬ 
ment  of  Agriculture  were  as  follows : 


Present  tendency  as  compared  with  5  years  ago. 

Iowa. 

Illinois. 

Total. 

Greater . 

21 

24 

45 

Same . 

13 

12 

25 

Less . 

4 

12 

16 

• 

38 

48 

86 

Present  tendency  as  compared  with  10  years  ago. 

Iowa. 

Illinois. 

Total. 

Greater . 

23 

25 

48 

Same . 

8 

9 

17 

Less . ■ . *. . 

4 

9 

13 

35 

43 

78 

Although  the  number  of  elevators  iiiA  oh^ed  is  too  small  to  permit 
very  definite  conclusions,  the  aboA’e  Avould  indicate  that  there  is  at 
present  little,  if  any,  tendency  for  this  practice  to  increase  in  the 
Northwest  and  that  there  is  probably  a  considerable  increase  in  hold¬ 
ing  grain  in  loAva  and  Illinois.  The  reason  for  the  difference  be¬ 
tween  the  two  areas  in  this  respect  is  probably  to  be  found  in  the 
fact  that  the  Northwest  is  relatively  neAV  territory  as  compared  with 
loAA^a  and  especially  Illinois,  and  that  the  economic  status  of  the 
farmers  in  these  two  States  is  someAvhat  better  than  in  the  NortliAA^est. 

Where  grain  is  held  back  by  the  farmer  for  higher  prices  the 
A’olume  of  it  is  likely  to  be  considerable,  as  compared  Avith  those  cases 
Avhere  it  is  held  for  seed.  Owing  to  the  frequent  inadequacy  of  farm 
storage  space,  therefore,  or  other  considerations  of  expediency,  the 
eleA’^ator  or  Avarehonse  rather  than  the  farm  is  likely  to  be  employed 
for  storage  purposes  instead  of  the  reverse,  as  Avhere  grain  is  held 
for  seed. 


Interviews  referred  to  in  this  se<?tion  occurred  in  1918, 


COUNTRY  GRAIN  MARKETING. 


106 

The  attitude  of  country  elevator  operators  regarding  warehousing 
or  storing  grain  for  farmers  varies  greatly.  A  majority  of  the 
numerous  elevators  in  the  Northwest  visited  by  the  Commission  s 
agents  reported  that  they  received  gram  for  storage  from  farmers.  A 
few  concerns  reported  that  they  refused  to  accept  gram  for  storage 
and  a  number  of  others  that  while  they  formerly  stored,  for  farmers 
they  were  now  either  refusing  to  do  so  or  else  discouraging  the  prac- 

*“ln  the  two  States  of  Iowa  and  Illinois  21  of  some  90  elevators 
replying  to  inquiries  of  the  Department  of  Agriculture  on  this  sub¬ 
ject  stored  grain  for  farmers.  In  most  cases  these  houses  reported 

oats  as  the  principal  grain  stored.  ....  r.ti.. 

Elevators  frequently,  if  not  generally,  prefer  to  store  little  or  no 
grain,  and  many  of  them  refuse  to  store  at  all  upon  one  ground  or 
another.  A  frequent  reason  given  by  agents  lor  refusing  to  stoie 
is  that  the  elevators  do  not  have  sufficient  space.'"  A  further  objec¬ 
tion  to  storage  by  the  elevator  reported  by  one  agent  was  that  mis¬ 
understandings  with  farmers  not  infrequently  arose  when  grain  w-as 
stored.  One  elevator  in  the  Northwest  reported  goring  gram  tor 
farmers  only  when  such  farmers  were  tenants  and  it  was  not  known 
what  the  landlords  wanted  to  do  with  the  gram.  In  this  case  the 
storage  would  be  temporary.  Likewise,  elevators  are  often  com¬ 
pelled  to  store  because  competing  elevators  do  so. 

AVhen  grain  is  stored  in  the  ordinary  .fashion  the  elevator  usua  y 
makes  a  charge  for  such  storage,  and  practically  always  if  the  gram 
is  special  binned.  On  the  other  hand,  some  houses  make  no  charge 
for  storage  whatever,  either  for  competitive  or  other  reasons.  ^  otill 
others  make  no  storage  charge  unless  delivery  of  the  gram  is  de- 

"^Storage  charges.— The  practice  with  reference  to  diarges  for 
storage  among  the  elevators  visited  by  the  agents  of  the  Commission 
and  the  Department  of  Agriculture  shows  considerable  variation. 
Many  concerns,  for  competitive  reasons,  etc.,  store  gratis,  as  stated,  and 
it  appears  to  be  customary  for  most  elevators  to  allow  free  storage  of 
from  15  to  30  days.  Occasionally  longer  periods  are  allowed.  One 
case  was  reported  where  two  months  were  permitted  and  one  coopera¬ 
tive  house  gave  six  months  free,  as  only  stockholders  stored  in  the 
house.  After  the  period  of  free  storage  the  charges  reported  ranged 
from  a  half  a  cent  to  1  cent  per  month  for  each  bushel.  In  some  cases 
one  rate  was  made  for  a  certain  period  after  free  storage  and  a  lower 
rate  thereafter.  The  rates  were  made  on  a  15-day  basis  m  some  cases 
and  in  others  on  a  30-day  basis. 

Sale  after  storage  transactions.— IVhen  the  farmer  m  the  North¬ 
western  grain  States  elects  to  store  his  gram  in  the  elevator  or  ware¬ 
house  instead  of  selling  it  immediately,  he  usually  dop  so  with  the 
intention  of  ultimately  disposing  of  it  to  the  house  m  which  it  is 
stored  In  such  a  case  the  method  of  handling  the  gram  at  the  local 
house  is  practically  the  same  as  when  the  grain  is  sold  outright  (sec. 

12  Thniiph  this  is  freauently  merely  an  excuse,  it  should  be  tmrne  in  that  the 

Tnougn  tnis  is  u  oniv  nhont  10  or  11  bins  and  about  2.5, oOO  bushels  capacity. 

NenTlfaToTt'kir  e^^^^  least  two 

nr  th/ee  kinds  of  ?raif  Sd  sometimes  four  or  five,  including  flax,  each  of  various  grades, 
s^me  if  nS  all  of  which  grades  as  well  as  the  different  kinds  of  grain  must  be  kept 

separate. 


PURCHASE  AND  STORAGE  OF  GRAIN. 


107 


3),  except  that  no  price  is  fixed,  and  consequently  no  check  or  draft 
issued  by  the  a^ent  to  the  farmer.  The  "rain,  however,  is  graded, 
weighed,  and  docked,  unloaded,  and  elevated  to  the  proper  bin  in 
the  same  fashion  as  though  it  had  been  sold  outright.  Instead  of  a 
check  or  draft  the  farmer  receives  from  the  agent  a  storage  ticket 
for  each  load  delivered  at  the  elevator,  showing  the  kind  and  grade 
of  grain,  the  gross  weight,  dockage,  and  net  weight  of  the  load.  The 
ticket  also  shows  the  rate  of  storage  charged  and  the  conditions 
under  which  the  grain  is  stored.  This  ticket,  when  signed  by  the 
elevator  agent,  is  negotiable  and  can  be  used  as  collateral  for  loans. 
Form  l2  is  a  typical  storage  ticket  in  use  in  the  Northwestern  grain 
States. 


* 


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108 


COUNTRY  GRAIN  MARKETING. 


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COUNTRY  GRAIN  MARKETING. 


i 

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110 

The  farmer  retains  this  storage  ticket  until  such  time  as  he  decides 
to  sell.  He  then  presents  his  ticket  to  the  elevator  agent,  who  coin- 
putes  the  total  storage  charges,  deducts  them  from  the  price  he  is 
paying  for  that  grade  of  grain  on  that  day,  and  draws  a  check  or  draft 

to  the  farmer  for  the  net  proceeds. 

Storage  tickets  are  often  lost.  Duplicates  can  be  had  upon  appli¬ 
cation  to  the  issuing  company  and  the  filing  of  a  bond. 

Very  rarely  does  a  farmer  present  his  storage  tickets  and  demand 
delivery  of  the  grain  called  for  by  such  tickets.  In  the  event  that  he 
were  to  do  so  he  would  be  required  to  pay  such  storage  charges  as 
might  have  accrued  upon  the  grain  in  question.  Moreover,  in  such 
cases  the  farmer  would  not  and  could  not  receive  back  the  actual  gram 
which  he  delivered  to  the  elevator,  since  this  grain  would  not  ordi¬ 
narily  have  been  kept  separate  but  would  have  been  binned  with  other 
grain  of  similar  kind  and  grade  owned  either  by  the  elevator  com¬ 
pany,  other  farmers,  or  by  both  the  elevator  and  farmers.  In  fact,  the 
actual  grain  delivered  by  the  farmer  may  have  been  sold  and  shipped 
a  long  time  previously,  the  elevator  company  having  purchased  a 
future,  which  is  sold  when  the  farmer  cashes  in  his  storage  tickets. 

(Ch.  IX.)  ^  ^  ^  . 

Special  bin  storage.— If  the  farmer,  instead  of  storing  his  gram 
in  the  elevator  or  warehouse  with  the  intention  of  ultimately  selling 
it  to  the  house,  stores  with  the  expectation  or  intention  of  later 
demanding  delivery  of  the  identical  lot  he  has  unloaded,  the  grain  in 
question  is  treated  as  special  bin  storage  grain.  ^ 

Special  bin  storage  transactions  are  comparatively  rare  m  the 
central  grain  'States.  Such  transactions  usually  occur  either  when 
a  farmer  intends  to  ship  his  own  grain  or  when  the  farmer  and 
elevator  agent  are  unable  to  agree  upon  the  grade.  In  the  first  case 
the  grain  is  put  in  an  empty  bin,  and  a  special  bin-storage  ticket  is 
issued  for  each  load.  This  ticket  does  not  indicate  grade  or  dockage, 
but  simply  the  gross  weight  and  bin  number.  The  reason  for  omit¬ 
ting  the  grade  and  dockage  is  that  the  elevator  is  not  responsible  for 
the  same  and  guarantees  only  that  the  identical  grain  received  will 
be  surrendered  upon  the  presentation  of  the  tickets.  M  hen  the 
farmer  has  finished  his  hauling  or  decides  to  ship,  the  elevator  loads 
the  grain  into  a  car,  collecting  fees  for  this  elevation  and  loading  serv¬ 
ice  (Ch.  VII)  and  also  for  the  storage,  if  any.  In  the  event  of  a  dis¬ 
agreement  between  the  farmer  and  the  agent  as  to  grade,  the  grain  is 
elevated  to  an  empty  bin  and  its  identity  preserved  until  a  sample 
has  been  sent  to  the  terminal  market  and  there  graded.  The  grade 
thus  established,  the  elevator  agent  issues  a  regular  storage  ticket  to 
the  farmer  if  he  does  not  wish  to  sell  immediately,  or  a  check  in  case 
he  does.  If  the  regular  storage  ticket  is  issued,  the  grain  is  given 
the  grade  thus  determined,  and  thereby  becomes  ordinary  storage 
grain.  The  usual  ticket  issued  for  special  bin  grain  by  elevators  m 
the  Northwestern  grain  States  is  the  regular  storage  ticket ’with  a 
notation  thereon  that  the  transaction  is  special  bin  storage.  The  use 
of  a  separate  ticket  for  such  special  storage  is  not  general,  as  the 
occasions  are  not  frequent  enough  to  warrant  different  forms  for 
this  type  of  transaction. 

IS  The  only  instance  reported  to  the  Commission  of  a  farmer  demanding  delivery  of 
ordinary  stored  grain  was  in  a  case  where  the  grain  was  required  for  seed. 


PURCHASE  AND  STORAGE  OF  GRAIN. 


Ill 


Storagf/for  own  account. — Elevators  as  well  as  farmers  may  hold 
back  grain  from  the  terminal  market  awaiting  higher  prices.  The 
e.xtent  of  this  practice  varies.  In  the  Northwest  only  13  out  of  about 
150  elevators  visited  by  the  Commission’s  agents  reported  storing  for 
higher  prices.  Several  of  these  reported  that  they  held  only  about  10 
])er  cent,  or  “  very  little,”  or  “  occasionally.”  One  reported  holding 
from  15,000  to  20,000  bushels  of  wheat ;  and  still  another  that  grain 
was  held  if  bought  on  a  falling  market  until  a  profit  could  be  realized. 
Line  elevators  in  the  Northwest  frequently  fill  the  house  with  good 
grades  of  grain  (usually  wheat)  for  the  purpose  of  carrying^ it 
through  the  winter. 

In  Iowa  and  Illinois  grain  apparently  is  much  more  often  held  by 
elevators  for  higher  prices  than  in  the  Northwest.  In  Illinois  about 
one-half  of  the  elevators  visited  by  the  Department  of  Agriculture 
agents  reported  affirmatively  on  this  matter  and  in  Iowa  about  one- 
third.  The  following  tabular  statement  presents  the  number  of  ele¬ 
vators  in  Iowa  -  and  Illinois  reporting  to  the  department’s  agents 
affirmatively  and  negatively  on  this  question  for  each  crop  year, 
1912-13  to  1916-17. 

Elevators  reporting  on  holding  grain  for  higher  prices. 


Crop  year. 

Iowa. 

Illinois. 

Yes. 

No. 

Yes. 

No. 

1912  13 . 

9 

21 

22 

19 

1913-14 . 

12 

21 

21 

20 

1914-15 . 

12 

21 

24 

21 

1915-16 . 

12 

22 

24 

23 

1916-17 . 

11 

23 

20 

24 

56 

108 

111 

107 

There  are  indications  in  the  data  gathered  by  the  Commission 
that  the  attitude  of  the  country  elevator  on  holding  back  its  own 
grain  is  frequently  influenced  by  the  hedging  policy  of  the  ele¬ 
vator,  and  the  differences  in  this  respect  between  the  Northwest 
on  the  one  hand  and  Illinois  and  Iowa  on  the  other  confirms  this 
view.  Eeference  to  the  chapter  on  hedging  operations  (Ch.  IX) 
shows  that  in  the  Northwest  hedging  is  much  more  prevalent  than 
in  either  Iowa  or  Illinois.  If  an  elevator  has  hedged  its  grain, 
there  is  little  reason  to  hold  it  except  for  the  purpose  of  realizing 
either  a  carrying  charge  or  a'  possible  premium  of  the  cash  grain 
over  the  future.  By  hedging,  the  elevator  has  presumably  pro¬ 
tected  itself  against  loss,  but  it  has  also  presumably  limited  its 
profit,  except  so  far  as  the  cash  grain  goes  to  a  premium  later 
in  the  crop  year.  Unless  the  cash  grain  should  go  to  a  premium, 
any  advance  will  presumably  be  offset  by  a  corresponding  advance 
in  the  future.  For  this  reason,  therefore,  there  is  projbably  less 
inducement  for  the  hedging  house  to  hold  grain  than  for  the  non¬ 
hedging  house.  The  nonhedging  house,  however,  having  no  future  out¬ 
standing,  will  obtain  the  full  ben«fit  of  any  price  advance,  although 
it  must  also  bear  the  loss  resulting  from  any  decline.  In  the  case 
of  the  nonhedging  house,  therefore,  there  is  a  speculative  inducement 


■ 


112 


COUNTRY  GRAIN  MARKETING. 


for  holding  grain,  which  is  largely  absent  in  the  case  of  hedging 
houses. 

Pacific  coast. — As  a  rule  the  Pacific  coast  warehouse  is  much  more 
a  warehousing  facility  for  the  farmers  than  is  the  elevator  in  the  moie 
easterly  sections,  which  is,  on  the  whole,  chiefly  a  merchandising 
organization.  Storage  of  grain  on  the  Pacific  coast  is  quite  distinct 
from  that  of  other  sections.  Low,  flat  warehouses  with  large 
capacities  predominate,  and  as  the  grain  is  handled  in  sacks  it  is 
a  simple  matter  to  store  the  individual  grain  of  a  farmer  in  distinct 
piles,  and  this  is  frequently  done.  Some  companies  in  issuing  a 
storage  ticket  for  grain  do  not  specify  the  grade  of  gram,  but  keep 
it  piled  separately.  Other  companies  ordinarily  issue  a  storage 
ticket  which  specifies  the  grade,  but  do  not  keep  the  spemfic  grain 
separate  except  when  requested  to  do  so  by  the  farmers,  lii®®® 
methods,  therefore,  roughly  correspond  with  special  bin  and  ordinary 
storage  in  the  case  of  bulk  handling. 

Section  5.  Sale  of  grain  by  contracts.  . 

Many  of  the  contracts  of  elevators  with  farmers  for  the  deliveiy 
of  "rain  are  reported  as  made  while  the  grain  is  being  harvested. 
This  is  to  be  interpreted  broadly,  however.  It  may  mean  while  the 
grain  is  being  cut,  while  it  is  in  the  stacks,  or  again  while  being 
threshed,  or  even  after  threshing.  In  other  cases  contracts  are  made 
prior  to  the  harvest,  before  the  grain  has  been  cut.  Generally  the 
devators  in  the  Northwest  that  contract  for  gram  confine  their 
contracts  to  grain  being  threshed  or  already  threshed  and  stored  m 

the  farmers’  granaries.  ,  n  -o 

Such  contracts  for  grain  are  both  oral  and  written.  Lecause  ot 

the  reluctance  of  some  farmers  to  sign  written  contracts,  some  com¬ 
panies  make  oral  contracts  only.  Other  companies  will  make 
written  contracts.  The  oral  contracts  are  frequently  loosely  made 
and  indefinite.  The  written  contracts  are  more  explicit,  more  formal 
in  character,  and  more  easily  enforced.  In  making  a  contract  the 
country  agent  may  agree  to  purchase  the  farmer  s  gram  either  at  a 
price  agreed  upon  at  time  of  contracting  or  based  upon  the  price 

prevailing  at  time  of  delivery.  i  i  •  <1 

Various  samples  of  written  contracts  were  obtained  during  the 

inouirv,  one  of  which  is  printed  herewith  as  Appendix  3.  -r-rri  •! 

On  the  whole,  these  written  contracts  are  very  much  alike.  While 
there  is  some  variation  in  the  form  and  wording  thereof,  they  are 
generally  short,  simple,  and  explicit,  calling,  for  the  delivery 
a  specified  time  of  a  certain  number  of  bushels  of  gram  m  a  stated 
condition.  For  example,  in  the  case  of  corn  the  contracts  usually 
specify  whether  the  corn  is  to  be  shelled  or  on  the  ear.  Contracts 
made  by  cooperative  and  independent  companies  are  generally  m 
duplicate,  one  copy  going  to  the  farmer  and  one  being  retained  by 
the  elevator ;  those  of  line  companies  are  usually  made  m  triplicate, 
the  third  copy  going  to  the  head  office  of  the  line  company.  ,  ,  . 

Intervieavs  on  grain  contracting.— The  character  and  extent  of 
grain  contracting  was  carefully  inquired  into  by  the  agents  of  the 
Commission  and  the  Department  of  Agriculture.  On  the  basis  o 
this  information  the  following  sta^ments  with  regard  to  this  prac¬ 
tice  may  be  made. 


PURCHASE  AND  STORAGE  OF  GRAIN. 


113 


In  the  Northwest,  with  some  differences  in  different  sections,  prac¬ 
tically  all  classes  of  elevators  are  disposed  to  discourage  the  making 
of  contracts  with  farmers.  The  Minneapolis  line  companies  inter¬ 
viewed  stated  that  they  preferred  not  to  make  these  contracts,  while 
of  the  approximately  *150  representatives  of  mill,  cooperative,  and 
independent  elevators  interviewed  in  the  country  69  per  cent  stated 
that  they  did  not  make  contracts,  and  18  per  cent  that  they  con¬ 
tracted  but  very  little  and  only  with  farmers  whom  they  were  certain 
would  deliver.  About  4  per  cent  of  these  representatives  informed 
the  Commission’s  agents  that  they  had  contracted  in  the  past,  but 
had  abandoned  the  practice  because  of  failure  of  farmers  to  deliver, 
and  another  4  per  cent  reported  that,  while  they  contracted,  they  did 
so  onlv  in  special  cases,  as,  for  example,  when  the  farmers  were  in 
need  o*^f  money  owing  to  inability  to  deliver  grain  on  account  of  bad 


ronds 

In  the  grain  States  tributary  to  Chicago  contracting  appears  to 
be  much  more  prevalent  than  in  the  Northwest.  Thus  in  Iowa  a^d 
Illinois  73  out  of  95  elevators  reported  that  they  made  contracts  for 
t>'rain  with  farmers ;  21  out  of  39  in  Iowa ;  and  52  out  of  56  in  Illinois, 
fn  south  central  Illinois  a  few  elevators  reported  contracting  acreage. 

The  few  line  companies  operating  out  of  Chicago,  Indianapolis, 
and  Peoria,  in  contrast  to  those  in  the  Northwest,  do  considerable 
contracting.  Although  one  milling  line  reported  only  a  few  acreage 
contracts  for  grain,  and  only  with  farmers  whom  they  thought  would 
make  deliveries,  an  official  of  one  of  the  other  line  concerns  stated  that 
his  company  made  contracts  just  prior  to  the ffiar vest  for  about  5  per 
cent  of  the  grain  received  at  its  elevators  and  for  froni  25  to  50  per 
cent  between  the  time  of  cutting  and  the  time  of  threshing  the  gram. 
These  contracts  were  made  by  the  agents  of  the  company  and  the 
farmer  at  a  stipulated  price  and  called  for  delivery  on  or  before  a 

specified  future  time.  .  .  •  xi. 

A  19-house  line  operating  out  of  Peoria  is  also  in  the  habit  ot 

making  contracts  with  farmers  for  the  delivery  of  gram,  these  con¬ 
tracts  usually  running  for  10,  30,  60,  or  90  days.  An  Indianapolis 
mill  line  likewise  reported  a  good  many  contracts  with  farmers  tor 

the  sale  of  grain.  ,  .  ,  j.-  ^ 

Contracting  for  grain  at  a  fixed  price  has  proven  an  unsatisfactory 

practice  with  many  elevators.  The  principal  objection  thereto  is 
that  if  prices  are  in  advance  of  those  stipulated  in  the  contract  when 
the  time  of  delivery  arrives  the  farmer  becomes  dissatisfied  and  often 
refuses  to  fulfill  the  contract.^  If  the  elevator  then  attempts  to 
enforce  it  the  usual  result  is  that  the  farmer  transfers  his  business  to 
another  elevator.  His  dissatisfaction  easily  spreads  to  other  farmers, 
esiiecially  if  the  elevator  in  question  is  an  independent  or  one  ot  a 
lino  company  and  may  result  in  a  serious  loss  of  business. 

Pacific  coast.— Contracting  with  farmers  for  their  gram  by  both 
warehouses  and  terminal  market  interests  is  a  common  practice  on 
the  Pacific  coast.  In  this  territory  the  farmers  are  financed  to  a 
considerable  extent  by  terminal  market  buyers,  mills,  and  other 
vrain  dealers.  When  such  advances  are  made  it  is  quite  customary 


14 


agents 


fi  5  wsirs  s  sKf 


not  to  be  relied  upon. 


90G4°— 20 - 8 


114 


COUNTRY  GRAIN  MARKETING. 


to  enter  into  contracts  either  for  the  farmer’s  whole  crop  or  else  to 
an  amount  sufficient  to  cover  the  advances.  The  contracts  are  gen-  ' 
erally  made  during  the  harvest  season  and  usually  to  enable  the  < 

farmer  to  pay  the  expenses  of  harvesting.  They  usuallv  specify  the  i 

price  to  be  paid  the  farmer  for  his  grain.  "  ' 

In  this  territory,  apparently,  contracts  are  customarily  complied 
with,  and  no  complaint  from  this  section  that  the  farmers  refuse  to 
fulfill  such  agreements  was  reported. 


Section  6.  Distribution  of  total  purchases  by  kind  of  grain. 

Relative  marketing  importance  or  different  grains. — Appendix 
Table  6  presents  the  purchases  of  about  two  billion  bushels  of  o-rain 
by  country  elevators  in  the  14  principal  grain-producing  States^dur- 
ing  the  crop  years  1912-13  to  1916-17,  classified  according  to  the  kind 
of  gram  (Appendix  2,  inquiry  14).  This  table  may  be  consulted  for 
the  details  of  country-elevator  purchases. 

The  following  summary  staternent  presents  the  proportion  of 
different  kinds  of  grain  purchased  in  the  14  principal  grain-produc¬ 
ing  States  in  comparison  with  the  production  of  those  grains  in  the 
same  States : 


Grain. 

Proportion 
of  total 
elevator 
purchases 
in  14  grain- 
producing 
States, 
crop  rears 
1913-1917. 

Proportion 
of  total 
production 
of  5  princi¬ 
pal  grains 
in  14  grain- 
producing 
States  for 

5  calendar 
years 
1913-1917.1 

Wheat . 

oO.  d4 

15. 75 

oU.  o(J 

29. 04 

Uo 

50.60 

D,  oU 

1.70 

3.64 

.97 

each  the  Department  of  Agriculture 


The  foregoing  figures  may  be  said  to  be  fairly  indicative  of  the 
relative  marketing  importance  through  elevators  of  the  different  i 

kinds  of  grains.  The  great  bulk  of  the  grain  crop  which  is  marketed  .i 

undoubtedly  nmves  through  the  local  elevators,  and  the  sample  ob¬ 
tained  by  the  Commission  is  so  large  that  it  would  seem  not  unrea-  ! 

sonable  to  assume  that  the  foregoing  results  reflect  the  actual  mar-  ii 

keting  conditions  with  very  substantial  accuracy.  About  37  per  cent  i 

or  the  total  grain  marketed  through  country  elevators  is  wheat  * 
about  31  per  cent  oats ;  and  barely  24  per  cent  corn.  The  proportion 
or  total  marketings  represented  by  barley  and  rye  are  very  small 
amounting  to  something  less  than  7  per  cent  of  the  total  in  the  case  ' ' 

of  barley  and  less  than  2  per  cent  in  the  case  of  rye. 

Although  corn  represents  about  50  per  cent  of  the  total  crop  pro-  ' 

duction  of  the  five  principal  grains  in  the  14  States  for  which  pur-  ! 

chases  were  tabulated,  it  amounts  to  less  than  25  per  cent  of  the  total  ' 

of  the  five  grains  marketed. 

In  the 'case  of  wheat,  rye,  and  barley  the  reverse  of  the  foregoing 
situation  with  regard  to  corn  obtains.  Although  Avheat  comprises 


PURCHASE  AND  STORAGE  OF  GRATN. 


115 


only  15.75  per  cent  of  the  total  production,  barley  only  3.64  per  cent, 
and  rye  0.97  per  cent,  these  three  grains  comprise  36.64,  6.80,  and  1.70 
per  cent  of  the  total  grain  marketed  through  country  elevators.  Oats 
alone  comprises  about  the  same  proportion  of  the  total  grain  marketed 
as  of  total  crop  production.  From  a  marketing  standpoint,  therefore, 
these  figures  would  indicate  that  the  ratio  of  the  marketings  of  wheat, 
barley,  and  rye  to  the  total  crop  is  about  twice  that  of  oats  and  three 

times  that  of  corn.  ,  i?  j- 

Both  corn  and  oats,  especially  corn,  are  extensively  used  tor  feeding 
purposes,  and  the  figures  are  therefore  also  indicative  of  the  rela¬ 
tively  large  amounts  of  both  of  these  grains  that  remain  on  the  farm 
for  such  use.  The  relatively  smaller  proportion  of  corn  marketed, 
as  compared  with  oats,  is  probably  due  to  the  exceedingly  extensive 
local  use  of  corn  for  feed  in  connection  with  the  cattle  and  hog  raising 
industry. 

Distribution  of  purchases  of  different  grains  by  bTATES.— ine 
foreo^ing  variations  in  total  crops  and  total  grains  marketed  are 
even*"more  pronounced  as  betAveen  the  A^arious  States,  as  appears  in 

Table  25. 


Table  2o. _ Yanatlons  in  crop  production  and  country  clevntor  marketings  of  the 

5  principal  grains  in  the  I  '/  principal  grain-producing  States  in  the  crop  years 

1912-13  to  1916-17. 


1 

state. 

AVheat. 

Com. 

Oats. 

Rye. 

Barley. 

Per 
cent  of 
total 
pur¬ 
chases 

5  grains. 

Per 
cent  of 
total 
pro¬ 
duction 
5  grains. 

Per 
cent  of 
total 
pur¬ 
chases 

5  grains. 

Per 
cent  of 
total 
pro¬ 
duction 
5  grains. 

Per 
cent  of 
total 
pur¬ 
chases 

5  grains. 

Per 

cent  of 
total 
pro¬ 
duction 
5  grains. 

Per 
cent  of 
total 
pur¬ 
chases 

5  grains. 

Per 
cent  of 
total 
pro¬ 
duction 
5  grains. 

Per 

cent  of 
total 
pur¬ 
chases 

5  grains. 

Per 
cent  of 
total 
pro¬ 
duction 
5  grains. 

North  Dakota . 

Minnesota . 

Illinois . 

South  Dakota . 

Iowa . 

Kansas . 

Nebraska . 

Montana . 

Indiana . 

Ohio . 

Miehiiran . 

Missouri . 

AATsconsin . 

Oklahoma . 

69.91 
35.97 

7.89 
36. 78 
5. 46 
85. 56 
43. 01 
90.  45 
27.  81 
29.10 
48. 60 
76.  71 

12. 91 

74. 92 

43.21 
18.48 
6.93 
20.08 
2. 35 
39. 92 
17.18 
49. 78 
13.16 

11.  63 

12.  42 

13.  40 
2. 39 

28.37 

0.04 
10. 95 

41.83 
13.63 
41.24 
11.89 
41.03 

.05 
34. 61 

28.83 
9.42 

17.86 

9.49 

20.80 

5. 66 
29. 75 
61.62 
40. 99 
62.34 

38. 90 
57.09 

2. 77 

65. 91 
59.18 
40. 56 
71.82 
32.73 
50. 33 

10.36 
30.24 
49.53 
35.  62 
49.32 
1.95 
14.  81 
8.  41 
36. 56 
39. 77 
34.07 
5.18 
36. 19 
4.20 

33.18 
37.82 
30. 97 
27. 33 
33.42 
18.  64 
23.91 
42. 90 
20.00 
25. 13 
40. 74 
14.  61 
49.37 
21.11 

3.09 
4. 62 
.38 
1.12 
.24 
.10 
.76 
.21 
1.01 
.78 
6.  60 
.26 
11.38 
.07 

2.25 
2. 04 

.14 

1.32 

.18 

.33 

.83 

.37 

.81 

.64 

4. 26 
.12 

4.16 

.07 

16.60 
18.23 
.37 
12.  84 
3.74 
.50 
.40 
.88 

1.52 

1.31 

30.03 

.01 

15.70 
It  91 
.34 
10.28 
].n 
2.21 
.99 
4.18 
.12 
.42 
2.02 
.05 
11.35 
.12 

14  States . 

36.  64 

15.75 

24.06 

50. 60 

30.80 

29. 04 

1.70 

.97 

6.80 

3.64 

It  will  be  noted  that  in  every  one  of  the  14  States  in  the  fore¬ 
going  table  Avheat  comprises  a  larger  proportion  of  the  total  gram 
marketed  than  it  does  of  the  total  crop  production.  In  the  case  of 
corn,  on  the  other  hand,  exactly  the  reA^erse  is  true.  Oats  constitutes 
a  higher  proportion  of  total  grain  marketed  than  of  production  in 
Illinois,  South  Dakota,  loAva,  Indiana,  and  Ohio;  rye  in  North  Da¬ 
kota,  Minnesota,  Illinois,  Ioaati,  Indiana,  Ohio,  Michigan,  Missouri, 
and  Wisconsin ;  and  barley  in  North  Dakota,  Minnesota,  Illinois, 
South  Dakota,  Iowa,  Ohio,  and  Wisconsin.  The  other  States  show  a 
higher  proportion  of  total  crop  production  than  of  total  gram 
marketed  for  each  of  these  three  grains. 


116 


COUNTRY  GRAIN  MARKETING. 


Section  7.  Purchases  of  grain  by  different  types  of  elevators. 

All  types. — Appendix  Table  7  presents  by  type  of  house  and  by 
years  the  distribution  of  purchases  of  different  kinds  of  grain  for  tlie 
period  1912-13  to  1916-17.  (Appendix  2,  inquiry  14.)  The  follow¬ 
ing  table  shows  by  type  of  house  the  proportion  of  total  elevator 
purchases  during  this  period  represented  by  wheat,  corn,  oats,  rye, 
and  barley: 

Table  26: — Proportions  of  different  kinds  of  grain  purchased  by  different  types 
of  elevators  during  the  five  crop  years  1912-1917. 


Grain. 

All 

ele¬ 

vators. 

All 

line 

ele¬ 

vators. 

All 

indi¬ 

vidual 

ele¬ 

vators. 

Indi¬ 

vidual 

mill 

ele¬ 

vators. 

Mill 

line 

ele¬ 

vators. 

— 

i/ 

pendent 

ele¬ 

vators. 

Com¬ 

mercial 

line 

ele¬ 

vators. 

Indi¬ 

vidual 

cooper¬ 

ative 

ele¬ 

vators. 

Cooper¬ 

ative 

line 

ele¬ 

vators. 

Indi¬ 
vidual 
malt¬ 
ster  ele¬ 
vators. 

Line 
malt¬ 
ster  ele¬ 
vators. 

Wheat . 

36. 64 

43.29 

31.97 

72.95 

t 

72.75 

23. 59 

36.65 

32.42 

47.08 

0. 17 

4.09 

Oats . 

30. 80 

27. 24 

33.31 

11.22 

13. 34 

39. 29 

30. 94 

31. 60 

20. 61 

5.02 

Corn . 

24. 06 

20. 13 

26.82 

11. 77 

7.85 

30.63 

22.  87 

26. 02 

27.56 

Barley . 

6. 80 

7.49 

6.31 

1. 79 

3. 70 

4. 98 

7. 82 

8.45 

4. 01 

99.63 

81.42 

Rye . 

1. 70 

1.86 

1.A9 

2. 27 

?.37 

1.52 

k71 

1.'51 

0.74 

0.20 

9.47 

Mill  and  maltster  elevator  purchases. — As  between  the  various 
types  of  elevators,  wheat  constitutes  nearly  three-fourths  of  the  pur¬ 
chases  of  both  line  and  individual  mill  elevators  and  thus  comprises 
a  far  greater  proportion  of  the  total  purchases  of  these  elevators  than 
it  does  of  those  of  any  other  type.  The  high  proportion  of  wheat 
purchases  and  low  proportions  of  all  other  grain  purchases  made 
by  mill  elevators  follows  from  the  fact  alreadj?^  frequently  alluded 
to  in  this  volume,  that  the  mill  elevator  is  in  business  primarily  to 
furnish  a  supply  of  grain  to  the  mill,  and  as  a  rule  is  either  not  en¬ 
gaged  at  all  or  only  incidentally  in  merchandising  either  wheat  or  i 
other  grains.  Similarly,  the  extremely  high  percentages  of  barley 
bought  by  maltster  elevators  (81.42  per  cent  of  the  purchases  of  the 
line  houses  of  this  type  and  99.63  per  cent  of  the  purchases  of  the  in¬ 
dividual  houses)  and  the  low  proportions  of  other  grain  purchases 
are  explainable  by  the  fact  that  the  maltster  elevator  is  run  as  an 
adjunct  to  the  malting  establishment'  to  furnish  it  with  an  adequate 
supply  of  barley  in  the  same  way  as  the  mill  elevator  is  operated  as 
an  adjunct  of  the  mill  to  furnish  a  supply  of  wheat. 

Commercial  line,  cooperative,  and  independent  purchases. — The 
purchases  of  each  of  the  five  grains  made  by  commercial  lines  are 
roughly  in  about  the  same  proportion  as  the  purchases  of  the  same 
grains  by  individual  cooperatives.  Both  these  types  buy  a  consider¬ 
ably  higher  proportion  of  wheat  and  barley  than  does  the  independ¬ 
ent  type  and  a  considerably  less  proportion  of  both  corn  and  oats. 
The  explanation  of  this  situation  lies  in  the  geographical  distribu¬ 
tion  of  these  types  of  elevators.  An  examination  of  Appendix 
Table  6  reveals  the  fact  that  about  one-half  of  the  reported  pur¬ 
chases  of  both  corn  and  oats  are  in  Illinois  and  Iowa,  both  of 
which  States  have  a  relatively  high  proportion  of  independent  andv  • 
relatively  low  proportion  of  both  commercial  line  and  cooperative 
elevators.  The  higher  proportion  of  barley  purchases  reported  by 
the  commercial  lines  and  the  individual  cooperatives  as  compared  ' 
with  the  independent  is  due  to  a  similar  set  of  facts.  As  shown  in 


PITRCHASE  AND  STORAGE'^F  GRAIN. 


1/aa- 


117 


the  appendix  table  above  referred  to  nearly  80  per  cent  of  the  re- 
})orted  purchases  of  barley  during  the  period  under  discussion  were 
in  Minnesota  and  the  Dakotas,  all  three  of  which  are  important  com¬ 
mercial  line  and  cooperative  elevator  States,  but  low  in  the  propor¬ 
tion  of  independent  houses  operating  therein. 

Section  8.  Average  bushels  handled  (purchased). 

By  types. — F rom  the  reported  total  purchases  of  grain  by  country 
elevators  (iVppendix  2,  inquiry  14)  it  is  possible  to  derive  the  average 
purchases  made  by  elevators  of  different  types.  As  the  purchases  re¬ 
ported  are  for  five  years,  the  carry-over  or  inventory  at  the  beginning 
and  end  of  the  period  would  not  presumably  affect  the  averages  in 
any  very  serious  degree,  and  the  average  purchase  figures  of  different 
types  may  therefore  be  regarded  as  substantially  identical  with 
average  bushels  handled.^® 

Table  27  presents  the  annual  average  purchases  of  different  types 
of  country  elevators  during  the  five  crop  years  1912-13  to  1916-17, 
obtained  W  dividing  the  total  purchases  reported  for  the  five  years 
by  the  number  of  elevator  years.  (Appendix  Table  7.) 

Table  27. — Average  number  of  bushels  of  specified  grains  purchased  annually 
by  specified  types  of  cmintry  elevators  in  U  States  during  crop  years  1912-13 
to  1916-17. 


All  grains. 

Wheat. 

Com. 

Oats. 

Rye. 

Barley. 

Commercial  line . 

Cooperative  line . 

Millline . 

MaltEfftr  linr».  . 

77,250 
136, 825 
78,613 
61,457 

28,315 
64, 413 
57, 191 
2,514 

17,670 

37,703 

6,172 

23,905 

28,203 

10,484 

3,087 

1,322 

1,017 

1,861 

5,820 

6,038 

5,489 

2,905 

50,036 

Average  line . 

Cooperative  individual . 

Independent  individual . 

Mill  individual . 

Maltster  individual . 

78,423 

33,847 

15,788 

21,362 

1,456 

5, 870 

152,792 
102,934 
113, 100 
158, 699 

49,543 

24,279 

82,502 

278 

39,754 

31,526 

13,311 

48,279 

40,444 

12,692' 

2,311 

1,561 

2,571 

312 

12,905 
5, 124 
2,024 
158, 109 

Average  individual . -  . 

Average,  line  and  individual . 

119,913 

38,332 

32, 166 

39,944 

1,902 

7,569 

98.405 

36,059 

23, 676 

30,311 

1,671 

6,688 

An  examination  of  the  foregoing  table  reveals  some  important 
and  interesting  facts.  The  average  elevator  in  the  14  principal 
grain-producing  States,  according  to  these  figures,  buys  close  to 
100,000  bushels  of  grain  annually ;  36,059  bushels  of  which  is  wheat, 
30,311  oats,  23,676  corn,  6,688  barley,  and  1,671  rye. 

Explanation  of  type  variations. — The  average  individual  elevator 
buys  or  handles  119,913  bushels  annually,  or  about  50  per  cent  more 
than  the  average  line  purchases  (78,423  bushels).  Excepting  the 
cooperative  lines,  the  line  types  generally  report  a  very  much  lower 
volume  of  purchases  than  the  individual  types.  The  individual 
maltster  elevator  reports  the  largest  volume  of  purchases,  but  on 
account  of  the  small  number  of  these  elevators  reporting,  some  doubt 
must  be  expressed  as  to  the  representative  character  of  this  average. 
Aside  from  these  individual  maltster  elevators,  the  individual  co- 


“Tt  should  be  noted  that  these  average  fifrures  vary  considerably  from  those  used  in 
determining  costs  and  profits  (Vol.  IV)  on  account  of  the  carry-over  and^also  the 
difference  in  the  size  of  the  two  samples. 


118 


COUNTRY  GRAIN  MARKETING. 


operative  buys  annually  on  the  average  a  far  greater  volume  of  grain 
than  does  any  other  type;  nearly  twice  the  volume  of  either  the 
commercial  or  mill  line,  more  than  twice  that  of  the  maltster  line,  and  | 
about  one-half  and  one-third  more  than  the  independent  and  the  j 
individual  mill  respectively. 

The  generally  smaller  volume  handled  by  the  line  type  except  i; 
the  cooperative  line,  as  compared  with  the  individual  type,  is  ex-  j 
plainable  chiefly  in  the  terms  of  competitive  conditions,  and  may 
probably  be  assigned  largely  to  the  more  or  less  hostile  attitude  of  the 
producer  toward  the  line  house  (Ch.  XI,  sec.  11),  and  possibly  to  his 
belief  that  he  will  obtain  a  “  fairer  deal  ”  from  the  individual  ele¬ 
vator  than  from  the  line  house.  The  individual  elevator  is  locally 
managed  and  operated  as  a  rule,  and  depends  solely  upon  the  jj 
locality  for  its  patronage.  Either  its  owmers  or  operators,  or  both,  |j 
are  members  of  the  community,  as  line  agents  seldom  are,  and  it  is  j 
not  unreasonable  to  assume  that  with  his  information  as  to  the  j, 
ownership,  operation,  and  policy  of  the  average  individual  house,  | 
the  producer  is  more  willing  to  deal  with  it  than  with  the  line  agent,  1 
of  whom  he  frequently  knows  little  and  the  policy  of  whose  em-  j 
,  ployer  he  is  inclined  to  distrust.  The  large  volume  handled  by  the 
individual  cooperative  and  also  the  cooperative  line  is  probably  in  ii| 
part  contributed  to  by  this  opposition  of  some  farmers  to  line  com-.il 
panies,  but  is  also  attributable  to  patronage  dividends  and  the  attitude  i 
of  the  producer  toward  cooperative  elevators  and  cooperation  in  -i 
general.  (Ch.  XI,  sec.  11.)  ^  g 

The  variations  in  the  foregoing  table  in  the  proportions  of  different^ 
kinds  of  grain  purchased  by  different  types  of  houses  are  of  course  the'l 
same  as  the  type  variations  in  the  proportions  of  total  purchases  of 
different  grains  and  have  been  explained  in  the  preceding  section.  f 

By  States. — Table  28  shows  the  variations  in  annual  average  pur-  •  ji 
chases  of  different  kinds  of  grain  in  the  14  principal  grain-producing  jli 
States.  i: 


Table  28. — Average  numher  of  hiishels  of  specified  grains  purchased  annually 
hy  country  elevators  in  specified  States  during  the  crop  years  1912-13  to 
1916-17. 


State. 

All 

grains. 

A\'Iieat. 

Corn. 

Oats. 

Rye. 

Barley. 

Illinois . 

164, 791 

13,009 

68,934 

81,623 

620 

605 

Iowa . .  -  - . 

131,317 

7,167 

54, 158 

64,760 

315 

4,917 

Indiana . 

117,582 

32,694 

40, 700 

42,993 

1,191 

4 

South  Dakota . 

104,424 

.  38,407 

14,236 

37,203 

1,173 

13,405 

Kansas . 

100,287 

85, 8C9 

11,919 

1,956 

105 

498 

Nebraska . 

93,397 

40, 167 

38,316 

13,828 

709 

377 

Ohio . 

92,835 

27,014 

26,763 

36,918 

725 

1,415 

Minnesota . . 

79,282 

28,514 

8,680 

23,972 

3,666 

14,450 

Oklahoma . 

73,253 

54,883 

15,234 

3,074 

52 

10 

Montana . 

72,560 

65,629 

39 

6,099 

155 

638 

Wisconsin . . . . 

70, 792 

9,139 

6,718 

25,617 

8,059 

21,259 

North  Dakota . 

70,294 

49,145 

25 

7,281 

2,173 

11,670 

Missouri . . . 

66,855 

51,284 

11,939 

3,461 

171 

Michigan . 

56,816 

27.;  614 

5;  353 

19,356 

3,749 

744 

14  States . 

98,405 

36, 059 

23,676 

30,311 

1,671 

6,688 

Section  9.  Seasonal  variations  in  country  elevator  purchases. 

The  following  table  presents  in  cumulative  percentages  the  pro¬ 
portion  of  the  crop  of  the  five  principal  grains  marketed  in  each  , 


PURCHASE  AND  STORAGE  OF  GRAIN. 


119 


month  for  tlie  two  crop  years  1918-14  and  1916-17.  (Appendix  2, 
inquiry  14.)  The  number  of  elevators  reporting  and  the  total  vol¬ 
ume  of  their  purchases  of  each  kind  of  grain  in  each  month  will  be 
found  in  Appendix  Table  8,  together  with  the  ratio  of  the  purchases 
in  each  month  to  the  total  purchases. 

Table  29. — Monthly  distnhntion  of  country  elevator  purchases  of  five  principal 
yraiih^  in  the  Uf  principal  (jrain-produciny  States^  expressed  in  cumulative 
percentages,  crop  years  1913-14  1916-17. 


Month. 

All 

grains. 

Wheat. 

Corn. 

Oats. 

Rye. 

Barley. 

1913-14. 

July,  1913 . 

8.32 

13.31 

4.50 

6.52 

5.58 

2.60 

August,  1913 . 

20.27 

25. 34 

11.33 

24. 65 

20. 94 

11.43 

September,  1913 . 

33.34 

39.85 

19.42 

37.96 

41.13 

33.21 

October,  1913 . 

44.60 

54. 10 

24.99 

48. 28 

56.47 

52.30 

November,  1913 . 

53.86 

65.09 

33.69 

54.71 

65.88 

63.97 

December,  1913 . 

64.57 

73.21 

51.01 

62.77 

75. 19 

73.05 

January,  1914 . 

72.59 

80. 18 

62.48 

69.09 

81. 13. 

80.07 

February,  1914 . 

79.98 

85.70 

73.43 

76.05 

86.68 

86.00 

March,  1914 . 

86.11 

90. 19 

81.48 

83.04 

91.36 

91.07 

AprU,  1914 . 

89.25 

92.96 

85. 12 

86.60 

93. 64 

92. 97 

May,  1914 . 

94.70 

96. 56 

93.26 

92.91 

96.26 

95.91 

June,  1914 . 

100.00 

100.00 

100.00 

100.00 

100.00 

100.00 

1916-17. 

July, 1916 . 

8.59 

13.56 

5.73 

7.25 

3.13 

4.04 

August,  1916 . 

24.21 

30. 19 

12.53 

30. 14 

18.01 

17. 10 

September,  1916 . 

36.54 

44.68 

19. 05 

43.25 

42. 33 

39.02 

October,  1916 . . . 

47. 70 

59. 16 

23.31 

55.58 

62. 25 

57.16 

November,  1916 . 

58. 64 

69.55 

36.54 

64.04 

77.07 

72. 91 

December,  1916 . 

66.20 

74.94 

49. 39 

69.27 

84.07 

79.43 

January,  1917 . 

76.07 

82.25 

65.81 

76.69 

88. 63 

86. 10 

February,  1917 . 

81.82 

85.56 

75.28 

82.01 

91.98 

89.95 

March,  1917 . 

87. 42 

90. 12 

82.60 

87.66 

95. 10 

93.14 

April,  1917 . 

91.38 

•  93.86 

87.30 

91.62 

96.85 

95. 17 

May,  1917 . 

96.02 

97.71 

93.80 

95. 87 

98.50 

97.86 

Jime,  1917 . 

100.00 

100.00 

100.00 

100.00 

100.00 

'  100.00 

1  For  States  included,  see  Ch.  II,  sec.  5. 

From  this  table  some  fairly  definite  conclusions  with  reference  to 
the  time  distribution  of  country  marketings  can  be  drawn.  During 
the  first  six  months  of  the  crop  year  about  three-fourths  of  the  wheat 
crop  in  the  14  principal  grain-producing  States  is  marketed  and  a 
somewhat  higher  proportion  of  both  the  rye  and  barley  crops.  Due 
perhaps  in  a  considerable  degree  to  the  wide  distribution  of  the 
oats  crop,^®  the  proportion  of  this  grain  marketed  during  the  first 
six  months  of  the  crop  year  is  appreciably  below  that  of  wheat, 
barley,  or  rye,  only  62.77  per  cent  of  this  grain  in  1913-14  and  69.27 
per  cent  in  1916-17  being  marketed  in  the  six  months  from  July  to 
December. 

Corn  is  marketed  the  latest  of  any  of  the  five  principal  grain  crops. 
Less  than  one-fourth  of  the  corn  crop  in  the  14  States  tabulated  is 
marketed  during  the  first  four  months  of  the  crop  year  as  compared 
with  about  one-half  or  more  of  the  crop  of  each  of  the  other  grains. 
Moreover,  while  the  heavy  movement  of  corn  begins  usually  in  Novem¬ 
ber,  only  about  50  per  cent  of  the  crop  is  marketed  during  the  first 
six  months  of  the  crop  year  as  compared  with  about  65  per  cent  of 
the  oats  and  much  higher  proportions  of  wheat,  rye,  and  barley. 


18  The  Department  of  Agriculture  is  authority  for  the  statement  that  oats  is  the  most 
widely  distributed  agricultural  plant  of  the  country  excepting  only  the  potato. — Pinch 
and  Baker,  Geography  of  World’s  Agriculture,  p.  36. 


120 


COUNTRY  GRAIN  MARKETING. 


1 


The  difference  in  the  period  of  marketing  of  the  various  grains  is 
also  indicated  by  the  months  in  which  the  largest  proportion  of  each 
grain  is  marketed.  (Appendix  Table  8.)  Diagram  G  shows  graphi¬ 
cally  the  percentages  of  each  and  of  all  five  of  the  principal  kinds 
of  grain  combined  marketed  in  each  month  through  country  elevators 
for  each  of  the  two  crop  years  under  consideration.  The  month  of 
heaviest  marketing  of  all  grains  combined  through  country  elevators 
in  the  14  principal  grain-producing  States  is  either  August  or  Sep¬ 
tember;  of  wheat,  the  same;  of  barley  and  rye,  September;  and  of 
oats,  August.  The  largest  proportion  of  corn  marketed  in  any  one 
month,  on  the  other  hand,  is  in  either  December  or  January. 

Section  10.  Rate  of  capacity  turnover. 

Eesults  or  STUDY. — Appendix  Table  9  presents  in  detail  the  rates 
at  which  the  elevator  capacity  was  turned  over — or  the  ratio  of 
capacity  to  purchases  during  the  year — for  the  elevators  of  all  types 
reporting  both  their  capacity  and  purchases  in  the  States  of  Okla¬ 
homa,  Illinois,  Ohio,  Missouri,  Wisconsin,  Michigan,  Montana,  and 
North  Dakota  during  the  crop  years  191^13  to  1916-17.  The  fig¬ 
ures  were  obtained  by  taking  a  simple  average  of  the  average  rates 
of  capacity  turnover  for  the  individual  elevators  as  found  by  divid¬ 
ing  the  average  yearly  purchases  of  each  elevator  by  its  capacit}^ 
(Appendix  2,  inquiries  11  and  14.) 

The  average  rate  of  capacity  turnover  for  all  the  2,229  elevators 
reporting  is  3.94.  The  lowest  rate  is  shown  by  those  elevators  han¬ 
dling  combinations  of  the  four  principal  grains  other  than  corn, 
the  next  higher  by  elevators  handling  one  of  the  five  grains  exclu¬ 
sively,  and  the  highest  by  those  elevators  handling  corn  in  combina¬ 
tion  with  one  or  more  of  the  other  four  grains.  These  rates  of  turn¬ 
over  by  grains  handled  exclusively  and  in  various  combinations  are 
as  follows: 


1 

I 


Table  30. — Ratio  of  elevator  capacity  to  average  purchases  (capacity  turnover) 

in  eight  States.^ 


Handling — 


Capacity 

turnover. 


Oats  exclusively. . . 
Wheat  exclusively 
Com  exclusively... 
Rye  exclusively . . . 
Barley  exclusively, 


4.30 
4.0(7 

3.30 
2.60 
2.50 


Average 


3.92 


2  grains,  excluding  com. 

3  grains,  excluding  com 

4  grains,  excluding  com 


3.46 

2.74 

2.64 


Average 


2.* 


Com  and  1  other  grain. 
Com  and  4  other  grains 
Com  and  2  other  grains. 
Corn  and  3  other  grains 


5.54 
5.20 
5. 18 


Average 


5.34 


Average,  all  groups 


3.94 


^  Oklahoma,  Illinois,  Ohio,  Missouri,  Wisconsin,  Michigan,  Montana,  and  North  Dakota 
These  States  were  selected  at  random. 


99G4°- 


Pei'Csnf 


PerCetif 


Diagram  G.  Proportions  of  wheat,  corn,  oats,  rye,  and  barley  marketed  through  country  elevators  in  each 

month  during  the  crop  years  1913-14  and  1916-17. 

99G4° — 20.  (To  face  page  120.) 


PURCHASE  AND  STORAGE  OF  GRAIN. 


121 


Explanation  of  variations. — The  explanation  of  the  foregoing 
differences  in  the  average  rate  of  turnover  of  capacity  according  to 
the  number  and  combination  of  grains  handled  is  found  in  a  variety 
of  considerations.  The  first  one  is  suggested  by  the  grains  and  their 
combinations  within  each  group,  together  with  the  harvesting  period 
of  each  grain  and  the  necessity  the  elevator  is  under  of  having  a  suf¬ 
ficient  number  of  bins  to  permit  the  separation  of  the  different  grains. 
The  bulk  of  the  wheat,  oats,  barley,  and  rye  crops  is  marketed  at 
about  the  same  time.  (Sec.  9.)  On  the  other  hand,  the  bulk  of  the 
corn  crop  is  harvested  and  marketed  at  a  considerably  later  date 
than  that  of  any  one  of  the  other  four  grains.  During  July,  August, 
September,  and  October  the  elevators  have  absorbed  more  than  half 
of  the  wheat,  oats,  rye,  and  barley  marketed  through  country  eleva¬ 
tors.  During  the  latter  part  of  November  the  marketing  of  the  new 
corn  crop  begins,  and  when  this  starts,  the  capacity  of  the  elevator  in 
the  corn  States  will  in  many  cases  be  devoted  very  largely  to  the 
handling  of  this  grain.  Consequently,  it  is  to  be  expected  that  the  ele¬ 
vator  which  handles  corn  and  one  or  more  of  the  other  grains  to  an 
appreciable  degree  can  have  a  higher  average  rate  of  utilization  than 
an  elevator  which  handles  no  corn  whatsoever.  Other  things  being 
equal,  if  no  corn  is  handled,  the  elevator  would  probably  be  in  opera¬ 
tion  a  smaller  portion  of  the  year  than  if  it  handles  corn  in  combina¬ 
tion  with  other  grains.  In  the  latter  event  it  would  logically  be  com¬ 
pelled  to  remain  open  for  a  considerably  greater  number  of  months 
than  in  the  former,  merely  in  order  to  receive  the  grain  which  is 
offered.  The  capacity,  therefore,  tends  to  be  utilized  a  greater  num¬ 
ber  of  times  when  corn  is"  handled,  because  the  house  will  be  able  to 
handle  a  greater  volume  of' grain  owing  to  a  longer  period  during 
which  grain  will  be  offered  in  large  quantities.  This  explanation  of 
the  high  rate  of  utilization  of  elevators  handling  corn  together  with 
other  grains  seems  to  be  substantiated  by  the  figures  of  reported  pur¬ 
chases  for  the  various  States.  These  figures  appear  to  indicate  that 
the  elevators  in  the  large  corn  States  tend  to  have  a  somewhat  more 
even  distribution  of  purchases  throughout  the  year  than  those  in 
States  where  the  corn  crop  is  smaller  and  where  little  of  it  is  handled 

through  the  elevators.  .  tit  •  i 

More  specifically,  this  may  be  shown  by  contrasting  Illinois  and 

Ohio,  States  reporting  a  relatively  large  proportion  of  elevators  han¬ 
dling  corn  in  combination,  with  Montana  and  North  Dakota,  which 
States  have  scarcely  any  elevators  handling  com,  but  have  large 
proportions  of  elevators  handling  wheat. 


122 


COUNTRY  GRAIN  MARKETING. 


Table  31. — Monthly  distribution  of  total  grain  purchases  in  specified  States  in 

the  crop  years  1913-U  and  1916-17. 


Illinois. 

Ohio. 

Montana. 

North  Dakota. 

Month  and  year. 

Per  cent 
of  total 
pur¬ 
chases. 

Cumu¬ 
lative 
per  eent. 

Per  cent 
of  total 
pur¬ 
chases. 

Cumu¬ 
lative 
per  cent. 

Per  cent 
of  total 
pur¬ 
chases. 

Cumu¬ 
lative 
per  cent. 

Per  eent 
of  total 
pur¬ 
chases. 

Cumu¬ 

lative 

percent. 

1913. 

July . 

11.19 

11.19 

10.53 

10.53 

1.30 

1.30 

2,61 

2.61 

August . 

14.62 

25.81 

16.69 

27.22 

10.62 

11.92 

6.97 

9.58 

September . 

11.01 

36.82 

6.86 

34.08 

26.46 

38.38 

26.44 

36.02 

October . 

6.67 

43.49 

5.99 

40.07 

21.12 

59.50 

22.78 

58.80 

November . 

5.56 

49.05 

7.23 

47.30 

17.45 

76.95 

16.89 

75.69 

December . 

7.56 

56.61 

8.51 

55.81 

10.69 

87.64 

8.03 

83.72 

*  1914. 

January . 

7.70 

64.31 

8.38 

64.19 

3.41 

91.05 

3.60 

87. 32 

February . 

9.36 

73.67 

8.58 

72.77 

1.72 

92.77 

2.94 

90.26 

March . 

5.80 

79.47 

8.91 

81.68 

1.87 

94.64 

2.78 

93.04 

April . 

3.94 

83.41 

4.86 

86.54 

1.25 

95.89 

1.57 

94.61 

May . 

8.57 

91.98 

6.63 

93.17 

1.69 

97.58 

2.05 

96.66 

June . 

8.02 

100.00 

6.84 

100.00 

2.42 

100.00 

3.34 

100.00 

1316. 

July . 

11.05 

11.05 

9.67 

9.67 

3.08 

3.08 

8.69 

8.69 

August . 

19.19 

30. 24 

18.61 

28.28 

5.62 

8.70 

9.98 

18.67 

September . 

9.26 

39.50 

8.15 

36.43 

18.47 

27.17 

21.14 

39.81 

October . 

6.35 

45.85 

8.62 

45.05 

18.84 

46.01 

16.43 

56.24 

November . 

8.53 

54.38 

8.87 

53.92 

17.02 

63.03 

13.67 

69. 91 

December . 

6.80 

61.18 

6.55 

60.47 

8.96 

71.99 

5.32 

75.23 

1917. 

January . 

11.00 

72.18 

12.38 

72.85 

8.41 

80.40 

4.66 

79.89 

February . 

6.73 

78.91 

6.94 

79. 79 

4.52 

84.92 

3.32 

83. 21 

March . 

5.92 

84.83 

7.44 

87.23 

5.73 

90.65 

4.90 

88.11 

April . 

4.78 

89.60 

5.05 

92.28 

3.40 

94.05 

3.93 

92.04 

May . 

5.64 

95.24 

4.55 

96. 83 

2.52 

96.57 

4.45 

96. 49 

June . 

4.76 

100.00 

3. 16 

100.00 

3.42 

100.00 

3.50 

100.00 

Elevators  handling  1  grain . 

Elevators  handling  2  or  more  grains,  excluding  com! ! ! ! 
Elevators  handling  corn  in  combination . . 


Total  reporting. 


Illinois. 

Ohio. 

Montana. 

North 

Dakota. 

24 

23 

60 

5 

6 

22 

117 

740 

486 

171 

1 

21 

516 

216 

178 

766 

An  examination  of  this  table  reveals  the  fact  that  in  Ohio  and 
Illinois  from  55  to  60  per  cent  of  the  grain  is  marketed  during  the 
first  six  months  of  the  crop  year  and  from  40  to  45  per  cent  during  the 
last  six  months.  In  Montana  and  North  Dakota,  on  the  other  hand, 
from  about  70  to  85  per  cent  of  the  crop  is  marketed  during  the 
first  six  months,  and  only  about  15  to  30  per  cent  during  the  last  six 
months.  Ohio  and  Illinois  also  show  a  considerably  more  even  dis¬ 
tribution  of  purchases  from  month  to  month  throughout  the  year 
than  do  Montana  and  North  Dakota. 

As  between  those  elevators  handling  corn  in  combination  on  the 
one  hand  and  those  handling  one  grain  exclusively,  or  the  various 
grains  other  than  corn  in  combination,  on  the  other,  therefore  the 
sharp  contrast  in  the  number  of  times  the  capacity  is  utilized  may  be 
assigned  chiefly  to  the  foregoing  facts.  The  higher  average  number 
of  times  capacity  is  utilized  in  the  case  of  elevators  handling  one 
grain  exclusively  as  compared  with  those  handling  two  or  more 


!>,  i  V‘V( 


123 


f 

PURCHASE  AND  STORAGE  OF  GRAIN. 


1 

,  ^ 

I 


ip' 


.?■ 

^*v 

ip 


other  than  corn  is  presumably  due  to  the  lack  of  necessity  of  effecting 
a  separation  of  as  many  different  kinds  and  grades  of  grain  in  tlie 
case  of  the  former  class  with  the  result  that  tlie  bins  are,  on  the 
average,  kept  better  filled. 

The  lowest  rate  of  utilization,  as  already  stated,  is  found  in  the  case 
of  those  elevators  which  handle  two,  or  three,  or  four  grains  other 
than  corn.  These  grains,  that  is,  wheat,  oats,  rye,  and  barley  must  be 
handled  at  practically  the  same  time.  (Sec.  9.)  On  account  of  this 
fact  larger  facilities  must  be  provided  than  if  only  one  grain  is 
handled  or  if  the  particular  combination  included  corn  (which  moves 
largely  after  the  bulk  of  the  other  grains).  All  the  grains  must  be 
separated  both  by  kind  and  by  certain  grades.  The  larger  the  number 
of  kinds  and  grades  handled  and  the  more  the  bulk  of  the  business  is 
concentrated  within  a  brief  period  of  time,  the  larger  will  be  the 
capacity  and  the  number  of  bins  theoretically  required  to  handle  the 
same.  For  example,  if  an  elevator  handles  four  kinds  of  grain  the  bulk 
of  which  moves  at  about  the  same  time,  it  must  provide  bins  for  the  dif¬ 
ferent  kinds  of  grain  and  certain  grades  of  each.  If  the  four  grains  in¬ 
clude  corn,  which  moves  later  than  any  of  the  others,  it  is  either  not 
necessary  for  the  elevator  to  have  as  many  bins  or  as  large  a  capacity  to 
handle  a  given  volume  of  grain  or  else  a  given  number  of  bins  and 
capacity  will  enable  the  elevator  to  handle  a  larger  volume.  As  bear¬ 
ing  on  this  point,  it  is  interesting  to  note  that  one  elevator  in  the 
Northwest,  for  example,  reported  that  20  per  cent  of  its  capacity  was 
practically  dead  space  owing  to  the  necessity  of  keeping  grains  and 
grades  separated.  Moreover,  in  the  case  of  elevators  handling  two, 
three,  and  four  grains,  excluding  corn,  the  rate  of  capacity  turnover 
varies  inversely  as  the  number  of  grains  handled,  the  highest,  3.46, 
being  shown  by  elevators  handling  two  grains.  (Table  30.)  This 
rate  is  considerably  lower  than  the  rate  of  elevators  handling  wheat 

exclusively  (4.07).  .  ,  .  i  . 

The  rates  for  elevators  handling  one  gram  exclusively  except 

wheat  are  based  upon  so  few  elevators  (cf.  Appendix  Table  9)  that 
the  results  are  probably  not  reliable,  and  comparisons  with  houses 
liandling  two  or  more  grains,  excluding  corn,  are  of  no  value. 

State  variations  in  turnover. — The  theory  of  the  dependency  ot 
capacity  turnover  figures  upon  the  kinds  and  combinations  of  grain 
handled,  as  just  set  out,  is  also  confirmed  in  a  considerable  meapre 
by  the  figures  of  the  rate  of  capacity  turnover  for  each  of  the  eight 
States  tabulated  in  comparison  with  the  number  of  elevators  in  those 
States  handling  different  combinations  of  grains.  (Appendix  fa¬ 
ble  9.)  A  summary  of  these  figures  is  presented  in  the  following 

table ; 


'C. 


124 


COUNTRY  GRAIN  MARKETING. 


Table  32. — Capacity  turnover  in  specified  States  in  comparison  with  the  propor¬ 
tions  of  elevators  handling  specified  grains  and  combinations  of  grains. 


Rate  of 

Percentage  of  elevators  reporting. 

state. 

capacity 

turnover 

(capacity 

into 

purchases). 

Handling 
corn  and 
other 
grains. 

Handling 
one  grain 
exclusively. 

Handling 
combina¬ 
tions  of 
grain  other 
than  corn. 

Oklahoma . 

5.72 

56. 31 

36.89 

6.80 

IlUnois . 

5.67 

94. 19 

4. 65 

1. 16 

Ohio . 

4. 87 

79. 17 

10.  65 
27. 48 

10. 19 
8.40 

Missouri . 

4.35 

64. 12 

Wisconsin . '. . . 

3.  67 

27. 45 
35. 54 

11. 11 

61.44 

59.04 

65.73 

96.61 

Michigan . 

3. 60 

5. 42 

Montana . 

2. 85 

.56 

33.  71 

North  Dakota . 

2. 57 

2.  74 

.65 

2,229  elevators . 

3.94 

41.36 

9.51 

49. 13 

From  this  table  it  is  apparent  that  among  the  eight  States  tabu¬ 
lated  the  rate  of  capacity  turnover  tends  to  vary  directly  with  the 
proportion  of  elevators  handling  combinations  of  corn  with  other 
grains  and  inversely  with  the  proportion  handling  combinations  of  the 
other  grains  than  corn. 

Capacity  turnover  by  capacity  of  house. — Appendix  Table  10 
presents  for  each  of  the  seven  States  tabulated  the  rate  at  which  the 
capacity  of  houses  of  different  sizes  is  turned.  The  following  table 
presents  a  summary  of  the  results  for  all  the  States  combined ; 


Table  33. — Rate  of  capacity  turnover  {capacity  into  purchases)  of  houses  of 

specified  capacities  in  seven  States.^ 


Capacity  (bushels). 


Less  than  5,000. 
5, 000  to  9, 999... 
10,000  to  14,999. 
15,000  to  19,999. 
20,000  to  24,999. 
25,000  to  29,999. 
30,000  to  34,999. 
35,000  tc  39,999. 
40,000  to  44,999. 
45,000  to  49,999. 
50,000  to  54,999. 
55,000  to  59,999. 
60,000  and  over. 

Total . 


Elevators 

reporting. 

Rate  of 
capacity 
turnover. 

56 

6.60 

202 

5.77 

274 

5.11 

212 

4.71 

308 

3.44 

265 

3. 19 

277 

2.98 

149 

2.87 

123 

3.32 

38 

3. 11 

77 

2.84 

13 

2.35 

115 

2.63 

2,109 

3.87 

'  Oklahoma,  Illinois,  Ohio,  Wisconsin,  Michigan,  Montana,  and  North  Dakota. 
*  Capacity  into  average  purchases. 


This  table  shows  that  the  average  rate  of  capacity  turnover  tends 
to  decrease  as  the  capacity  of  the  elevator  increases.  In  other  words, 
the  elevators  of  small  capacity  have  the  highest  rates  of  utilization, 
while  those  of  large  capacity  have  the  lowest. 


/ 


ClIAlTER  VI. 

THE  SALE  AND  SHIPMENT  OF  GRAIN. 


.  J 


dd  i  c 


Section  1.  Handling  country  elevator  shipments. 

Time  of  sale. — There  are  some  indications  of  consid^able  diifer- 
ences  between  the  Northwest  and  the  remainder  of  the  14  principal 
grain-producing  States  in  the  length  of  time  elapsing  between  the 
time  of  purchase  of  ^rain  by  the  country  elevator  and  the  time  of  its* 
sale  (Ch.  V,  sec.  4).  ITliis  is  probably  partly  due  to  the  prevalence  of 
hedging  in  the  former  area  and  its  relative  disuse  in  the  latter.  (Ch/ 
IX.)  In  the  case  of  elevators  which  have  hedged  their  purchases  • 
there  is  little  advantage  in  holding  the  grain  in  store  (except  in  the 
event  of  a  possible  premium),  and  such  elevators  probably  tend  to 
ship  out  the  grain  more  rapidly  than  houses  in  areas  where  hedging 
is  less  employed,  since  by  so  doing  the  amount  of  money  invested  in 
the  grain  is  reduced  and  also  interest  on  borrowed  capital,  insurance, 
charges,  .etc.l» — — — -- — -  ^ 

^RUERiNGjCARS. — Some  time  prior  to  shipping,  the'^ent  orders  a 
car  of  the  Required  capacity  from  the  local  railroad  agent.  Such  an 
order  requires  some  care  and  attention.  If,  for  example,  it  is  for  a 
G0,000-pound  capacity  car  and  the  railroad  furnishes  an  80,000-pound 
capacity  car,  fhe  elevator  agent  need  load  the  car  only  to  the  mini¬ 
mum  capacity  of  the  60,000-pound  car  ordered;  whereas,  if  the  order 
is  for  an  80-000-pound  capacity  car  the  agent  is  obliged  either  to 
load  it  to  at  least  the  iminimum  capacity  of  the  larger  car  or  pay , 
freight  on  the  difference  between  the  weight  of  the  car’s  contents 
and  that  minimum  capacity./  The  reason  for  this  rule  is  that  in  the 
first  instance  the  car  is  furnished  not  in  accordance  with  the  order 
but  at  the  railroad’s  convenience.  •"  A  notation  to  the  latter  effect  is 
ade  on  the  bill  of  lading  in  such  cases. 

A  common  occurrence  at  country  points  equipped  with  a  nuinber 
()f  elevators  are  disputes  over  the  distribution  of  cars  to  the  various 
elevators.  State  and  Federal  laws  and  regulations  now  govern  such 
distribution,  and  these  laws  have  diminished  g»e#fcy  the  discrimina¬ 
tion  in  allotment  formerly  prevailing,  although  occasional  cases  of 
unfair  distribution  occur  to-day.  The  laws  of  Minnesota  may  be 
taken  as  typical  of  such  regulations. 

*  *  *  Such  ears  as  the  company  can  furnish  shall  be  divided  among  the 

applicants  equally  until  each  shipper  has  received  at  least  one  car,  after  which 
the  balance  shall  be  divided  ratably  in  proportion  to  the  amount  of  daily  re¬ 
ceipts  of  grain  or  other  freight  to  each  shipper  or  to  the  total  amount  of  grain 
offered  at  such  station  or  sidetrack.* 


iecfion  '{lie  following  statement,  quoted  from  the  interview  with  a  Minne- 


1  In  this  c? 

apolis  line  elevator  operator  is  of  interest : 

“  In  the  nonhedging  States  the  grain  business  is  done  more  on  a  merchandising  basis. 
The  elevators  fill  themselves  up  in  the  fall  on  the  theory  that  before  spring  they  will 
be  able  to  sell  out  and  make  a  profit.  In  the  Northwest  a  different  basis  is  used,  the 
theory  here  being  that  the  future  shoiPd  bo  sold  as  soon  as  the  grain  is  received  and  the 
grain* shipped  out  as  early  as  possible.”  _  .  ,  j. 

2  Laws  relating  to  the  Railroad  and  Warehouse  Commission,  including  general  pro¬ 
visions  governing  railroads  and  common  carriers.  (Sec.  4364,  pp.  52—53.) 


S'- 


125 


126  -  .-GOUOTRY  GRAIN  MARKETING. 

When  cars  are  scarce  and  frequent  requests  to  the  local  railroad 
agent  are  without  results,  the  elevator  agents  usually  send  word  of 
their  difficulty  to  the  terminal  markets.  The  line  company  agents 
report  the  facts  to  their  head  offices ;  the  cooperative  and  independent 
agents,  to  the  commission  firms  handling  their  business.  The  line 
companies  and  the  commission  firms  then  communicate  with  the  rail¬ 
road  companies  and  endeavor  to  secure  relief. 

When  the  empty  car  which  has  been  ordered  is  “  spotted  ”  at  the 
elevator,  the  elevator  agent  inspects  it  carefully  for  leaks  and  weak 
spots.  Often  it  may  be  necessary  to  clean  the  car.  While  the  rail¬ 
roads  are  required  to  furnish  cars  both  clean  and  in  good  condition, 
these  requirements  are  not  always  lived  up  to.  In  fact,  it  is  seldom 
that  the  elevator  agent  is  not  compelled  to  do  some  coopering  or 
cleaning.  ^ 

Weighing  out. — In  addition  to  the  wagon  scale  used  for  receiving 
grain,  many'cduntry  elevators  are  equipped  with  shipping  or  loading- 
out  scales.  These  scales  are  of  the  hopper  variety ;  and  if  automatic, ' 
..are  placed  above  the  shipping  bin.  If  the  scale  is  not  automatic,  it 
^  may  be  placed  on  the  work  floor,  where  the  elevator  operator  will  be 
able  to  operate  it  as  well  as  to  attend  to  his  other  duties.  The  ship¬ 
ping  scales  as  found  in  country  elevators  are  practically  never  of 
carload  capacity,  and  in  consequence  it  is  impossible  to  weigh  a  car¬ 
load  at  a  time.  ^Instead  the  grain  is  spouted  into  the  scales  in  lots 
or  drafts  small  enough  to  be  within  the  scale  capacity. 

In  using  a  nonautomatic  hopper  scale  the  agent  allows  the  grain  to 
flow  into  the  scale  until  it  is  full,  cuts  off  the  flow,  weighs  the  drafts 
and  notes  the  quantity  on  a  weight  slip.  The  scale  is  then  dumped, ' 
the  grain  falling  into  the  pit  at  the  bottom  of  the  elevator,  from 
which  it  is  elevated  by  the  elevating  leg  and  spouted  into  the  ship¬ 
ping  bin,  which,  fts: pfevk)tmly-«tate4,  is  usually  placed  above  the 
elevator  work  floor  on  the  track  side  of  the  elevator.  This  operation 
is  repeated  until  the  total  quantity  to  be  shipped  has  been  weighed 
and  elevated  to  the  shipping  bin. 

The  automatic  scales  are  so  constructed  that  they  regulate  the  flow 
of  grain  into  the  scale  and  register  the  weight  of  each  draft.  The 
grain  flows  into  the  hopper  until  it  is  full,  and  when  the  flow  is  cut 
off  the  scale  weighs  the  load,  registers  the  quantity,  and  dumps  itself. 
This  process  is  repeated  until  the  quantity  to  be  shipped  has  been 
weighed. 

/  The  weighing  out  of  grain  is  most  important,  since  it  is  the  ele¬ 
vator’s  main  basis  for  claims  for  shortages  which  often  arise  on  ac¬ 
count  of  losses  in  transit.^  Where  possible,  therefore,  yelevator  agents 
endeavor  to  weigh  each  car  of  grain.  They  are  not  always  able  to  do 
so,  because  (1)  not  all  country  elevators  are  equipped  with  loading- 
out  scales,  (2)  the  agent  is  too  busy,  and  (3)  elevators  at  times  be¬ 
come  so  blocked  with  grain  that  it  is  impossible  to  get  the  grain  which 
it  is  desired  to  ship  to  the  scale.  When  for  one  reason  or  another  the 
grain  can  not  be  weighed,  its  flow  into  the  car  is  from  the  bin  in 
which  it  has  been  stored  to  the  pit ;  from  there  to  the  shipping  bin  and 
thence  into  the  car.  Here  the  depth  of  the  load  is  measured  after  it 
has  been  leveled  off  and  the  number  of  bushels  is  computed  from  this 
depth  measurement  and  the  inside  measurements  of  the  car. 

Loading  OUT. — After  the  grain  has  been  weighed  and  transferred  to 
-  the"  shipping  bin  and  the  car  has  been  cleaned  and  coopered  and 


9 


SALE  AND  SHIPMENT  OF  GRAIN. 


127 


the  grain  doors  put  in  place,  the  agent  takes  his  position  on  a  plat¬ 
form  beside  the  car  door  and  at  the  lower  end  of  the  elevator  loading 
spout.  Ihis  spout  is  usually  a  flexible  metal  tube  so  constructed  that 
it  can  be  directed  into  any  paH  of  the  car.  Setting  the  spout,  the 
agent  pulls  a  chain,  or  rope,  hanging  beside  it.  This  chain,  or  rope,  is 
connected  with  the  gate  at  the  bottom  of  the  shipping  bin,  and  pulling 
the  rope  opens  the  gate  and  allows  the  grain  to  fall  through  the  spout 
into  the  car.  The  agent  directs  this  stream  of  grain  to  various  sec¬ 
tions  of  the  car  in  order  to  secure  an  even  distribution  of  the  load 
and  when  the  shipping  bin  is  empty  levels  off  the  grain.  If  no  weigh¬ 
ing  has  been  done  he  also,  as  stated,  measures  the  depth  of  the  grain 
in  order  to  compute  the  weight  of  the  contents  of  the  car. 

Some  line  elevator  companies  require  their  agents  to  fill  out  and 
tack  on  the  doors  of  the  freight  car  a  notice  oimilni’ 

Tliii^Btne  givesr^^tatement  of  the  condition  of  the  car,  together 
with  the  weight  of  its  contents.  The  grade  of  grain  is  not  given, 
but  merely  the  kind  of  grain,  as 


This  slip  constitutes  a  notification  to  the  weighmaster  and  inspectors 
at  the  terminal  markets  of 'the  car’s  condition  and  facilitates  the 
making  of  reports  of  any  discrepancy  in  weights. 

Samples  of  each  shipment  are  obtained  by  the  ^ent  either  at  the 
scale  or  from  the  stream  as  it  leaves  the  spout.  These  samples  are 
then  mixed,  graded,  and  the  amount  of  dockage  determined. 

:r.nF.a  or  set- ttt — Occasionally  unscrupulous  country  ship¬ 
pers  attempt  to  defraud  grain  buyers  through  the  practice  of  plug¬ 
ging  ”  or  “  setting  up  ”  cars  of  grain,  i.  e.,  deliberately  distributing 
dirt,  screenings,  or  very  poor  grain  in  a  car  of  good  grain,  not 
throughout  the  load  but  in  such  a  manner  as  to  avoid  its  detection 
if  possible  and  create  the.  impression  that  the  entire  car  is  filled  with 
good  grain.  One  of  the  methods  usually  followed  is  to  sprinkle  a 
thin  layer  of  foreign  matter  over  the  floor  of  the  box  car  and  then 
fill  the  car  with  good  grain.  ^^Another  is  to  place  the  foreign  matter 
in  an  end,  corner,  or  along  the  side  of  the  car,  with  the  hope  that  it 
Avill  escape  the  probe  of  the  sampler  at  the  terminal  market. 

Such  practices  are  usually  heavily  penalized  by  all  the  various 
grain-inspection  departments,  whether  under  governmental  juris¬ 
diction  or  that  of  boards  of  trade  and  chambers  of  commerce.  Thus 
the  rules  of  the  Minnesota  Kailroad  and  Warehouse  Commission  pro¬ 
vide  that  “All  cars  found  to  be  ‘  set-up  ’  or  ‘  plugged  ’  shall  be  graded 
‘  no  grade.’  ”  ^ 

The  general  penalization  of  this  practice  tends  to  discourage  it  to 
considerable  degree.  T 

'  ^DviCE  or  SHIPMENT.— ^When  the  loading  of  the  car  has  been  com- 
^Ieted“,ThiriTiir'bf  ladiTig  and  a  notice  or  advice  of  shipment  is  pre- 
^^ared.  The  bill  of  lading  is  sometimes  made  out  by  the  railroad 
'^gent,  although  this  should,  "ftp- a  matt(H*-of  be  done  by  the  ele¬ 
vator  agent.'^Usually  these  bills  of  lading  are  order  bills  and  are 
negotiable  upon  indorsement.  •A-V  - 
The  most  elaborate  notices  or  advices  of  shipment  are  those  used 
by  the  liny  elevator  companies.  (See  Appendix  5.)  Elevators  other 
than  the  line  companies  do  not,  as  a  rule,  use  elaborate  shipping 
notices.  In  many  cases  the  notice  of  shipment  may  be  simply  in  the 


I 


*  Of.  Tv\’enty-nintli  Annual  Report,  Chief  Inspector  of  Grain  to  the  Railroad  and  Ware¬ 
house  Commission  of  Minnesota,  Aug.  31,  1914,  p.  17. 


128 


COUNTRY  GRAIN  MARKETING. 


form  of  R  letter  of  advice  written  by  the  agent  ^  and  in  still  other 
cases  the  bill  of  lading  constitutes  the  only  notice.  In  those  cases  _ 
where  the  elevator  company  draws  on  the  consignee  in  advance  on  | 
account  of  the  shipment,  the  draft  is  attached  to  the  bill  of  lading  | 
and  deposited  in  the  local  bank  instead  of  being  sent  direct  to  the  com¬ 
mission  company. 

After  the  necessary  documents  have  been  prepared  the  car  of  gram 
is  picked  up  by  the  railroad  company  and  hauled  to  the  terminal 
arket  or  other  destination.  ' 

> Section  Agents’  reports. 

line  agents. — Line  elevator  agents  are  usually  re¬ 
quired  to  make  up  a  detailed  daily  report  of  business  transacted,  and 
these  reports  are  mailed  each  day  to  the  head  office  of  the  company, 
where  they  are  carefully  checked.  Sometimes  a  daily  load  report 
(Appendix  6)  is  required  of  the  agent  and  daily  reports  of  receipts  , 
are  practically  always  made  up  and  sent  to  the  head  office, 
x/  The  load  report  sets  out  the  number  of  loads  of  grain  received  not 
only  by  the  reporting  elevator  but  also  by  each  competitor.  Weather 
and  road  conditipns  are  also  noted,  and  should  farmers  or  “  scoopers  ” 
be  shipping  grain,  this  fact  is  so  recorded  in  the  space  provided.  By 
reference  to  these  slips  the  company  is  able  to  keep  a  fairly  close 
check  upon  the  amount  of  business  being  done  at  the  station  and  also 
whether  their  agent  is  proving  himself  able  to  meet  existing  com¬ 
petition  and  procure  a  proper  proportion  of  the  business.  (Ch.  XI, 

Line  ^mpanies  usuall3r”pra^de  two  blanks  for  reporting  daily 
receipts,  one  for  wheat,  including  durum,  and  one  for  coarse  grains. 

These  forms  are  similar  to  Appendix  T. 

When  theTine  company  ships  grain  from' the  house,  the  shipment, 
as  stated  in  the  preceding  section,  is  reported  to  the  head  office  on  the  j 
form  known  as  Report  of  Shipment.  (Appendix  5.) 

Companies  issuing  storage  tickets  instead  of  scale  tickets  in  buying^ 
grain  (Ch.  A,  sec.  3)  usually  require  their  agents  to  return  on  the" 
daily  shipping  report  all  local  sales  of  grain  for  feed  or  seed,  etc., 
either  to  farmers  or  others.  Thus  the  Monarch  Llevator  Co.  requires 
that  all  gram  going  out  of  the  house,  whether  shipped  or  sold  locally,! 
must  be  reported  on  this  blank.  '^This  is  done  for  the  purpose  of  clear¬ 
ing  the  agents’  storage  ticket  account. 

The  reports  required  by  line  companies  of  their  agents  vary  some¬ 
what  with  each  company.  The  general  character  and  tenor  of  these 
reports,  however,,  is  much  the  same.  In  some  cases  agents  of  line 
companies  are  required  to  make  periodical  reports  to  their  traveling 
superintendents  in  addition  to  those  made  to  the  head  office.  These 
reports,  usually  rendered  weekly,  give  a  summary  statement  of  the 
Tveek’s  business. 

^  At  the  end  of  every  month  the  line  agents  are  required  to  submit 
to  the  head  ’offices  their  expense  accounts  showing,  among  other 

things,  the  various  bills  paid  b}^  them.  j.  •  j*  •  j  i  i 

Reports  of  elevators  other  than  line. — Agents  of  individual  ele¬ 
vators.  whether  cooperative,  independent,  or  mill-owned,  do  not  as  a 
rule  keep  extensive  records  and  reports  of  transactions  such  as  are 
made  up  by  the  line  elevator  agents.  '^Since  such  elevators  are  a  unit 
in  themselves,  there  is  no  home  office  to  report  to  nor  is  the  manage- 


SALE  AND  SHIPMENT  OF  GRAIN. 


129 


ment  of  the  average  individual  elevator  usually  given  to  keeping 
complete  and  accurate  records  and  reports.  Line  companies  usually 
record  in  minute  detail  every  step  of  the  various  operations.  The 
other  types  of  elevators  as  a  rule  keep  as  few  records  as  possible,  and 
at  times  these  are  exceedingly  poorly  kept.  The  situation  in  this 
respect  is  improving,  however  (Ch.  X,  sec,  4). 

In  a  number  of  cases,  however,  country  elevators  other  than  line 
houses  are  obliged  to  submit  to  commission  houses  detailed  daily  re¬ 
ports  similar  to  those  required  of  line  company  agents.  When,  as  is 
frequently  the  case  in  the  Northwest,  the  elevator  is  financed  by  a 
commission  company,  the  latter  organization  in  many  cases  requires 
such  reports  as  a  measure  of  protection  to  itself,  and  in  such  instances 
records  and  reports  comparable  with  those  of  line  agents  may  be 


X,  sec.  4.) 


Destinations  _of  country  elevator  and  warehouse  shipments. 

Trri‘.T*r-Mav»Mi?N«. — Of  1,541,391  cars  of  grain  reported  by  country 
elevators  and  warehouses  as  shipped  during  the  five  crops  years — 
191^13  to  1916-17  (Appendix  2,  inquiry  6) — about  70  per  cent  went  ^ 
to  cities  w'hich  received  5,000  or  more  cars  during  this  period,  or  an 
average  of  more  than  1,000  cars  a  year.  These  cities  were  arbitrarilv 
classed  as  terminal  markets  as  distinct  from  other  geographic  points 
receiving  less  than  5,000  cars  during  the  period  and  from  various 
TOmmercial  factors  to  which  shipments  were  also  reported^ 

■wiiig^taMeiTOesen'ts  the  numbei^  "rrf-><iQTs  shipped  to  eac5^^<rr  the 
23  niarkets  to  whmk^gountry  elevators  and  w^^houses  repoffed  ship¬ 
ment  of  5,000  or  mo?&''«^^  during  the  five  orop  y^afsT  1912-13  to 
1916417.  together  with  the*'>«cc^tages  of  tol^J'^ipments  to  all 


destinations : 

Table134. — 'Number  of  oars  shipped  to  speci^hdmarket^eceivmg  more  thm. 
5,00\  cars  and  jyroportion  of  total  slupme)jfts\^orted  country  elevators 


and  warehmises,  crop  years  1912-13  to  IJ 


Markets. 


Louisville,  Ky, 
Gralvestoii,  Tex 


Nixmber 
of  cars 
reported. 


Per  ce 
oftdtal 
sl^ipineiits 
reported. 


Markets. 


Number 
of  cars 
sported. 


Per  cent 
of  total 
shipments 
reported. 


Portland,  Oreg . 

Geveland,  Omo . 


5,053 

5,473 

5,530 

6,006 

6,055 

6,293 


Philadelpihia,  Pa. . . 

Baltimore,  Md . . 

Seattle,  Wash .  6:496 

Cairo,  Ill .  6,634 

New  Orleans,  La 
Detroit,  Mich.^. 

Wichita,  Kans. 

Toledo,  Ohio. ... 

Cincinnati,  Ohio 


7,677 

8.070 


8J12 


Buffalo,  N.  Y.... 
Indianapolis,  Ind. 
Peoria,  Ill.... 

St.  Louis,  Mo. 
Milwaukee,  Wis. 
Omaha,  Nebr. 
Kansas  City,  Mo. 
Duluth,  Minn. 
Chicago,  Ill.... 
Mtnneapohs,  Minn. 


16,991 
‘■,026 
,576 
12X174 
\S,5 

81^ 

85, 

262, 03^ 
308,691 


1.10 

1.56 
1.79 
2.74 
3.64 

4.56 
5.29 
5.54 

17.00 

20.03 


117087 

12,091 


Total. 


1,070,027 


69.42 


Ht  appcariGr^hafaalighttlTjiess  than  70  per  cent  of  the 


total  reported  shipments  went  to  terminal  markets.  Another  and 
smaller  proportion  (7.08  per  cent)  of  the  total  shipments  went  to 
various  geographic  points  receiving  less  than  5,000  cars.  The  bal¬ 
ance,  or  about  23^  per  cent,  was  sold  to  mills,  feeders,  interior  brokers, 
maltsters,  retailers,  etc.  The  following  table  presents  the  numbers 
and  propoilions  of  cars  , moving  to  various  destinations  from  all 
reporting  country  elevators  and  warehouses; 


9064°— 20 — ^9 


130 


COUNTRY  GRAIN  MARKETING 


Table  3^. — Destination  of  total  shipments  from  all  reporting  country  elevators 
^^''7  amd  warehouses  for  the  five  crop  years  1912~1S  to  1916-17. 


\  / 
Destination.  / 

/' 

■i  .  ..  . 

1912-13 1(^916-17 

"5 

Number'/ 
of  carSj 

'  Per  cent 
of  otalt. 

;  GBDGRAPHIC  POINTS.  ^ 

Terminal  markets  each  receiving  Jv000>of  more  cars _ . . . 

/ 

1,070,027 
109,  lOB 

208, 22d 

30,  238( 
93,334 

30, 457 

09. 42 
7.08 

13.51 

1.96 

6.05 

1.98 

Points  each  receiving  less  than  5,00f^^§rs . ....j. . . 

1  f  '  CQJrf^RCIAL  FACTORS.  ^  / 

Mills . . . ..yii . 

Fevers . . . . . 

Tntflrior  brokers _ :  . 

Miscellaneous,  i^cWSing  private  terminal  elevators,  maltsters,  and  other  con- 
vertersj-Fotai!^^,  etc. . .  . 

Total . . . 

1,541,391 

100.00 

)  Movement  by  States  and  grand  divisions. — The  next  table  pre¬ 
sents  by  States  and  grand  divisions  and  according  to  destination  the 
movement  of  the  total  grain  (i.  e.,  wheat,  corn,  oats,  rye,  and  barley) 
reported  as  shipped  by  country  elevators  and  warehouses  during  the 
five  crop  years  1912-13  to  191^17 : 

Table  36. — Distribution  of  total,  shipments  of  five  principal  grains  from  country 
elevators  and  warehouses  in  specified  States  and  grand  divisions  according  to 
specified  destinations  during  the  five  crop  years  1912-13  to  1916-17. 


State. 

Number 
of  cars 
shipped. 

Terminal 

markets. 

Smaller 

points. 

Mills. 

Feeders. 

Interior 

brokers. 

Miscella¬ 

neous.! 

ELEVATORS. 

Oklahoma . 

27,039 

27.71 

5. 39 

46.61 

2.15 

17.39 

0.75 

Michigan . 

20,236 

27.84 

8.87 

39.76 

3.91 

18. 29 

1.33 

Ohio . 

46,369 

35.50 

10.29 

23. 15 

1.69 

28.40 

.97 

Kansas . 

117,909 

49. 04 

6.77 

27.32 

1.46 

14. 87 

.54 

Nebraska . 

•  132, 317 

57.77 

7.21 

5. 20 

6.15 

9.44 

14.23 

Montana . 

30,  8l8 
19, 938 

62.17 

2.19 

31.69* 

1.12 

1.94 

.89 

Missouri . 

64. 41 

9.31 

22.00 

3. 50 

.76 

.02 

Indiana . 

75,997 

64.98 

7.42 

14. 21 

1.40 

11.76 

.23 

Total . 

470,623 

52.11 

7.16 

20. 28 

3.00 

13.02 

4.43 

Wisconsin . 

15,809 

74.53 

4.06 

7.51 

2. 04 

7.10 

4.76 

Iowa . 

186, 430 

76.14 

10. 80 

7.37 

2.11 

2.96 

.62 

South  Dakota . . . 

133, 998 

80,31 

2.48 

11.92 

1.25 

2.69 

1.35 

Illinois . . 

249, 636 

83.16 

8.08 

4.50 

.58 

3.30 

.38 

Minnesota . 

185, 683 

84.19 

4.37 

8.40 

.80 

.57 

1.67 

North  Dakota . 

188, 154 

88.93 

2.24 

8.62 

.18 

.02 

.01 

Total . . 

959, 710 

82.59 

5.90 

7.70 

.96 

2.04 

.81 

Total,  14  States . 

1,430,333 

72.56 

6.31 

11.84 

1.63 

5.65 

2.01 

GRAND  DIVISIONS.  2 

Elevators. 

Southern  Division . 

19, 467 

16.47 

10.27 

52. 60 

3.71 

15. 77 

1.18 

Middle  Atlantic . 

12,406 

17.01 

9.25 

57. 21 

2.24 

13.26 

1.03 

Mountain  and  Pacific . 

21,352 

28.28 

18. 24 

37.81 

9.42 

5. 38 

.87 

Warehouses. 

Southern  Division . 

Middle  Atlantic . 

4,860 

956 

14.18 

40.06 

5.76 
16. 01 

60.39 

40.27 

3.17 

16.46 

3.66 

.04 

Mountain  and  Pacific . 

33, 815 

32.37 

29.13 

15. 39 

8. 81 

10.  85 

3.45 

Central . 

18, 202 

48.55 

8.13 

27.05 

4.22 

11.62 

.43 

Total  grand  divisions . 

111,058 

29.00 

•16.  93 

34.99 

6.23 

11.24 

1.61 

All  elevators  and  ware- 

houses . 

1,541,391 

69. 42 

7.08 

13.51 

1.96 

6.05 

1.98 

*  Private  terminal  elevators,  retailers,  maltsters,  and  other  converters,  etc. 

*  For  States  included  in  the  various  grand  divisions,  see  Ch.  II,  sec.  5. 


SALE  AND  SHIPMENT  OF  GRAIN. 


131 


The  direction  of  the  movement  of  "rain  from  the  countr^y"  ele¬ 
vators  and  warehouses  is  governed  by  a  wide  variety  of  conditions, 

V  gyf  which  renders  any  explanation  .more  or  less  un¬ 
satisfactory.  It  is,  however,  possible  at  least  to  point  out  certain 
factors  which  undoubtedly  exercise  an  important  influence  upon  • 
^lis  floiv. 

y  A-^1^bM^■.ldy  indirateflr-ft^ little  le§s  than  ^er "T:ent  of  all  griiin 
>^Hpped  _liy  country  elevators  gees  to  the  terminal -inaFket:  7T)nly 
;i6,  of  the  14  principal  grain-producing  States,  i.  e.,  Illi¬ 

nois,  Iowa,  AVisconsin,  Minnesota,  and  the  Dakotas,  report  a  higher 
than  average  proportion  of  total  grain  shipments  to  terminal 
markets.  AVhile  thus  considerably  above  the  average  in  its  propor¬ 
tion  of  terminal  market  shipments,  this  area  as  a  whole  is  consist^ 
ently  below  the  average  in  the  percentage  of  its  shipments  which 
go  to  mills,  feeders,  interior  brokers,  and  the  smaller  markets.  In 
the  balance  of  the  14  principal  grain  producing  States,  i.  e.,  Okla¬ 
homa,  Michigan,  Ohio,  Kansas,  Nebraska,  Montana,  Missouri,  and 
Indiana,  the  reverse  of  this  situation  obtains,  and  much  higher  than 
average  proportions  of  their  shipments  go  to  small  markets,  mills, 
feeders,  etc.,  and  a  much  lower  than  average  proportion  to.  terminal 
markets  (as-low-as  peiMjicint  imm^Miobtgain 


of  terminal  markets  to  dnumm^rain  movement. 


Relation  of  size 


■  at  OrPTERENT  TERMINALl^R- 

ww. — There  appears  to  be  good  reason  for  assuming  that  the  pro¬ 
portion  of  terminal  market  shipments  by  country  elevators  from  a 
given  area  as  compared  with  shipments  to  other  destinations  will  be 
considerably  affected  by  the  size  of  the  terminal  markets  t@  which  the 
area  is  tributary.  Other  things  being  equal,  the  larger  the  marke,t  the 
greater  the  number  of  buyers,  the  keener  the  competition  between 
them,  and  the  higher  the  resulting  price  that  will  be  obtained  for 
grain.  >?^hus  size  may  become  an  attractive  force,  leading  to  a  high 
proportion  of  terminal  market  shipments  by  rendering  it  difficult 
.for  the  smaller  markets  and  local  buyers  to  compete  with  such 


arketer 


examination  of  Table  36  reveals  the  fact  that  five  of  the~six 
States  reporting  the  highest  proportion  of  terminal  market  ship¬ 


ments,  i.  e.,  Minnesota,  the  Dakotas,  Iowa,  and  Illinois,®  are  very 
directly  tributary  to  Chicago  and  Minneapolis. 

The  balance  of  the  principal  grain-producing  States  are  tributary 
chiefly  to  other  primary  markets;  for  example,  Kansas  and  Nebraska 
to  Kansas  City ;  Michigan  to  Detroit ;  Missouri  to  St.  Louis ;  Ohio  to 
Cincinnati;  Indiana  to  Indianapolis,  Cincinnati,  and  Detroit.  (See 
.  Table  37.) 

Based  on  the  shipments  reported  by  country  elevators  and  ware¬ 
houses,  Minneapolis  during  the  five-year  period  received  something* 
over  300,000  cars  of  "rain  and  Chicago  262,000.  The  reported  re¬ 
ceipts  of  country  grain  at  each  of  these  two  markets,  therefore,  are 
between  three  and  four  times  as  great  as  those  at  Kansas  City,  the 
third  largest  market  in  point  of  country  receipts,  as  reported,  and 
are  many  more  times  the  receipts  at  the  small  terminal  markets.  (See 
Table  37.) 


^  Wisconsin  not  included. 


132 


COUNTRY  GRAIN  MARKETING. 


Direction  of  grain  movement. — The  size  of  the  Chicago  and  Min- 

(neapolis  markets  as  compared  with  the  various  other  terminal  mar¬ 
kets  is  greatly  affected  by  the  direction  of  the  grain  movement  and 
the  location  of  the  markets  with  reference  to  production V  Droadly 
speaking,  the  general  current  of  the  grain  movement  is  from  the 
surplus  to  the  deficit  areas,  or  from  west  to  east,  with  a  certain 
amount  of  southern  and  southeastern  flow,  there  being  comparatively 
little  westward,  northern,  or  southwestern  movemenL  iflSC^ars 

^  ^‘^7110 1^  trom  Taiffe  ai-^ylnch  presen^  the  propcrrfl^  of  the 

totaA  country  r^eipts  of  the  prmciparTSrmmal  markets  which  are 
deri^d  from  e^^  of  the  14  principal  grainWoducing  States  and 
variolas  grand  divisions  during  the  crop  years  ]tel2-13  to  1916-17. 

Table  37. — Distribution  of  'country  grain  shipments  to-specified  terminal  markets 
as  reported  for  crop  years  1912-13  to  1916-17. 


Markets. 

Grand 

total. 

Illinois. 

Indi¬ 

ana. 

Iowa. 

Kan¬ 

sas. 

Michi¬ 

gan. 

Minne¬ 

sota. 

Mis¬ 

souri. 

Mon¬ 

tana. 

Cars. 

Percent. 

Percent. 

Percent. 

Percent. 

Percent. 

Percent. 

Per, cent. 

Percent. 

Chicago . 

262,033 

51.98 

2.44 

31.43 

0.35 

0.03 

5.79 

0.71 

0.02 

Minneapolis . 

308, 691 

.01 

1.01 

.11 

36.03 

4.24 

Kansas  City . 

81 '551 

.04 

• 

6.53 

55.24 

.71 

3.26 

AO 

Dnlnth . . . . . 

85,385 

.02 

17.79 

6. 15 

St.  Louis . 

42, 174 

41.63 

.10 

26.47 

.49 

1.07 

19.73 

.43 

Milwaukee . 

56'  085 

1.39 

32.35 

.01 

23.53 

G) 

Omaha . 

70'  338 

22.38 

.21 

.20 

.47 

Peoria . 

27'  576 

78.68 

21.04 

.10 

.01 

Indianapolis . 

24' 026 

47.26 

48.61 

0) 

Cincirmati . 

12,091 

12.09 

67.99 

.33 

.02 

.21 

.08 

Detroit . . . 

8,070 

11.95 

39.74 

44.99 

Wichita . 

8, 712 

.44 

97.81 

.ii 

Buffalo . 

16,991 

16.73 

47.01 

.08 

1.94 

Baltimore . 

6;  293 

20.56 

12.59 

.02 

2.69 

Louisville . 

5' 053 

40.43 

49.40 

.04 

6.67 

Toledo . 

11,087 

7.12 

39.99 

9.96 

.01 

New  Orleans . 

7,677 

44.59 

17.66 

Galveston . 

5' 473 

23.15 

Portland . 

5,530 

.63 

Seattle . •. . 

6' 496 

1.31 

Markets. 


Chicago. 
Minneapolis.. 
Kansas  City.. 

Duluth . 

St.  Louis . 

Milwaukee... 

Omaha . 

Peoria . 

Indianapolis.. 
Cincinnati. . . . 

Detroit . 

Wichita . 

Buffalo . 

Baltimore.... 
Louisville. . . . 

Toledo . 

New  Orleans. 
Galveston.... 

Portland . 

Seattle . 


Ne¬ 

braska. 


Percent. 
78 
86 
39 
02 
39 
74 
19 


26 


63 


05 


04 


10 

04 


05 


North 

Dakota. 


Percent. 
0.23 
33.98 
.05 
72.20 
.04 
.25 


Ohio. 


Percent. 

0.01 


0) 


.01 

11.03 

1.10 


30.33 

19.75 

.20 

40.98 


Okla¬ 

homa. 


Percent. 

0.07 

.05 

1.81 


.33 

■'62 


1.56 


32.24 

53.08 


South 

Dakota. 


Percent. 
3.30 
23.11 
3.78 
3.38 
.25 

23.15 

12. 16 
.04 

C) 


.02 

.02 


.02 

.’os' 


Wis¬ 

consin. 


Percent. 
0.50 
.09 
MO 
.01 
.40 
17.74 


.01 


Middle 
Atlan¬ 
tic  Di¬ 
vision. 


Percent. 


0.09 

13.34 


Moun¬ 
tain 
and  Pa¬ 
cific  Di¬ 
vision. 


Percent. 
0.53 
.38 
1.00 
.15 
.51 
.04 
.97 


.28 


.03 


.06 

2.31 


4.09 

3.40 

99.36 

98.57 


South¬ 
ern  Di¬ 
vision. 


Percent. 


0.44 

".’63 


24.79 


1.32 

20.32 


Central 

Divi¬ 

sion.* * 


Percent. 
0.84 
.13 
.48 
.28 
2. 12 
.79 
.40 
.13 
4.12 
7.96 
2.22 


3.81 

6-18 

.91 

1.93 


1  Less  than  one  one-hundredth  of  1  per  cent. 

*  Warehouses  only,  elevators  being  included  among  States  separately  tabulated. 


SALE  AND  SHIPMENT  OF  GRAIN. 


133 


■tH  be  no^d  from  thiyfablo  th?rt  Chicago  obtains  the  bulkoF^ 
grain  from  Illinois  (52  per  cent)  and  Iowa  (31^  per  cent).  It 
also  obtains  a  little  from  Minnesota  and  South  Dakota  to  the  north¬ 
west,  but  practically  none  from  Ohio,  Michigan,  or  Indiana  to  the 
,east  or  from  Missouri  to  the  south.  Miimewp»ta5=ga>iptia  htb  uliiL^hr 
^riiiiii  Miiiiicffotn  (1^^^  per  ^ant)  and  the  Dakotafi  (57  pfr  r^^t}-irn^l  a 
^nftllei‘"proportion  from  Montana,  all  to  the  wcsl 

'fT'ti'i  ^11y  nil  DiiIntL  rpppipfg  nvr  ■Prnwa-^thp  Neither 

market  receives  much  of  anything  from  Wisconsin,  Illinois,  Iowa, 
or  Nebraska.  Kansas  City  obtains  more  than  half  its  grain  from 
Kansas  to  the  west  and  more  than  one-fourth  from  Nebraska  to  the 
northwest.  Less  than  4  per  cent  is  derived  from  Missouri  and  prac¬ 
tically  nothing  from  Illinois,’  on  the  east.  Kansas  City  also  obtains 
a  substantial  proportion  from  Iowa  (6J  per  cent),  to  the  north, 
but  much  less  from  Oklahoma,  on  the  south.  St.  Louis  obtains  above 
40  per  cent  of  its  grain  from  Illinois,  lying  north  and  east.  To  w^hat 
extent  this  movement  is  from  the  east  rather  than  the  north  is  difficult 
to  determine.  In  so  far  as  the  movement  is  westward,  it  is  exceptional. 
^St.  Louis  also  receives  about  20  per  cent  from  Missouri,  26  per  cent 
!rom  Iowa,  to  the  north,  and  a  substantial  amount  from  Nebraska 


Milwaukee  obtains  practically  nothing  from  the  south  or  east  (Illi¬ 
nois,  Indiana,  or  Michigan),  securing  the  great  bulk  of  its  receipts 
from  Wisconsin  and  the  States  west,  i.  e.,  Minnesota,  Iowa,  and 
South  Dakota.  Omaha,  like  St.  Louis,  is  exceptional  in  obtaining 
heavy  receipts  from  Iowa  (22J  per  cent)  directly  to  the  east.  It 
procures  practically  nothing,  however,  from  either  Missouri  to  the 
southeast  or  Kansas  to  the  south,  the  balance  of  its  grain  being  ob¬ 
tained  chiefly  from  Nebraska  (63  per  cent).  About  13  per  cent,  how¬ 
ever,  is  derived  from  South  Dakota,  to  the  northwest.  Peoria  sup¬ 
plies  are  obtained  practically  exclusively  from  Illinois  and  Iowa 
and  those  of  Indianapolis  from  Indiana  and  Illinois.  Cincinnati 
draws  some  grain  from  its  own  State,  but  obtains  the  great  bulk  of 
it  Tndi^rn  Illinois  to  the  west. 

'he  general  direction  of  the  grain  current  from  west  to  east  and 
southeast  is  indicated  in  the  following  quotation  from  an  opinion  of 
the  Interstate  Commerce  Commission: 

As  this  grain  moves  from  point  of  origin  toward  the  east  and  southeast  it 
reaches  or  comes  within  the  several  spheres  of  influence  of  certain  centers  or 
primary  markets.  For  example,  grain  is  shipped  in  large  quantities  to  Min¬ 
neapolis  and  reshipped  from  Minneapolis  to  Chicago  or  Milwaukee  and  from 
thence  to  various  destinations  in  the  east  and  southeast.  Several  railroads 
have  lines  from  Minneapolis  to  Chicago  and  no  lines  north  or  west  of  Minne¬ 
apolis.  If  they  participate  in  the  transportation  of  this  tonnage,  as  they  always 
have  insisted  upon  doing  and  as  they  undoubtedly  will  always  insist  upon  doing, 
they  must  take  out  from  Minneapolis  grain  that  comes  in  on  some  other  road. 
There  are  numerous  railroads  with  lines  east  and  southeast  from  Chicago  that 
have  no  lines  west  or  north  of  Chicago,  and  if  they  participate  in  the  movement 
of  this  traffic  they  must  take  out  from  Chicago  that  which  comes  in  on  some 
other  road.  In  every  instance  of  a  carrier  so  situated  an  additional  competitive 
influence  is  injected  into  the  situation.® 


e24  I.  C.  C.,  120. 


134 


COUNTRY  GRAIN  MARKETING. 


Effect  of  direction  of  mo\t:ment  on  terminal  tributary  areas.— ^ 
These  eastward  and  southerly  channels  of  grain  movement  have  been 
more  definitely  established  through  freight-rate  adjustments  in  con¬ 
formity  with  the  general  status  of  supply  and  demand.N/  Because  of 
the  fact  that  there  is  little  westward  or  northern  movement  of 
grain,  the  States  lying  to  the  south  and  east  of  the  principal  primary 
markets  do  not  feel  the  pull  of  these  markets  to  the  same  extent  as 
do  those  States  lying  more  directly  to  the  north  or  west  of  them. 
Many  of  these  markets  therefore  have  but  a  relatively  small  area  to 
draw  from. 

In  the  case  of  the  more  easterly  and  southerly  markets  this  is  due 
to  the  existence  of  primary  markets  farther  west  which  cut  off  the 
bulk  of  the  flow.s  For  example,  St.  Louis  receives  almost  nothing  from 
Kansas,  which  is  a  heavy  shipper  to  the  intervening  market  of  Kan¬ 
sas  City,  and  Cincinnati  receives  only  about  12  per  cent  of  its  receipts 
from  Illinois,  though  the  intervening  market  of  Indianapolis  obtains 
nearly  50  per  cent  of  its  grain  from  this  State.  Peoria  draws  almost 
exclusively  from  Illinois  and  Iowa,  obtaining  nothing  practically 
farther  north  or  west.  In  the  case  of  certain  of  the  most  westerly, 
primary  markets  the  small  area  drawn  upon  is  due  to  the  restricted 
producing  territory  lying  to  the  westward,  as  with  Kansas  City  and 
Omaha. 

Minneapolis,  on  the  other  hand,  can  and  does  draw  from  all  four 
of  the  Northwest  States,  there  being  no  market  farther  west  in  this 
area.  Chicago,  like  some  of  the  smaller  markets,  is  cut  off  to  the  west  ‘ 
of  Iowa  by  Omaha,  and  in  consequence  receives  comparatively  little 
grain  from  Nebraska.  Owing  to  general  current  of  eastward  and 
southeastern  movement  and  rate  structure  based  thereon,  however, 
Chicago  is  able  to  draw  a  substantial  volume  of  receipts  (about  9  per 
cent)  from  southern  Minnesota  and  South  Dakota.  Moreover,  based 
upon  the  average  figures  for  five  years — 1912-13  to  1916-17 — the  total 
annual  production  of  wheat,  corn,  oats,  rye,  and  barley  in  Illinois  and 
Iowa  amounted  to  over  one-fifth  of  the  production  of  the  entire 
United  States.  Although,  therefore,  the  Chicago  tributary  area  is 
largely  cut  off  by  Omaha  to  the  west  and  by  Minneapolis  and  Mil¬ 
waukee  to  the  north,  the  production  of  this  area  is  so  huge  that  its 
comparatively  small  size  has  not  restricted  the  growth  of  the  Chicago 
market  to  the  same  extent  as  the  small  size  of  the  areas  tributary  to 
the  markets  farther  east  and  west  has  prevented  their  development  on 
a  scale  comparable  with  Chicago  and  Minneapolis. 

Section  5.  Effect  of  terminal-market  organization  on  grain  movement. 

The  size  of  the  terminal  market  as  a  factor  explaining  variations 
in  the  proportion  of  shipments  to  various  destinations  is  of  course 
closely  related  to  and  intimately  interwoven  with  the  degree  of  or¬ 
ganization  of  the  terminal  market  mechanism,  v  The  more  highly 
organized  this  mechanism  and  the  more  extensive  its  ramifications, 
both  geographically  and  otherwise,  the  greater  the  attractive  power 
of  the  market.'^  Size  promotes  organization  and  organization  pro¬ 
motes  size.^  Neither  can  be  regarded  as  the  result  of  the  other,  but 
both  are  important  causal  factors  in  explaining  the  variations  in  the 
destination  of  shipments.  The  relatively  higL  percentage  of  termi- 


SALE  AND  SHIPMENT  OF  GRAIN. 


135 


nal  market  shipments  by  Iowa,  Illinois,  Minnesota,  and  the  Dakotas^ 
may  thus  probably  be  attributed  in  part  to  the  highly  organized  ter¬ 
minal  market  mechanism  of  Chicago  and  Minneapolis,  to  which 
markets  these  five  States  are  directly  tributary. 

In  Minnesota  and  the  Dakotas  are  hundreds  of  houses  ot  line 
elevator  companies,  chiefly  with  headquarters  in  Minneapolis,  and, 
although  these  companies  will  usually  ship  anywhere,  they  are  ex¬ 
ceedingly  close  to  the  Minneapolis  market  situation  and  ship  in  when- . 
ever  prices  are  favorable  for  even  the  briefest  period. 

The  necessity  of  buying  malting  barley  by  sample  and  the  prefer¬ 
ence  of  the  Minneapolis  mills  for  buying  country-run  grain  (secs. 

6  and  16)  has  tended  to  develop  the  sample  market  for  both  these 
o-rains  at  IMinneapolis  on  an  extensive  scale.  /This  in  turn  has  greatly 
mcreased  the  cash  commission  business,  since  it  has  made  it  desirable 
for  country  elevators  to  consign  to  some  house  sufficiently  expert 
in  selling  to  be  able  to  realize  the  best  price  for  the  wheat  or 
barley  involved.  As  a  result  of  the  competition  between  these  cash 
commission  houses,  their  representatives  CQver  the  entire  Northwest, 
soliciting  shipments  for  Minneapolis  and  also  Duluth.  To  the  south 
the  wire'^hoiises  out  of  Chicago  have  of  late  embarked  extensively  in 
the  cash  commission  business,  and  the  wire  house,  especially  highly 
developed  in  Illinois  and  Iowa,  is  used  both  for  the  solicitation  and 
purchase  of  grain  for  shipment  to  Chicago.  This  market  having 
little  consumptive  demand,  the  grain  business  is  largely  shipping  tor 
domestic  consumption  or  export,  centered  chiefly  in  the  hands  ot  the 
oreat  terminal  elevators.  As  a  rule,  this  business  can  be  handled  satis- 
•  factorily  on  a  grade  as  well  as  a  sample  basis.  The  result  has  been 
that  the  elevators  and  other  dealers  have  reached  out  to  bid  the  county 
for  o-rain  directly  in  competition  with  the  commission  houses  solimt- 
ino"  consignments  and  have  built  up  a  huge  volume  of  business,  this 
is  "transacted  chiefly  upon  the  basis  of  acceptances  by  country  eleva¬ 
tors,  shippers,  and  dealers  of  bids  for  grain  of  specified  kinds  and 
tirades  made  by  wire  or  otherwise  directly  by  Chicago  buyers  to- 
arrive  ”  or  to  be  shipped  within  a  specified  number  of  days,  in  this 
territory  there  is  also  considerable  buying  “  on-track ’’  in  the  country 
by  representatives  of  terminal  dealers.  (See  Vols.  Ill  and  i  y  .) 

It  must,  of  course,  be  admitted  that  the  territory  ui^er  discussion 
is  also  in  large  measure  tributary  to  Milwaukee  and  Duluth  as  well 
as  Chicago  and  Minneapolis.  (Table  37.)  Shipments  to  these  mar¬ 
kets  tend  to  increase  the  importance  of  terminal  market  movement 
in  this  area  above  the  average.  Especially,  perhaps,  is  this  true  ot 
Duluth,  whose  dealers  engage  extensively  in  the  financing  ot  country 
elevators.  Exporting  through  Duluth  by  way  of  the  Lakes  is  also 
a  factor  of  importance  in  directing  the  flow  of  a  considerable  Por¬ 
tion  of  o-rain  to  the  Duluth  market,  while  the  Milwaukee  demand  tor 
barley  was  at  least,  prior  to  prohibition,  an  important  contributory 
factor  in  the  terminal  market  movement  of  this  gram. 

At  the  same  time  the  average  annual  receipts  of  Minneapolis  ana 
’  Chicago  are  so  huge  as  compared  with  those  of  Duluth  and  iviil- 


’  Wisconsin  can  not  properly  be  regarded,  as  tributary  to  Chicago  or  Minn e^ 

shipped  by^houses  in  Wisconsin  over  ten  thousand  were  rye  and  barley,  (lable  4  .) 


136 


COUNTRY  GRAIN  MARKETING. 


waukee  that  the  proportion  of  terminal  market  shipments  from  the 
area  under  discussion  may  safely  be  assigned  in  considerable  measure 
to  the  drawing  power  of  Chicago  and  Minneapolis  resulting  from 
size  and  organization  of  these  markets. 

Section  6.  Other  factors  affecting  terminal-market  movement, 

CONSUMPTION. — Important  contributory  factors  to 
the  high  percentages  of  terminal  market  shipments  in  Chicago-Min- 
neapolis  tributary  territory  are  (l)’^the  consumption  of  Minneapolis 

mills,  (2)  the  sale  of  barley  by  sample,  and  (S)*" terminal  market 
nnancing. 

As  is  well  known,  the  city  of  Minneapolis  is  the  greatest  flour-mill- 
mg  center  in  the  country.  To  this  market  Minnesota  and  the 
Dakotas,  three  of  the  leading  wheat-producing  States,  are  directly 
tributary,  and  the  enormous  capacity  of  the  mills  at  this  marketris 
^pphed  almost  entirely  with  wheat  and  rye  grown  in  these  States. 
Owing  to  the  mixing  practices  of  the  terminal  elevators,  the  mills 
almost  without  exception  prefer  to  buy  country-run  grain,  and  will 
usually  pay  premiums  if  necessary  in  order  to  obtain  it.  (Sec.  16.) 

It  is  probably  owing  largely  to  the  huge  buying  power  of  these 
mills  demanding  country-run  grain  that  country  elevators  in  Minne¬ 
sota  and  the  Dakotas  send  much  higher  than  average  proportions  of 
their  wheat®  shipments  to  the  terminal  markets.  (Table  41.) 

Sample  selling  of  barley. — Based  upon  the  yearly  average  for  the 
^op  years  1912-13  to  1916-17,  Iowa,  Wisconsin,  Minnesota,  and  the 
Dakotas  were  among  the  six  leading  States  in  the  production  of  bar¬ 
ley.  As  shown  in  a  subsequent  section,  malting  barley  is  the  one 
gram  in  the  purchase  of  which  grades  have  the  least  significance  and 
color  and  other  factors,  such  as  the  individual  preferences  of  the 
buyers,  play  the  most  important  part.®  If  the  highest  prices  are  to  be 
obtained  by  the  country  elevators  for  malting  barley,  advantage  must 
be  taken  of  these  facts  by  shipping  to  a  point  where  numerous  buyers 
for  maltsters  and  others  are  to  be  found.  The  result  is  that  the  bulk 
of  the  malting  barley  has  as  a  rule  been  shipped  to  the  terminal  mar¬ 
ket^  consignment.  (Sec.  15.) 

Terminal  AiAgTCJi-r  factor  of  considerable  im- 

porlance  also  in  accounting  for  the  high  proportion  of  grain  shipped 
to  t^minal  markets  from  Iowa,  Illinois,  Wisconsin,  Minnesota,  and 
the  Dakotas  is  probably  the  financing  of  country  elevators  by  ter¬ 
minal  market  grain  dealers. 

It  is  interesting  to  note  that  those  States  which  send  the  greatest 
proportion  of  their  grain  to  terminal  markets  are,  generally  speakino- 
those  in  which  terminal  market  concerns  are  most  frequentlyj-eporte^’ 
as  lenders  of  funds  borrowed  by  country  houses  - - 


*  And  probably  rye  as  well. 

for  factors  are  not,  of  course,  of  such  importance  in  the  case  of  barley  used 


.SALE  AND  SHIPMENT  OF  GRAIN. 


137 


Table  38. — Proportion  of  country  elevator  shipments  to  terminal  markets  from 
specified  States  in  comparison  vyith  the  proportion  of  terminal  market  financ- 
iny.' 


state. 

rroportion 
of  ship¬ 
ments  to 
terminal 
markets. 

Ratio  of 
terminal 
market 
sources  of 
loans  to 
total 
sources 
reported. 

27.71 

1.88 

27.84 

.53 

35. 50 

.90 

49.04 

.44 

57.77 

1.55 

62. 17 

25.88 

64.41 

4. 46 

64.98 

.35 

♦ 

1 

52.11 

3. 30 

74.53 

9.79 

76. 14 

3. 08 

80.31 

23. 08 

83.16 

5. 77 

84. 19 

20.26 

8a  93 

36.64 

82.59 

18.56 

72. 56 

12.71 

I  As  indicated  by  the  ratio  of  the  number  of  times  terminal  market  dealers  are  reported  by  comtry  ele¬ 
vators  as  sources  of  borrowed  funds  to  the  total  number  of  sources  reported.  (Appendix  1  able  20.) 


While  there  is  no  very  exact  correlation,  the  proportion  of  financing 
by  terminal  dealers  is,  on  the  whole,  distinctly  higher  in  those  States 
which  report  the  larger  proportions  of  shipments  going  to  terminal 
markets  than  it  is  in  those  States  with  lower  proportions  of  such 

shipments.  .  . 

As  subsequently  indicated,  terminal  financing,  at  least  by  commis¬ 
sion  houses,  is  usually  done  under  arrangements  whereby  the  country 
house  accommodated  agrees  to  ship  all  or  a  very  large  proportion 
of  its  grain  to  the  financing  house.  This  financing,  therefore,  is  an 
important  factor  in  influencing  shipments  to  the  terminal  market. 
(Ch.  X.) 

Section  7.  Shipments  in  territory  outside  Chicago-Minneapolis  tributary 

area. 

The  lower  than  average  percentage  of  terminal  market  shipments 
shown  "  by  the  principal  producing  States  outside  the  Chicago- 
Minneapolis  tributary  area — i.  e.,  Oklahoma,  Kansas,  Nebraska,  Mis¬ 
souri,  Indiana,  Ohio,  and  Michigan — is  probably  due  chiefly  to  the 
absence  of  those  factors  which  have,  tended  to  produce  a  high  pro¬ 
portion  of  terminal  market  shipments  in  the  former  section.  The 
terminal  markets  located  in  this  latter  area  are,  as  already  indicated, 
very  much  smaller  than  Chicago  or  Minneapolis,  less  highly  organ¬ 
ized,  and  consequently  lacking  in  the  attractive  power  of  these 
markets.  None  of  the  smaller  markets  possess  the  extensive  sample 
markets  nor  such  extensive  buying  interests  as  those  represented  by 
the  Minneapolis  mills  or  Chicago  terminal  elevators.  Neither  are 


138 


COUNTRY  GRAIN  MARKETING. 


there  the  large  line  companies  operating  from  the  terminal  market, 
nor  the  highly  organized  system  of  commission  house  soliciting  and 
financing  which  is  found,  especially  in  Minneapolis  territory,  nor  the 
extensive  wire-house  soliciting  and  purchasing  and  the  terminal 
elevator  direct  buying  which  exists  out  from  Chicago.  The  absence 
,of  these  factors  weakens  the  attractive  power  of  the  smaller  markets 

and  thus  gives  greater  scope  to  operations  outside  the  terminal 
markets.^® 


Section  8.  Analysis  of  mill  shipments. 

An  important  contributory  factor  to  the  low  proportion  of  terminal 
market  shipments  in  territory  tributary  to  the  smaller  markets  is 
the  extent  of  the  local  milling  industry  in  this  area.  Outside  of 
shipments  to  terminal  markets  the  mills  absorb  a  larger  proportion 
of  the  total  shipments  than  do  either  the  smaller  markets,  the  feeders, 
the  interior  brokers,  or  the  miscellaneous  purchasers. 

The  proportion  of  shipments  to  mills  ranges  all  the  way  from  44 
per  cent  in  Illinois  to  46^  per  cent  in  Oklahoma.  Broadly  speaking 
these  variations  may  be  assigned  chiefly  to  the  relative  importance 
of  the  local  milling  industry  and  local  mill  buying. 

The  following  table  presents  for  the  14  States  separately  tabulated 
the  proportion  of  shipments  to  mills  reported  by  country  elevators 
in  comparison  with  the  proportions  of  individual  mill  elevators 
reported  in  the  same  States.^ 

It  will  be  noted  that  the  seven  States  showing  the  lowest  propor¬ 
tions  of  mill  shipments  include  those  in  the  Chicago-Minneapolis 
tributary  area  and  the  seven  showing  the  highest  proportions  are  in 
the  territory  tributary  to  the  smaller  markks. 


Table  39.  Proportion  of  total  country  elevator  shipments  from  speeified  States 
to  mills,  crop  years  1912—13  to  1916—17,  in  comparison  tvith  proportion  of  indi¬ 
vidual  mill  elevators. 


state. 


Oklahoma . . . . 

Michigan . 

Montana . 

Kansas . 

Ohio . 

Missouri . 

Indiana . 

South  Dakota. 


North  Dakota. 

Minnesota . 

Wisconsin . 

Iowa . 

Nebraska . 

Illinois . 


Total  14  States. 


Percentage 
of  ship¬ 
ments  to 
mills. 


46.61 
39. 76 
31.69 
27.32 
23.15 
22.00 
14. 21 
11.92 


8.62 
8.40 
7.51 
7.37 
5. 20 
4.50 


11.84 


Percentage 
of  indi¬ 
vidual  mill 
elevators. 


6.86 

12.45 

4.61 

8.43 

13.56 

26.75 

14.96 

2.48 


1.81 

4.21 

13.16 

1.75 

2.85 

3.12 


5.54 


10  Montana  belongs  with  this  group  rather  than  with  the  Chicago-Minneanoli<?  trihntnrv 
of  its  great  distance  from  terminal  markets  it  doel  not  feeft^^^^^ 
force  of  these  markets  to  the  same  extent  as  do,  for  example  the  DaStas  VlthonL^^^ 

^  considerable  volume  of  grain  to  both  Minneapolis  and  Duluth 
the  oth|r  Newest" tta^  developed  to  a  much  greater  extent  relatively  than  in 

nf  elevators  are  taken  as  the  best  available  index  of  the  relative  extent 

of  local  milling  from  the  standpoint  of  its  breadth  of  distribution  reianve  extent 


SALE  AND  SHIPMENT  OF  GRAIN. 


139 


An  exfimintition  of  this  table  reveals  the  fact  that  there  is  a  dis¬ 
cernible  tendency  for  mill  shipments  to  vary  directly  with  the  pro¬ 
portion  of  individual  mill  elevators.  '"Of  the  eight  States  reporting 
higher  than  average  proportion  of  mill  shipments,  six  report  a  con¬ 
siderably  higher  than  average  proportion  of  mill  elevators.  Mon¬ 
tana,  with  nearly  32  per  cent  of  total  shipments  going  to  mills, 
is  slio-htly  below  the  average  in  its  percentage  of  mill  elevators,  and 
South  Dakota,  with  slightly  above  the  average  in  mill  shipments,  is 
considerably  below  the  average  in  mill  elevators.  Of  the  six  States 
reporting  mill  sliipments  less  than  the  average,  all,  with  the  exception 
of  Wisconsin,  report  a  considerably  lower  than  average  proportion 
of  individual  mill  elevators. 

Section  9.  Destination  of  total  grain  movement  by  kinds  of  grain. 

The  direction  of  the  grain  movement  varies  considerably  as  be¬ 
tween  the  different  kinds  of  grainf  Thus  about  83  per  cent  of  the 
rye  and  barley  shipments  go  to  terminal  markets,  but  only  about  65 
per  cent  of  the  wheat.  "^The  mills,  on  the  other  hand,  get  about  24 
per  cent  of  the  wheat,  but  only  about  3  per  cent  of  the  rye  and 
barley.  Considerably  larger  proportions  of  corn  than  of  any  other 
grains  are  shipped  to  feeders  and  interior  brokers,  while  the  various 
smaller  markets  procure  considerably  higher  proportions  of  the  corn 
and  oats  shipments  than  of  either  wheat  or  rye  and  barley. 


r£i _ i*'roportioTi  of  countT'y  clcvotov  (tfid  wcivcliousB  shipmcmts  of  specified 

grains  going  to  specified  destinations,  crop  years  1912-13  to  1916-17. 


Grain. 

Number 
of  cars. 

Terminal 

markets. 

Smaller 

points. 

Mills. 

Feeders. 

Interior 

brokers. 

Miscella¬ 

neous. 

^Vheat . 

Com. . . . 

Oats . 

Rye  and  barley . 

657, 106 
424, 445 
319, 119 
140,  721 

Per  cent. 
65.2 
67.0 
75.1 
82.8 

Per  cent. 

4.8 

9.6 

8.6 

6.9 

Per  cent. 
24.2 
6.6 
5.2 
3.4 

Per  (ent. 
0.3 

4.8 

1.8 
1.6 

Per  cent. 

4.1 
9.4 

7.2 
2.7 

Per  cent. 
1.4 
2.6 
2.1 
2.6 

All  States  and  grand  divi- 
sions . 

1,541,391 

69.4 

7.0 

13.5 

2.0 

6.1 

2.0 

Section  10.  Terminal-market  shipments  by  kind  of  grain. 

Results  of  tabulation. — The  foregoing  variations  in  destination 
are  explainable  chiefly  in  the  light  of  the  factors  affecting  the  general 
movement  in  the  14  principal  grain-producing  States  already  dis¬ 
cussed  in  the  preceding  sections.  Table  41  presents  the  proportions 
of  shipments  of  the  various  grains  to  terminal  markets  from  the  14 
principal  grain-producing  States. 


140 


COUNTRY  GRAIN  MARKETING. 


Table  41. — Distribution  of  country  elevator  shipments  of  specified  grains  from 
specified  States  to  terminal  markets^  during  the  crop  years  1912-13  to 
1916-17, 


State. 

All  grains. 

Wheat. 

Com. 

Oats. 

Rye  and  barley. 

Total 

num¬ 

ber 

cars 

shipped 
to  all 
destina¬ 
tions. 

Per 
cent 
shipped 
to  ter¬ 
minal 
mar¬ 
kets. 

Total 
num¬ 
ber 
cars 
shipped 
to  all 
destina¬ 
tions. 

Per 
cent 
shipped 
to  ter¬ 
minal 
mar¬ 
kets. 

Total 
num¬ 
ber 
cars 
shipped 
to  all 
destina¬ 
tions. 

Per 
cent 
shipped 
to  ter¬ 
minal 
mar¬ 
kets. 

Total 
num¬ 
ber 
cars 
shipped 
to  all 
destina¬ 
tions. 

Per 
cent 
shipped 
to  ter¬ 
minal 
mar¬ 
kets. 

Total 
num¬ 
ber 
cars 
shipped 
to  all 
destina¬ 
tions. 

Per 
cent 
shipped 
to  ter¬ 
minal 
mar¬ 
kets. 

North  Dakota . 

188, 154 

88.93 

143,067 

86.3 

179 

87.7 

11,543 

93.4 

33,365 

98.8 

Minnesota . 

185,683 

84.19 

77,622 

80.9 

22,594 

83.7 

40,655  , 

87.6 

44;  812 

87.0 

Illinois . 

249, 636 

83.16 

22,915 

80.3 

140,678 

79.7 

83, 899 . 

89.2 

2,144 

99.5 

South  Dakota . 

133,998 

80.31 

67,610 

75.5 

24;  010 

75.9 

19, 184 

85.3 

23, 194 

94.7 

Iowa . 

186, 430 

76,14 

8,676 

89.1 

89,374 

76.6 

80, 615 

74.7 

7,765 

72.5 

Wisconsin . 

15,809 

74.53 

790 

83.0 

'199 

19.6 

3,879 

62.1 

10,941 

79.3 

Indiana . 

75,997 

64.98 

19,256 

51.6 

30,942 

68.0 

24,785 

71.7 

1,014 

65.2 

Missouri . 

19,938 

64,41 

14,517 

70.3 

4,355 

39.2 

965 

85.9 

101 

98.0 

Montana . 

30,818 

62.17 

29,335 

62.7 

36 

69.4 

1,135 

38.5 

312 

89.8 

Nebraska . 

132,317 

57.77 

61,692 

71.0 

55, 126 

43.4 

13, 797 

54.6 

1,702 

69.7 

Kansas . 

117, 909 

49.04 

98, 655 

48.3 

16, 751 

51.7 

1,638 

41.8 

865 

88.8 

Ohio . 

46, 369 

35.50 

13,443 

31.0 

16;  354 

37.4 

16;  194 

36.9 

378 

56.9 

Michigan . 

20,236 

27.84 

9,454 

22.3 

1,802 

17.1 

5,977 

37.7 

3,003 

32.0 

Oklahoma . 

1 

27,039 

27.71 

21,116 

32.6 

5,024 

9.4 

'831 

13.6 

68 

22.1 

14  States.... j 

1,430,333 

72.56 

588,148 

69.2 

407,424 

68.8 

305,097 

77.3 

129,664 

88.4 

1  Those  receiving  over  5,000  cars  during  the  period. 


Rye  and  barley. — As  shown  by  Table  41,  a  very  much  higher  pro¬ 
portion  of  rye  and  barley  combined  than  of  either  wheat,  corn,  or 
oats  is  shipped  to  terminal  markets.  ■ 

The  production^  of  both  of  these  classes  of  grains  is  relatively 
highly  localized  in  the  Chicago-Minneapolis  tributary  territory. 
Based  on  five-year  average  ^gures,  1913-1917,  Minnesota,  North  and 
South  Dakota,  Wisconsin,  ’^nd  Iowa  rank  second,  third,  fourth, 
fifth,  and  sixth,  respective!;^,  in  barley  production,  and  nearly  60 
per  cent  of  the  barley  raised  in  the  United  States  during  this  period 
was  grown  in  these  five  States!  A  somewhat  similar  situation  exists 
in  the  case  of  rye.  Wisconsin,  Minnesota,  and  North  and  South  Da¬ 
kota  ranked  first,  second,  fifth,  and  seventh  in  average  production 
during  the  five  years  1913  to  1917,  and  produced  on  the  average 
above  40  per  cent  of  the  total  rye  crop  of  the  United  States. 

Michigan,  Ohio,  and  Indiana,  though  among  the  leading  rye  States, 
are  small  producers  of  barley.  Only  small  amounts  of  either  of  these 
grains  are  raised  in  any  other  of  the  14  principal  grain-producing 
States  which  are  not  within  the  Chicago-Minneapolis  tributary  area. 

These  facts  probably  are  sufficient  in  view  of  the  discussion  in  the 
preceding  sections  to  account  for  the  much  higher  proportion  of 
barley  and  rye  combined  which  goes  to  the  terminal  market  as  com¬ 
pared  with  wheat,  corn,  or  oats.  '  < 

Wheat. — The  reason  for  the  comparatively  low  proportion  of  ter¬ 
minal  wheat  shipments  is  found  chiefly  in  the  extensive  buying  by 
mills  outside  the  terminal  markets,  especially  in  the  southwestern 
milling  section  and  the  grain  States  east  of  Chicago. **^^The  proportion 
of  terminal  wheat  shipments  in  the  Chicago-Minneapolis  tributary 
area  is  extremely  high,  largely  owing  to  Minneapolis  consumptive 
buying.  (Ch.  VI,  sec.  6.)  Outside  this  area  the  attractive  power  of 


♦  Sec.  12,  Table  4.3. 


SALE  AND  SHIPMENT  OF  GRAIN. 


141 


( 

V. 


the  terminal  markets  is  less  and  the  local  mills  absorb  a  very  large 
proportion  of  the  total  wheat  shipments.  (Ch.  VI,  secs.  7  and  8.) 

^  Corn  — The  low  proportion  of  corn  moving  to  terminals 

mayTe  attributed  to  the  more  widespread  use  of  corn  than  of  other 
grains  for  local  feeding  purposes  in  connection  with  the  cattle  and 
hoo-  raising  industry.  '^This  results  in  a  very  much  greater  percentage 
of  ^orn  being  shipped  to  feeders  than  is  the  case  with  oats,  and  this 
local  use  for  feeding  apparently  gives  rise  to  a  somewhat  greater 
brokerage  business  in  the  former  grain  than  in  the  latter.  Corn  is 
also  milled  to  a  somewhat  greater  extent  apparently  than  oats,  judg¬ 
ing  from  shipments  to  mills.  (Ch.  VI,  sec.  12.) 

’Section  11.  Shipments  by  kind  of  grain  to  smaller  points.  ^ 

The  grain  movement  to  smaller  points — that  is,  those  not  sufficiently 
laro-e  to  be  classed  as  terminal  markets — is  relatively  highest  in  the 
case  of  corn.k^Oats  is  second  in  this  movement  and  rye  and  barley 
combined  and  wheat  follow  in  order.  The  explanation  of  the  highei 
proportions  of  corn  and  oats  going  to  small  points  as  compared 
with  the  other  grains  may  be  found  perhaps  in  the  fact  that  the 
local  use  of  both  corn  and  oats  for  feed  gives  rise  to  a  considerable 
distributive  business  from  various  local  centers,  and  as  a  result  a 
considerable  proportion  of  these  grains  is  shipped  to  these  smaller 
points  for  local  redistribution.  The  lower  proportions  of  the  other 
trrains  moving  to  these  points  may  be  assigned  to  the  fact  that  the 
great  bulk  of  the  wheat  and  rye  crops.goes  to  the  terminal  markets  . 
and  mills  and  the  great  bulk  of  the  malting  barley  to  the  terminal 
markets  for  sale  by  sample.  (Ch.  VI,  secs.  6  and  16.) 


T\ble  42. _ Distribution  of  country  elevator  shipments  of  specified  grains  from 

specified  States  to  smaller  points^  during  the  crop  years  1912-13  to  1916-1 1. 


state. 

All  grains. 

Wheat. 

Corn. 

Oats. 

Rye  and  barley. 

Total 
number 
cars 
shipped 
to  all 
destina¬ 
tions. 

Per 

cent 

shipped 

to 

smaller 

points. 

Total 
number 
cars, 
shipped 
to  all 
destina¬ 
tions. 

Per 

cent 

shipped 

to 

smaller 

points. 

Total 
number 
cars 
shipped 
to  all 
destina¬ 
tions. 

Per 

cent 

shipped 

to 

smaller 

points. 

Total 
number 
cars 
shipped 
to  all 
destina¬ 
tions. 

Per 

cent 

shipped 

to 

smaller 

points. 

Total 
number 
cars 
shipped 
to  all 
destina¬ 
tions. 

Per 

cent 

shipped 

to 

smaller 

points. 

Iowa . 

Ohio . 

Missouri . 

Michigan . 

Ilhnois . 

Indiana . 

Nebraska . 

Kansas . 

Oklahoma . 

Minnesota . 

Wisconsin.. . 

South  Dakota . 

North  Dakota . 

Montana . 

14  States. ... 

186,430 
46,369 
19,938 
20,236 
249, 636 
75,997 
\ 132, 317 
117,909 
27, 039 
185,683 
15,809 
!  133,998 
i  188,154 

1  30,818 

10.80 

10.29 

9.31 

8.87 

8.08 

7.42 

7.21 

6.77 

5.39 

4.37 

4.06 

2.48 

2.24 

2.19 

8,676 
13,443 
14, 517 
9,454 
22,915 
19,256 
61,692 
98,655 
21,116 
77,622 
790 
67,610 
143,067 
29,335 

3.9 

7.9 

5.4 
8.8 
2.6 

7.8 

4.4 
6.3 
5.0 
1.7 

.9 

1.0 

2.5 

1.9 

89,374 
16,354 
4,355 
1,802 
140,678 
30,942 
55, 126 
16,751 
5,024 
22,594 
199 
24,010 
179 
36 

10.4 
10.0 
23.9 

.5 

10.0 

7.2 

10.5 
9.9 
5.7 

7.1 
1.0 

5.3 

1.1 

80,615 

16,194 

965 

5,977 

83,899 

24,785 

13,797 

1,638 

831 

40,655 

3,879 

19,184 

11,543 

1,135 

11.7 

12.5 

3.1 

7.8 
-  6.7 

7.‘3 

7.5 
7.3 

13.1 

6.8 
5.7 
4.9 

2.5 
11.0 

7,765 
378 
101 
3,003 
2,144 
1,014 
1,702 
865 
68 
44,812 
10,941 
23, 194 
33,365 
312 

14.4 

10.6 

1.0 

16.0 

.1 

9.7 

3.7 

2.4 

1.5 
5.4 

/  3.7 

1.8 
1.1 
1.0 

jl,  430, 333 

6.31 

588,148 

3..  6 

407,424 

9.5 

305,097 

8.1 

129,664 

4.2 

1  Those  receiving  less  than  5,000  cars  during  the  period. 


Section  12.  Shipments  to  mills  by  kind  of  grain. 

Wheat.— As  appears  from  Table  43,  the  great  bulk  of  the  mill 
flow  is  wheat,  nearly' one-fourth  of  this  gram  going  to  these  local 
establishments. 


142 


COUNTRY  GRAIN  MARKETING. 


Table  43— Distribution  of  country  elevator  shipments  of  specified  grains  from 
specified  States  to  mills  during  the  crop  years  1912-13  to  1916-17. 


State. 

All  grains. 

Wheat. 

Corn. 

Oats. 

Rye  and  barley. 

Total 
number 
cars 
shipped 
to  all 
destina¬ 
tions. 

1  Per 
cent 
shipped 
to 

mills. 

Total 
number 
cars 
shipped 
to  all 
des^na- 
tions. 

Per 

cent 

shipped 

to 

mills. 

Total 
number 
cars 
shipped 
to  all 
destina¬ 
tions. 

Per 

cent 

shipped 

to 

mills. 

Total 
number 
cars 
shipped 
to  all 
destina¬ 
tions. 

Per 

cent 

shipped 

to 

mills. 

Total 
number 
cars 
shipped 
to  all 
destina¬ 
tions. 

• 

Per 

cent 

shipped 

to 

mills. 

Oklahoma . 

Michigan . 

Montana . 

Kansas . 

Ohio . 

Missouri . 

Indiana . 

South  Dakota . 

North  Dakota . 

Minnesota . 

Wisconsin . 

Iowa . 

Nebraska . 

Illinois . 

14  States. .. . 

27,039 
20,236 
30, 818 
117,909 
46,369 
19,938 
75,997 
133,998 
188, 154 
185, 683 
15, 809 
186, 430 
132,317 
249,636 

46.61 

39.76 

31.69 

27.32 

23.15 

22.00 

14.21 
11.92 

8.62 

8.40 

7.51 

7.37 

5.21 
4.50 

21,116 
9,454 
29,335 
98,655 
13,443 
14,517 
19,256 
67,610 
143,067 
77,622 
790 
8,676 
61,692 
22, 915 

50.8 
59.0 

33.2 

31.8 

46.5 
24.0 

36.7 

21.8 

11.2 

16.6 
14.7 

5.8 

9.8 
15.9 

3,024 
1,802 
36 
16,751 
16, 354 
4,355 
30,942 
24,010 
179 
22,594 
199 
89,374 
55, 126 
140,678 

34.0 

52.6 

25.0 

4.8 
15.5 
20.4 

6.9 
2.1 

.6 

3.2 
.5 

6.4 

1.2 
4.7 

■  831 

5,977 
1,135 
1,638 
16,194 
965 
24,785 
19,184 
11,543 
40,655 
3,879 
80,615 
13,797 
83,899 

18.0 

20.4 

1.8 

2.4 

11.9 

1.7 

6.1 

2.2 

1.3 
1.9 

2.3 
9.0 
1.2 
1.2 

68 

3,003 

312 

865 

378 

101 

1,014 

23,194 

33,365 

44,812 

10,941 

7,765 

1,702 

2,144 

.  41.2 

10.2 
.6 
1.2 

8.7 

9.0 

1.5 

2.7 
9.0 
3.0 
2.4 

.2 

1,430,333  1 

11.84 

588,148 

21.8 

407,424 

5.7 

305,097 

4.8 

129,664 

2.5 

The  proportions  of  wheat  thus  shipped  are  especially  high  in  the 
area  south,  west,  and  east  of  Illinois  and  Iowa,  which  is  tributary  to 
smaller  markets  than  Chicago  and  Minneapolis.  To  the  east  of  the 
Mississippi  the  milling  industry  uses  largely  soft  wheat,  especially 
the  country  mills,  and  supplies  are  drawn  chiefly  from  immediately 
tributary  territory.  (Ch.  IV,  sec.  6.) 

In  the  Southwest,  particularly  Xansas  and  Oklahoma,  where  hard 
wheat  is  extensively  used,  the  development  of  the  milling  industry, 
as  previously  pointed  out,  has  tended  to  be  relatively  much  more 
decentralized  than  in  the  Northwest.  Though  Kansas  City  is  an 
important  milling  center,  it  is  much  more  a  shipping  and  forwarding 
than  a  consuming  inarket.  ( Vol.  II,  Ch.  IV,  sec.  4. )  While  a  number 
of  southwestern  inills  are  located  at  Kansas  City,  its  importance  as 
a  milling  center  is,  relative  to  the  southwestern  production,  very 
much  less  than  that  of  Minneapolis  to  the  northwestern  production 
a  much  larger  proportion  of  the  southwestern  production  being  lo¬ 
cated  outside  this  terminal  market  and  at  small  interior  points  than 
IS  the  case  in  the  Northwest.  (Ch.  IV,  secs.  5  and  6.) 

Other  grains. — A  somewhat  higher  proportion  of  corn  than  of 
oats  moves  to  the  mills.  This  would  appear  to  indicate  that  corn 
milling  IS  somewhat  more  important  than  the  milling  of  oats,  the 
shipments  of  the  latter  grain  outside  of  those  to  mills  manufacturino" 
oat  meal  being  probably  chiefly  to  feed  mills.  ^ 

The  relative  proportions  of  rye  and  barley  combined  which  are 

shipped  to  mills  are  much  smaller  than  of  either  wheat,  corn  or 
oats.  ’ 

Section  13.  Shipments  to  feeders  by  kind  of  grain. 

The  proportions  of  wheat  shipments  and  also  of  rye  and  barley 
combined  to  feeders  is  insignificant.'^  Both  wheat  and  rye  are  used 
chiefly  for  human  consumption  and  barley  is  or  was  largely  so, 


SALE  AND  SHIPMENT  OF  GRAIN. 


143 


although  a  considerable  proportion  of  the  last  is  sold  for  feed. 
A  very  much  higher  proportion  of  corn  than  of  oats  is  shipped  to 
feeders,  presumably  owing  to  the  consumption  of  corn  by  the  cattle 
and  hog  raising  industries. 


Table  44. — Distribution  of  country  elevator  shipments  of  specified  grains  from 
specified  States  to  feeders  during  the  crop  years  1912-13  to  1916-17. 


State. 

All  grains. 

Wheat. 

Com. 

Oats. 

- * - 

Rye  and  barley. 

Total 
number 
cars 
shipped 
to  all 
destina¬ 
tions. 

Per 

cent 

shipped 

to 

feeders. 

Total 
number 
cars 
shipped 
to  all 
destina¬ 
tions. 

Per 

cent 

shipped 

to 

feeders. 

Total 
number 
cars 
shipped 
to  all 
destina¬ 
tions. 

Per 

cent 

shipped 

to 

feeders. 

Total 
number 
cars 
shipped 
to  all 
destina¬ 
tions. 

Per 
cent 
shipped 
to  . 

feeders. 

Total 
number 
cars 
shipped 
to  all 
destina¬ 
tions. 

Per 

cent 

shipped 

to 

feeders. 

132,317 

6.15 

61,692 

55,126 

13.3 

13, 797 

5.5 

1,702 

0.3 

Michigan . 

20, 236 

3.91 

9,454 

.  0.3 

1,802 

20.8 

5,977 

6.4 

3,003 

.  3 

19, 938 

3.50 

14,517 

4,355 

14.5 

965 

6.9 

101 

1.0 

27, 039 

2. 15 

21,116 

5,024 

10.8 

831 

4.5 

68 

2.9 

T0W3. . 

186, 430 

2.11 

8,676 

.4 

89,374 

3.2 

80,615 

1.2 

7,765 

.3 

15,809 

2.04 

790 

199 

50.8 

3,879 

5. 5 

10,941 

•  1 

Ohio . 

46,369 

1.69 

13,443 

.1 

16,354 

3.4 

16, 194 

1.3 

378 

.3 

Kansas . 

117,909 

1.46 

98,655 

.1 

16, 751 

9.1 

1,638 

8.2 

865 

.  9 

Indiana . 

75,997 

1.40 

19,256 

.1 

30,942 

2.7 

.  8 

1,014 

South  Dakota . 

133,998 

1.25 

67,610 

.1 

24,010 

4.6 

19, 184 

2.4 

23, 194 

.  1 

M  ontana . 

30,818 

1.12 

29,335 

.6 

36 

5.6 

1,135 

15. 3 

31^ 

1. 3 

185, 683 

.80 

77,622 

22,594 

3.3 

40, 655 

1.6 

44,812 

.  2 

Illinois . 

249,636 

.  58 

22,915 

.1 

140,678 

.9 

83,899 

-  .2 

2, 144 

North  Dakota . 

188, 154 

.18 

143,067 

179 

9.5 

11, 543 

2. 5 

33, 366 

.  1 

14  States.... 

1,430,333 

1.63 

588, 148 

.1 

407,424 

1 

4.4 

305,097 

1.6 

129,664 

.1 

Section  14.  Shipments  to  interior  brokers  and  others  by  kind  of  grain. 

Brokers. — The  activities  of  the  interior  brokers  are  most  im¬ 
portant  in  the  case  of  corn  and  oats.  ^  (Table  45.)  Relatively  their 
operations  are  most  extensive  in  Ohio,  Michigan,  and  Oklahoma. 
As  previously  indicated,  these  States  are  so  located  with  reference 
to  the  generally  eastward  and  southeasterly  current  of  the  grain 
movement  that  the  terminal  markets  exercise  little  effect  on  the 
grain  shipments  from  these  States.  (Ch.  Vl,  secs.  4  and  7.)  This 
fact  affords  the  maximum  opportunity  for  the  operations  of  this 
class  of  dealers  who  are  of  comparatively  little  importance  in  the 
territory  tributary  to  Chicago  and  Minneapolis  (especially  Minne¬ 
sota  and  the  Dakotas),  where  the  attractive  power  of  these  two 
markets  presumably  affords  small  scope  for  their  activities.  In  the 
area,  south  and  west  of  Iowa  and  Illinois  and  east  of  Illinois  the 
influence  of  the  smaller  terminal  markets  is  less  and  these  brokers 
find  a  better  opportunity  for  the  conduct  of  their  operations. 

The  consumptive  demands  of  the  mills  and  the  terminals  for 
wheat  and  rye,  together  with  the  extent  to  which  malting  barley  is 
sold  by  sample,  probably  explain  why  so  much  smaller  proportions 
of  wheat,  and  rye  and  barley  combined,  are  sold  to  interior  brokers 
as  compared  with  either  corn  or  oats,  which  are  used  largely  for 
feed. 


144 


COUNTRY  GRAIN  MARKETING. 


Table  45. — Distribution  of  country  elevator  shipments  of  specified  grains  from 
specified  States  to  interior  brokers  during  the  crop  years  1912-13  to  1916-17. 


State. 

All  grains. 

Wheat. 

Corn. 

Oats. 

Rye  and  bar¬ 
ley. 

Total 

number 

cars 

shipped 
to  all 
destina¬ 
tions. 

Per 
cent 
shipped 
to  in¬ 
terior 
bro¬ 
kers. 

Total 
number 
cars 
shipped 
to  all 
destina¬ 
tions. 

Per 
cent 
shipped 
to  in¬ 
terior 
bro¬ 
kers. 

Total 
number 
cars 
shipped 
to  all 
destina¬ 
tions. 

Per 
cent 
shipped 
to  in¬ 
terior 
bro¬ 
kers. 

Total 
number 
cars 
shipped 
to  all 
destina¬ 
tions. 

Per 
cent 
shipped 
to  in¬ 
terior 
bro¬ 
kers. 

Total 
number 
cars 
shipped 
to  all 
destina¬ 
tions. 

Per 
cent 
shipped 
to  in¬ 
terior 
bro¬ 
kers. 

Ohio . 

Michigan . 

Oklahoma . 

Kansas . 

Indiana . 

Nebraska . 

Wisconsin . 

Illinois . 

Iowa . 

South  Dakota . 

Montana . 

Missouri . 

Minnesota . 

North  Dakota . 

14  States.... 

46,369 
20,236 
27,039 
117,909 
75,997 
132,317 
15,809 
249,636 
186  430 
133,998 
30,818 
19,938 
185,683 
188,154 

28.40 
18.29 
17.39 
14.87 
11.76 
9. 44 
7. 10 
3.30 
2. 97 
2.69 
1.94 
.76 
.57 
.02 

13,443 

9,454 

21,116 

98,655 

19,256 

61,692 

790 

22,915 

8,676 

67,610 

29,335 

14,517 

77,622 

143,067 

14.4 

9.6 
11.6 

13.5 
3.8 

2.7 
1.3 
1.1 

.7 

.7 

1.5 

.3 

.1 

16,354 

1,802 

5,024 

16,751 

30,942 

55,126 

199 

140,678 

89,374 

24,010 

36 

4,355 

22,594 

179 

32.8 

4.1 

37.6 
21.4 

14.7 
16.6 
28.1 

4.3 

3.3 

9.1 

2.0 

1.7 

16,194 
5,977 
831 
1,638 
24,785 
13,797 
3,879 
83,899 
80,615 
19,184 
1,135 
965 
40,655 
11,543  ■ 

35.8 

24.7 

42.5 

35.1 

14.1 

11.5 

24.2 
-  2.2 

2.5 

3.6 
11.1 

2.4 
1.2 
•  2 

378 

3,003 

68 

865 

1,014 

.1,702 

10,941 

2,144 

7,765 

23,194 

312. 

101 

44,812 

33,365 

18.2 

41.5 

32.3 

6.7 
16.1 

1.8 
1.1 

.2 

6.4 

1.2 

6.7 

.3 

1,430,333 

5. 65 

588,148 

3.8 

407,424 

8.9 

305,097 

6.4 

129,664 

2.0 

Miscellaneous  shipments. — The  movement  of  grain  to  miscel¬ 
laneous  factors  includes  maltsters  and  other  converters,  private  ter- 
ininal  elevators,  retailers,  etc.  The  high  proportion  of  miscellaneous 
shipments  reported  for  Nebraska  is  due  to  the  existence  of  a 
number  of  private  terminal  elevators  located  at  relatively  small 
mterior  points  which  receive,  in  total,  a  considerable  volume  of  grain. 
The  only  other  btate  reporting  a  percentage  of  miscellaneous  ship¬ 
ments  greatly  above  the  average  is  Wisconsin  (Table  36),  where  the 
maltsters  absorb  large  volumes  of  barley. 

Section  15.  Consignment  and  direct  selling. 

Gteographical  variations.-^As  shown  in  the  foregoing  discussion, 
a  trifle  less  than  R)  per  cent  of  the  grain  shipped  by  all  country  ele¬ 
vators  and  warehouses  goes  to  the  terminal  markets  and  about  7  per 
cent  to  the  smaller  markets.  ;(Table  40.)  Of  775,100  cars  of  grain, 
shipped  to  both  of  these  destinations  and  for  which  the  method  or 
sale  was  reported,  about  Tl-per  cent  was  disposed  of  on  consignment, 
i.  e.,  shipped  to  some  commission  man  or  oiher  agent  to  be  disposed 
of  by  him  for  a  commission  upon  its  sale.  ^'The  balance  of  this  grain 
(about  29  per  cent)  is  sold  directly  by  the  country  elevator  or  ware¬ 
house  to  grain-buying  concerns  with  headquarters  in  these  terminal 
and  smaller  markets.  (Appendix  2,  inquiry  15.)  In  most  cases 
these  latter  sales  are  on  the  basis  of  acceptances  of  bids  sent  out  bv 
wire  or  by  mail  under  the  terms  of  which  the  grain  is  to  be  shipped 
to  or  IS  “  to-arrive  ”  at  the  market  within  a  specified  period  of  clays; 
perhaps  most  commonly  10,  20,  or  30,  though  any  period  may  be  fixed 
by  the  contract  covering  the  shipment,  subject  in  the  larger  markets  to 
the  rules  of  the  various  exchanges  governing  such  contracts.  (Vols. 
II  and  JII.)  In  other  cases  the  direct  sales  made  were  “  op4rack  ”  in 
the  country  to  the  representatives  of  grain-buying  concerns  iocated 
in  these  markets.  Table  46  presents  the  proportion  of  consignment 


S.VLE  AND  SHIPMENT  OF  GRAIN 


145 


and  direct  sales  to  terminal  and  smaller  markets  made  by  country 
elevators  and  warehouses  in  the  United  States. 

Table  46. — Numhei'  and  proportion  of  consignments  and  direct  sales  to  terminal 
and  smaller  markets  made  by  elevators  and  warehouses  in  specified  States  and 
grand  divisions  during  the  crop  years  1912-13  to  1916-17. 


state  or  division.i 


•  ELEVATORS, 

Oklahoma . . . 

Michigan . 

Ohio'. . 

Indiana . 

Illinois . 

Nebraska . 

Kansas . 

Iowa . 

Montana . 

Missouri . 

North  Dakota . 

Wisconsin . 

Minnesota . . 

South  Dakota . 

Southern  Division . 

Middle  Atlantic  Division . 

Mountain  and  Pacific  Division. . . 

Total . 


WAREHOUSES, 

Mountain  and  Pacific  Division..., 

Middle  Atlantic  Division . 

Central  Division . 

Southern  Division . 

Total . 

Grand  total . 


Total 

cars. 

Consignment. 

Sold  direct. 

Number 
of  cars. 

Per  cent 
of  total. 

Number 
of  cars. 

Per  cent 
of  total. 

7,668 

1,122 

14.63 

6,546 

85.37 

6,691 

1,461 

21.84 

5,230 

78.16 

18,530 

5,996 

32.36 

12,534 

67.64 

35,384 

17,194 

48.59 

18, 190 

51.41 

154,014 

92,910 

60.33 

6L  104 

39.67 

61,848 

38,929 

62.94- 

22,919 

37.06 

50,029 

35,285 

70.53 

14;  744 

29.47 

89,928 

64,618 

71.86 

25,310 

28. 14 

9,577 

7, 745 

80.87 

1,832 

19.13 

11,511 

9,511 

82.63 

2,000 

17.37 

99, 187 

89, 142 

89.87 

10,045 

10. 13 

11,003 

10,046 

91.30 

957 

r8.70 

117,580 

108, 161 

91.99 

9,419 

/8.01 

66,573 

61,640 

92.59 

4;  933 

■J  7.41 

4,657 

423 

9.08 

4,234 

<90. 9a 

3,073 

338 

ii:oo 

2, 735 

89.00 

7,833 

1,647 

21.03 

6, 186 

78.97 

755,086 

546, 168 

72.33 

208,918 

27.67 

12,774 

702 

5.50 

12,072 

94.50 

508 

155 

30.51 

353 

69.49 

5,843 

2,993 

51.22 

2,850 

48. 78 

889 

487 

54.78 

402 

45.22 

20,014 

4,337 

21.67 

15,677 

78.33 

775, 100 

550,505 

71.02 

224,595 

28.98 

^  For  States  included,  see  Ch.  II,  sec.  5. 


^  ARiATiONs  BETWEEN  GRAINS. — While  nearly  three-fourths  of  the 
total  grain  sold  and  shipped  by  country  elevators  and  warehouses  to 
the  various  terniinal  and  smaller  markets  is  reported  as.  handled  on 
consignment,  the  variations  in  the  proportions  of  consignment  and 
direct  sales  as  between  the  different  kinds  of  grain  are  considerable, 
as  appears  from  the  following  table : 


Table  47. — Proportion  of  consignment  and  direct' sales  to  terminal  and  smaller 
markets  made  by  all  country  elevators  and  warehouses  reporting  during  the 
crop  years  1912-13  to  1916-17. 


.  Grain. 

Number 
of  cars 
reported. 

Number 
sold  on 
consign¬ 
ment. 

Percentage 
sold  on 
consign¬ 
ment. 

Number 

sold 

direct. 

Percentage 

sold 

direct. 

Com . 

210,114 
172,869 
307, 946 
17, 523 
66,648 

131,528 
120,097 
225,518 
14, 198 
59, 164 

62.60 
69  47 

78,586 

52,772 

82,428 

3,325 

7,484 

37.40 
—  30.53 
26. 77 
18.98 
11.23 

Oats .  ‘ 

Wheat . 

73.23 
81.02 
88. 77 

Rve . 

Barley . 

All  grains,  all  elevators  and  ware¬ 
houses . 

775,100 

550,505 

71.02 

224,595 

28.98 

146 


COUNTRY  GRAIN  MARKETING. 


Eye  and  barley  are  most  extensively  sold  upon  consignment,  espe¬ 
cially  the  latter.  Oats,  and  especially  corn,  are  handled  to  the  least 
extent  on  consignment  and  to  greatest  extent  on  a  direct  basis.  f 
Wheat  occupies  an  intermediate  position  between  corn  and  oats  on 
the  one  hand  and  rye  and  barley  on  the  other.  •  | 

Section  16.  Explanation  of  geographical  variations  in  consignment  and  j 
direct  selling.  j 

Variations  in  grains  by  States. — These  variations  are  explainable  | 
primarily  by  the  location  of  the  grain-producing  areas  with  refer¬ 
ence  to  the  method  of  transacting  business  within  such  areas.  The 
following  table  presents  the  proportion  of  carloads  of  different  kinds  i 
of  grain  sold  to  terminal  and  smaller  markets  on  consignment  by  | 
country  elevators  in  the  principal  producing  States  during  the  crop  . 
years  1912-13  to  1916-17.  Appendix  Table  11  presents  the  figures 
in  detail. 


Table  48. — Proportion  of  total  cars  of  different  kinds  of  grain  sold  to  tei'nunal 
and  smaller  meirkets  by  country  elevators  ^  in  specified  States  duidny  the  crop 
years  1912-13  to  1916-17. 


State. 

All 

grains. 

Barley. 

Rye. 

Wheat. 

Oats. 

Com. 

South  Dakota . 

92.59 

96.77 

97.01 

95.34 

88.22 

82.13 

Minnpsnta .  . 

91.99 

91.39 

85.52 

92.26 

93.02 

93.08 

Wisenri.'siTi .  . 

91.30 

92.24 

88.19 

94.96 

90.86 

97.22 

Nnrth  Dakota .  . 

89.87 

92.15 

90.41 

89. 28 

90.42 

99.31 

Afis.snnri . 

82.63 

100. 00 

97.87 

84.34 

79.22 

76.50 

MoTitaria . 

80. 87 

62. 50 

92.94 

82.32 

27. 82 

100.00 

Tnwa  . 

71.86 

75.12 

90.24 

76.57 

75.40 

67.77 

Kansas . . 

70.53 

90. 49 

73.27 

70.14 

79.96 

70.93 

Nfibra.ska . 

62.94 

93.26 

77.83 

59.08 

73.61 

64.81 

Illinois  . 

60.33 

94.64 

81.44 

67.69 

J^.26 

56.77 

Tnrliana  . 

48.59 

22.50 

53.15 

46.23 

44. 58 

53.22 

Ohio  .  . 

32.36 

23.08 

38.89 

33.35 

31.35 

32.66 

Miohigan  . 

21.84 

9.52 

15.83 

19. 35 

27.23 

23.10 

Oklahoma . 

14.63 

9.09 

13.65 

27. 73 

21.01 

All  elevators . 

72.33 

91.00 

81.29 

75.53 

70.26 

62.89 

1 

1  Warehouses  not  included. 


•  • 

An  examination  of  this  table  shows  that  the  most  important  con¬ 
signing  States,  both  in  total  and,  with  a  few  exceptions,  for  each 
grain,  are  the  four  comprising  the  northwestern  group. together  with 
Wisconsin  and  Missouri.  The  situation  in  this  last  State  is  not 
susceptible  of  explanation  by  any  information  or  data  obtained,  and 
for  that  reason  is  not  further  considered, 
w  All  six  of  the  foregoing  States,  except  Missouri,  are  tributary 
■  chiefly  to  the  three  markets  of  Duluth,  Minneapolis,  and  Milwaukee, 
the  remainder  of  the  14  principal  producing  States  to  the  various 
other  primary  markets.  Thus,  as  shown  by  Table  37,  Duluth  and 
Minneapolis  each  obtain  above  95  per  cent  of  their  country  receipts 
from  this  area  and  Milwaukee  about  65  per  cent. 

Table  49  presents  the  reported  receipts  for  each  of  the  five  prin¬ 
cipal  grains  at  10  of  the  principal  primary  markets  of  the  United 


< 


12  As  published  by  the  exchanges. 


147 


SALE  AND  SHIPMENT  OF  GRAIN. 

States,  in  comparison  with  the  proportion  of  consignment  sales  re¬ 
ported  in  these  marketsd^ 


Table  49. — Proportion  of  grain  sold  on  consignment  in  specified  markets  in  com¬ 
parison  unth  the  receipts  of  specified  kinds  of  grain,  1912-13  to  1916-17. 


Market. 

Percentage 
of  all  grains 
reported  by 
country 
elevators  as 
sold  on  con¬ 
signment. 

Percentage 
ofall  grains 
received  on 
consign¬ 
ment  ac¬ 
cording  to 
terminal 
dealers.! 

Average  annual  receipts  of— 

Rye 

(thou¬ 

sand 

bushels). 

Barley 

(thou¬ 

sand 

bushels). 

Com 

(thou¬ 

sand 

bushels). 

Oats 

(thou¬ 

sand 

bushels). 

Wheat 

(thou¬ 

sand 

bushels). 

Minneapolis . 

Duluth . 

Milwaukee . 

Totals  markets . 

Kansas  City . 

St.  Louis . 

Chicago . 

Omaha . 

Cincinnati . 

Indianapolis . 

Peoria . 

Total?  markets . 

Total  10  markets . 

Per  cent  of  total  shipments  r 
Per  cent  of  total  shipments  r 
Per  cent  of  total  cars  report 
by  country  elevators . 

91.38 

90.60 

90.13 

290.3 

68.0 

82.5 

6,882 

3,299 

3,308 

33,171 

9,424 

18,840 

9,366 

862 

13,665 

30,446 

5,624 

28,156 

120,151 

56,884 

8,062 

91.06 

3  80.3 

13,489 

61,435 

23,893 

64,226 

185,097 

80.65 

77.73 

77*33 

71.09 

69.24 

57.71 

53.54 

67.7 
56.0 

57.4 

57.5 
66.1 

47.8 
50.4 

375 

518 

4,259 

805 

649 

147 

468 

1,084 

1,883 

28,033 

872 

905 

3,001 

20,422 
19,784 
100,592 
27,352 
8,504 
20, 119 
23,843 

9,712 

23,758 

136,687 

15,846 

7,014 

11,776 

12,779 

55,612 

34,203 

65,412 

21,275 

5,955 

3,426 

3,079 

74.81 

8  57.6 

7,221 

35,778 

220,616 

217,572 

188,962 

80.90 
eceived  by  3 
eceived  by  7 
ed  sold  on  C( 

8  64.4 
markets. .  - 

markets _ 

Dnsignment 

20,710 

65.13 

34.87 

81.02 

97,213 

63.20 

36.80 

88.77 

244,509 

9.8 

90.2 

62.60 

281,798 
22. 79 
77.21 

69.47 

374,059 

49.48 

50.52 

73.23 

1  See  tables  in  Vol.  IV. 

2  Disregarding  receipts  handled  by  main  ofBce  of  line  elevator  companies. 
8  Unweighted  average. 


A  study  of  this  table  shows  that,  whether  based  upon  country 
elevator  reports  or  upon  the  returns  of  terminal  market  dealers,  ^n- 
neapolis,  Duluth,  and  Milwaukee  are  the  three  leading  consignment 
markets  of  Ihe  United  States,  while  in  Chicago  and  the  other  mar¬ 
kets  to  the  south,  and  the  States  tributary~Thereto,  the  consignment 
business  is  relatively  less  and  the  direct  business  relatively  more 
important.  This  fundamental  fact,  which  in  large  measure  is  re¬ 
sponsible  for  the  variations  in  consignment  and  direct  business  be¬ 
tween  the  different  grains,  is  itself  explained  in  very  large  measure 
by  certain  of  the  same  factors  as  were  referred  to  in  accounting 
for  the  general  grain  movement  from  the  country  elevator  in  a 
preceding  section  of  this  chapter,  i.  e.,  financing  by  commission  houses, 
the  sale  of  barley  by  sample,  and  Minneapolis  consumption.  (Sec.  6.) 

Effect  of  financing  on  consignments. — In  Wisconsin,  and  espe¬ 
cially  the  four  Northwestern  States  which  are  tributary  to  Duluth, 
^linneapolis,  and  Milwaukee,  the  proportion  of  financing  by  terminal 
market  concerns  is  far  more  important  than  in  any  other  area.y  Most 
of  this  financing  is  done  by  commission  houses  under  the  terms  of 
which  arrangements  the  elevators  financed  usually  agree  to  consign 


^8  The  percentage  of  consignment  sales  is  given  on  the  basis  of  both  the  returns  made 
by  country  elevators  and  by  terminal  market  dealers.  (Vol.  IV.)  It  will  be  observed  that 
the  proportions  of  consignment  business  on  the  latter  basis  run  considerably  below  the 
percentages  reported  bv  country  elevators.  The  explanation  of  this  is  probably  to  be 
found  largelv  in  the  fact  that  in  the  reports  of  the  terminal  dealers  there  are  included 
a  considerabie  proportion  of  cars  bought  directly  in  other  terminal  markets,  whereas  the 
reports  of  the  country  elevators  relate  only  to  grain  shipped  in  from  the  country.  The 
terminal  market  returns,  however,  are  given  for  .the  purposes  of  comparison  and  also  in 
order  that  it  may  be  understood  that  reported  consignments  are  on  two  bases  in  the 
Grain  Trade  Report  (Vol.  IV). 


148 


COUNTKY  GRAIN  MARKETING. 


all  or  a  very  large  proportion  of  their  grain  to  the  financing  house. 
Competition  among  the  commission  houses  in  this  financing  which  is 
largely  peculiar  to  the  Northwest  has  resulted  in  developing  the  con- 
'  si^ment  business  in  this  area  in  a  high  degree.  (Ch.  X,  sec.  4.) 

Barley  and  the  consignment  business. — The  effect  of  financing 
is  coupled  with  the  further  facts,  also  previously  referred  to,  that 
barley  and  wheat,  of  which  grains  the  area  under  discussion  is  a 
heavy  producer,  are  sold  largely  by  sample,  the  former  generally 
and  the  latter  particularly,  in  Minneapolis. 

The  primary  use  for  high-grade  barley  was  for  malting,  at  least 
prior  to  prohibition.  The  bulk  of  the  low-grade  barley  is  used  for 
feed  and  a  considerable  proportion  therefore  remains  on  the  farm  for 
this  use.  ^The  bulk  of  the  high-grade  barley  on  the  other  hand  was 
marketed,  and  when  marketed  was  sold  on  consignment.^  The  reason 
for  this  method  of  selling  is  to  be  found  chiefly  in  the  fact  that  malt¬ 
ing  barley  is  bought  almost  entirely  upon  the  basis  of  color  and  gen¬ 
eral  appearance^In  the  northwestern  area,  as  well  as  elsewhere,  it 
shows  great  variations  in  both  these  factors,  and  as  a  result  it  is 
■  almost  impossible  satisfactorily  to  buy  and  sell  it  on  a  grade  basis.^^ 
j^most  every  maltster  has  his  own  individual  conception  of  the  char¬ 
acter  of  the  barley  which  he  wishes  to  buy,  and  in  this  conception 
color  and  appearance  are  usually  the  determining  factors.  Thus  the 
tables  for  the  display  of  barley  samples  at  Minneapolis  and  elsewhere 
are  usually  found  on  the  best-lighted  sections  of  the  floor,  and  such 
samples  will  frequently  be  found  on  the  window  ledges  as  well  as  the 
tables.  Few  large  buyers  of  malting  barley  are  willing  to  purchase 
this  grain  except  after  a  minute  examination  of  its  physical  pecu¬ 
liarities. 

Minneapolis  wheat  and  rye  consumption  and  consignments. — 
The  milling  requirements  of  the  Minneapolis  mills  represent  the 
^  greatest  concentrated  demand  for  grain,  especially  wheat,  in  the 

country,  and  this  demand  is  an  important  factor  in  the  development 
of  the  northwestern  consignment  business.  Most  of  these  mills  in 
the  manufacture  of  flour  endeavor  so  far  as  possible  to  standardize 
their  various  brands  and  to  produce  year  in  and  year  out  under  such 
brands  a  uniform  grade  and  quality  of  flour. 

Having  in  mind,  therefore,  certain  milling  qualities  to  conform 
more  or  less  definitely  to  certain  milling  standards  and  also  because 
of  the  mixing  practices  of  the  terminal  elevators  (Vol.  HI),  the 
mills  at  Minneapolis  quite  generally  prefer  to  buy  country-run  grain 
on  a  sample  basis  and  will  frequently  pay  premiums  over  current 
prices  for  particular  grades  because  of  certain  milling  qualities  or 
peculiarities.  ^In  consequence,  Minneapolis  is  extremely  important 
as  a  consignment  market  for  wheat  and  to  a  lesser  extent  for  rye. 

Situation  outside  of  Wisconsin  and  the  Northwest. — In  the  area 
tributary  to  Chicago  and  the  markets  to  the  south  there  is  next  to 
no  financing  hy  terminal  market  concerns  outside  of  a  small  amount 
in  Iowa  and  Illinois.>The  barley  crop  is  relatively  very  small  and 
wheat  consumption  by  terminal  market  mills  inconsiderable  as  com- 

The  same  is  also  true,  within  certain  limits,  of  wheat.  See  next  subdivision. 

Except  that  mill  sample  buying  probably  tends  to  account  partially  for  the  large 
consignment  business  at  Kansas  City.  Even  more  important  probably  at  that  market 
in  creating  a  high  proportion  of  consignments  has  been  the  action  of  the  terminal  ele¬ 
vators  in  engaging  in  the  commission  business  and  soliciting  consignments  in  competition 
with  the  regular  commission  houses.  (Vols.  II  and  III.) 


SALE  AND  SHIPMENT  OF  GRAIN. 


149 


pared  with  Minneapolis.  This  area,  moreover,  is  a  heavy  producer 
of  oats  and  especially  corn.  Both  of  these  ji^raiiis  are  used  largely 
for  feed.  In  consequence  they  can  be  bought  much  more  satisfac¬ 
torily  by  grade  than  either  barley  or  wheat  and  there  is  less  necessity 
for  sample  buying.  In  this  area,  therefore,  grain  can,  on  the  whole, 
be  sold  satisfactorily  on  a  grade  basis  to  a  much  greater  degree  than 
in  the  Northwest,  and  there  is  a  much  greater  volume  of  “  to-arrive  ” 
and  “  on-track  ”  buying  by  terminal  market  organizations. 

Section  17.  Explanation  of  variations  in  grains. 

These  geographical  differences  largely  explain  the  variations  in 
consignment  and  direct  sales  as  between  the  different  kinds  of  grains. 

As  has  alreadjT^  been  explained  in  this  chapter,  the  production  of 
rye  and  barley  is  relatively  highly  localized  in  Wisconsin,  Minnesota, 
and  the  Dakotas  (sec.  10),  the  bulk  of  the  grain  from  which  States 
goes  to  Minneapolis,  Duluth,  and  Milwaukee.  Table  37.) 

The  average  reported  receipts  of  barley  and  rye  at  these  three 
markets  total  nearly  65  per  cent  of  the  total  average  receipts  of  each 
of  these  grains  at  all  10  of  the  terminal  markets  tabulated  (Table  49) , 
while  87  per  cent  of  the  total  rye  and  barley  shipments  made  by  all 
reporting  country  elevators  and  warehouses  are  from  these  four 
States.^®  (See  Table  39.) 

The  situation  with  corn  and  oats  is  approximately  reversed.  Wis¬ 
consin  and  the  Northwest  produce  comparatively  little  corn,  and 
while  certain  of  these  States  are  among  the  very  largest  producers  of 
oats  the  total  volume  of  either  of  these  grains  raised  in  this  area  is 
considerably  below  the  volume  raised  in  the  remaining  14  grain- 
producing  States.  Of  the  average  corn  and  oats  receipts  at  10 
primary  markets,  Minneapolis,  Duluth,  and  Milwaukee,  the  prin¬ 
cipal  consignment  markets,  received  less  than  10  per  cent  of  the  corn 
and  only  23  per  cent  of  the  oats,  while  the  other  7  markets  received 
slightly  over  90  per  cent  of  the  former  grain  and  77  per  cent  of 
the  latter.  (Table  49.)  This  situation  largely  accounts  for  the  fact 
that  corn  and  oats,  especially  the  former,  are  sold  on  consignment  to 
a  much  less  extent  than  either  rye  or  barley. 

The  intermediate  position  of  wheat  in  the  proportion  of  consign¬ 
ment  selling  between  corn  and  oats  on  the  one  hand  and  rye  and 
barley  on  the  other  is  similarly  explainable.  The  Northwest  is  one  of 
the  largest  wheat-producing  areas,  but  the  territory  tributary  to  the 
other  markets  than  Minneapolis,  Duluth,  and  Milwaukee  is  also  a 
producing  area  of  great  importance.  As  a  result  of  this  fact  the  pro¬ 
portion  of  wheat  received  at  Minneapolis,  Duluth,  and  Milwaukee 
(about  50  per  cent)  to  the  total  received  at  all  10  markets  is  con¬ 
siderably  higher  than  the  proportion  of  corn  or  oats,  but  considerably 
lower  than  the  proportion  of  rye  or  barley.  Similarly,  in  the  terri¬ 
tory  tributary  to  the  other  markets  the  reverse  is  true,  and  the  pro¬ 
portion  of  wheat  received  at  the  other  7  markets  to  the  total  received 

i«The  high  percentages  of  consigned  rye  and  barley  reported  for  certain  States,  par¬ 
ticularly  Missouri,  are  misleading,  in  that  the  shipments  involved  are  so  small  that  they 
can  not  be  regarded  as  sufficiently  representative  to  indicate  the  situation  for  the  State 
as  a  whole  and  also  because  the  total  of  such  shipments  is  so  small  in  the  aggregate 
as  but  slightly  to  affect  the  figure  for  the  grain  as  a  whole.  So  far  as  barley  is  con¬ 
cerned  the  high  percentage  of  shipments  in  some  cases  reported  for  other  than  Wisconsin 
and  the  Northwestern  States  may  probably  be  attributed  to  the  extensive  employment 
of  sample  purchasing  referred  to  above. 


150 


COUNTRY  GRAIN  MARKETING 


at  all  10  is  considerably  above  the  proportions  of  rye  and  barley,  but  | 
considerably  below  the  proportions  of  corn  and  oats.  (Table  49.)  j 

Section  18.  Consignment  and  direct  grain  sales  in  important  cities.  \ 

The  following  table  shows  the  proportion  of  consignment  and  di-  \ 
rect  sales  of  grain  to  thirty-odd  cities  of  the  United  States  as  reported  ; 
by  country  elevators  and  warehouses.  | 

I 

Table  50. — Number  and  proportion  of  cars  of  grain  sold  by  country  elevators  t 
on  consignriient  and  direct  to  various  markets  during  the  crop  years  1912-J3 
to  1916-17.  f 


Market. 


INTERIOK. 


Consignment. 


Sold  direct. 


Total 
number 
of  cars. 


Number 
of  cars. 


Per  cent. 


Number 
of  cars. 


Percent. 


I 


Salt  Lake  City,  Utah 

Cairo,  Ill . 

Columbus,  Ohio . 

Spokane,  Wash . 

Denver,  Colo . 

Louisville,  Ky . 

Cleveland,  Ohio . 

Hutchinsom  Kans. . . 

Nashville,  Term . 

Pittsbrugn,  Pa . 

Toledo,  Ohio . 

Memphis,  Tenn . 

Detroit,  Mich . 

Buffalo,  N.  Y . 

Wichita,  Kans . 

Peoria,  Ill . 

Indianapolis,  Ind. . . . 

St.  Joseph^  Mo . 

Cincinnati,  Ohio . 

Omaha,  Nebr . 

Chicago^  Ill . 

St.  Louis,  Mo . 

Kansas  City,  Mo . 

St.  Paul,  Minn . 

Milwaukee,  Wis . 

Duluth,  Minn . 

Minneapolis,  Mimi . . 

Total . 


SEABOARD. 


Boston,  Mass . 

San  Francisco,  Calif 
Los  Angeles,  Calif. . 

Portland,  Oreg . 

Tacoma,  Wash . 

New  Orleans,  La. . . 

Seattle,  Wash . 

Galveston,  Tex . 

Philadelphia,  Pa. . . 
New  York,  N.  Y... 
Baltimore,  Md . 

Total . 

Grand  total . . 


M 


.  10 
4, 125 
426 
869 
2,285 
3,461 
4,658 
3,665 
1,039 
3,773 
6,472 
2,049 
5,302 
12,762 
6,640 
15,963 
16,877 
2,379 
9,248 
46,691 
167,586 
-  28,684 
59,508 
2,453 
40,045 
53,651 
192,701 


693,322 


61 

1,049 

1,094 

4,477 

2,903 

6,154 

4,218 

4,684 

4,299 

1,679 

5,210 


35.828 


729, 150 


133 

25 

87 

280 

506 

843 

844 
242 
932 

1,623 
566 
1,484 
4,167 
2,916 
8,546 
9,740 
1,549 
6,403 
33, 191 
129,597 
22,295 
47,994 
2, 159 
36,091 
48,607 
176,090 


536,910 


1 

12 

157 

181 

391 

269 

374 

473 

319 

1,888 


4,065 


540,975 


3.22 
5.87 
10.01 
12. 25 

14.62 
18. 10 
23.03 
23.29 

24.70 
25.08 

27. 62 
27.99 
32.65 
43.92 
53.54 

57.71 
65.11 
69. 24 
71.09 

80.65- 

‘^Coi 

•90. 13 

oorfeo 

91.^38 


77.44 


0. 10 
1.10 
3.51 
6.23 
6.35 
6.38 
7.98 
11.00 
19.00 
36.24 


11.35 


74. 19 


10 

3,992 

401 

782 

2,005 

2,955 

3,815 

2,821 

797 

2,841 

4,849 

1,483 

3,818 

8,595 

3,724 

7,417 

7,137 

830 

2,845 

13,500 

37,989 

6,389 

11,514 

294 

3,954 

5,044 

16,611 


156,412 


31,763 


28. 


22.56 


61 

1,048 

1,082 

4,320 

2,722 

5,763 

3,949 

4,310 

3,826 

1,360 

3,322 


100.00 

99.90 

98.90 
96. 49  “ 
93.77 

93. 65 
93.62 
92.02 

81.00 

63.76 


88.65 


188,175 


25. 81 


i 


Chapter  VIT. 

SECONDARY  OR  INCIDENTAL  FUNCTIONS  OF  COUNTRY 
ELEVATORS  AND  WAREHOUSES. 

•  Section  1.  Characteristics  of  incidental  functions. 

Besides  the  primary  operations  of  merchandising  and  warehousing 
many  elevators  and  warehouses  also  perform  certain  other  opera¬ 
tions,  usually  of  secondary  importance  to  either  of  their  two  primary 
functions.  Most  of  these  secondary  functions,  such  as  elevation, 
cleaning,  conditioning,  etc.,  may  be  said  to  be  directly  incidental  to 
the  operations  of  country  houses  in  the  buying,  selling,  and  storing 
of  grain.  Others,  like  the  handling  of  side  lines,  may  have  prac¬ 
tically  no  relation  to  the  grain  operations  of  the  local  house,  but 
have  been  undertaken  merely  for  the  convenience  of  patrons,  as  an 
additional  source  of  profit,  or  for  other  reasons. 

Section  2.  Elevation  and  loading  for  the  account  of  others  than  the  local 
house. 

General  description.— The  elevation  or  loading  of  grain  by  coum 
try  elevators  for  the  account  of  others  is  very  largely  the  outgrowth 
of  direct  shipping  by  farmers.  It  involves  unloading  from  the 
wagon  the  grain  hauled  in  by  the  farmer,  its  weighing,  elevation  into 
a  bin,  and  storage  either  until  all  the  farmer’s  gram  has  been  hauled 
or  the  quantity  in  the  particular  bin  is  sufficient  for  a  carload,  as 
the  case  may  be,  and  finalW  the  loading  of  the  grain  into  cars  for 
shipment  by  the  farmer.  During  the  period  between  the  receipt  of 
the  grain  and  its  loading  the  grain  is  special  binned,^  and  its  iden- 
*  tity  preserved.  There  are  cases  where  farmers  having^  stored  grain 
in  the  elevator  with  the  intention  of  later  disposing  of  it  in  the  local 
market  have  insisted  upon  shipping  when  they  have  been  dissatisfied 
with  the  price  offered  by  the  elevator.  These  instances,  however,  are 
rare,  since,  as  previously  explained,  ordinary  storage  gram  is  not 
siiecial  binned  and  the  farmer  could  not,  therefore,  if  he  later  de¬ 
sired  to  ship,  secure  the  identical  grain  which  he  had  hauled  to  the 

elevator. 

There  are  many  country  elevators  that  will  not  load  grain  for 
others  under  any  circumstances.  Practically  any  elevator  inay  re¬ 
fuse  to  accept  such  business  during  the  rush  season,  though  it  may 
be  entirely  willing  to  do  it  when  business  is  slack. 

Extent  of  practice. — In  the  nine  States  for  which  the  mqiiiry 
re^-ardino-  elevation  for  others  was  tabulated  ^  (Appendix  2,  inquiry 


1  Cli  V  SGC.  4. 

^Tliese  States  were  selected  at  random. 


151 


152  COUNTRY  GRAIN  MARKETING. 

19),  approximately  4,000  elevators  reported  as  to  whether  or  not  the}" 
performed  this  service  and  1,048  also  reported  as  to  the  extent  to 
which  it  was  done.  The  following  table  presents  the  results  of  this 
inquiry : 

Table  51. — Proportion  of  elevators  in  specified  States  reporting  elevation  or  no 
elevation  for  others,  together  with  the  extent  of  such  elevation  reported. 


state. 

Total 

elevators. 

Elevation  for 
others. 

No  elevation  for 
others. 

Number. 

Per  cent 
of  total. 

Number. 

Per  cent 
of  total. 

Michigan . 

233 

212 

146 

197 

778 

786 

618 

207 

850 

3 

4 

4 

20 

267 

296 

249 

119 

571 

1.29 
1.89 
2. 74 
10. 15 
34. 32 
37.66 
40.29 
57.49 
67.18 

230 
208 
142 
177 
•  511 

490 
369 
88 
279 

98.71 
98.11 
97.26 
89.85 
65.68 
62. 34 
59.  71 
42. 51 
32.82 

Wisconsin . 

Oklahoma . 

Missouri . 

Illinois . 

Minnesota . ! . 

South  Dakota . 

Montana . 

North  Dakota . 

Total . 

4,027 

1,533 

38.07 

2,494 

61.93 

State. 

Total 

elevators 

reportmg. 

Occasional.! 

Considerable.! 

Number. 

Per  cent 
of  total. 

Number. 

Per  cent 
of  total. 

Illinois . 

225 

101 

428 

168 

19 

96 

3 

4 

4 

196 

90 
384 
156 

18 

91 

3 

4 

4 

87.11 

89.11 
89.72 
92.86 
94.74 
94.79 

100.00 

100.00 

100.00 

29 

11 

44 

12 

1 

5 

12.89 

10.89 
10.28 

7.14 

5.26 

5.21 

South  Dakota . 

North  Dakota  . 

Minnesota . 

Missouri . 

Montana . 

Michigan . 

Oklahoma . 

Wisconsin . 

Total . 

1,048 

946 

90.27 

102 

9.73 

1  When  returned  as  a  percentage,  replies  less  than  5  per  cent  were  classed  as  ''occasional  ”  and  5  per  cent 
and  over  as  "considerable”  Expressions  such  as  "once  in  a  while,”  "seldom,”  "about  one-fourth,” 
"a  great  deal,”  "a  large  amount,”  etc.,  were,  of  course,  classified  readily  under  the  one  or  the  other  head. 
A  few  schedules  where  the  replies  were  too  vague  to  be  thus  definitely  classified  were  rejected  and  are 
not  here  included. 


About  38  per  cent  of  the  reporting  elevators  elevate  for  others,  the 
proportion  performing  this  service  ranging  all  the  way  from  as  low 
as  1.29  per  cent  in  Michigan  to  as  high-  as  67.18  per  cent  in  North 
Dakota. 

In  the  gre^t  proportion  of  cases  elevation  is  reported  a‘s  ‘‘occa¬ 
sional  ”  in  character — less  than  10  per  cent  of  the  houses  in  the  nine 
States  reporting  the  amount  as  “  considerable.” 

Section  3.  Kelation  of  elevation  to  shipping  by  farmers. 

Extent  or  farmer  shipping. — ^The "  foregoing  variations  between 
different  States  in  rendering  elevation  service  are  probably  accounted 
for  chiefly  by  the  extent  to  which  the  farmers  engage  in  direct  ship¬ 
ping  on  their  own  account.  (Appendix  2,  inquiry  19.)  Table  52 
shows  the  number  and  proportion  of  elevators  reporting  direct  ship- 


INCIDENTAL  FUNCTIONS  OF  COUNTRY  HOUSES. 


153 


ping  by  farmers  and  the  extent  of  this  practice  reported  in  the  nine 
States  for  which  this  inquiry  was  tabulated. 


Table  52. — Numher  and  proportion  of  elevators  in  specified  States  reporting 
direct  shipping  by  farmers  and  the  extent  to  which  such  shipping  is  re¬ 
ported. 


.state. 

Total 

elevators 

Direct  shipping  by 
farmers. 

No  direct  shipping 
by  farmers. 

answer¬ 

ing 

Inquiry. 

Number. 

Per  cent 
of  total. 

Number. 

Per  cent 
of  total. 

Wisconsin . 

203 

17 

8.37 

186 

91.63 

Michigan . . . 

223 

23 

10.31 

200 

89.69 

Oklahoma . 

132 

31 

23.48 

101 

76.52 

Illinois . 

734 

177 

24.11 

557 

75.89 

South  Dakota.  . 

539 

165 

30.61 

374 

69.39 

Minnesota . . 

731 

256 

35.02 

475 

64.98 

Atontana. ...  -  . - . 

195 

79 

40.51 

116 

59.49 

Missouri . 

188 

87 

46. 28 

101 

53.72 

North  Dakota . 

811 

615 

75.83 

196 

24.17 

Total . 

3,756 

1,450 

38.60 

2,306 

61.40 

Total 

elevators 

report¬ 

ing. 

Occasional.! 

Considerable.! 

, 

State. 

Number. 

1 

Per  cent 
of  total. 

Number. 

Per  cent 
of  total. 

Montana . . . . 

71 

59 

83. 10 

12 

16.90 

Missouri . 

79 

67 

84.81 

12 

15.19 

Michigan . , . 

22 

19 

86.36 

3 

13.64 

Wisconsin . . . . 

16 

14 

87.50 

2 

12.50 

North  Dakota  . 

607 

532 

87.64 

75 

12.36 

Illinois  . . 

167 

147 

88.02 

20 

11.98 

Minnesota . 

246 

224 

91.06 

22 

8.94 

South  Dakota . . . 1 . 

157 

144 

91.72 

13 

8.28 

Oklahoma . 

25 

24 

96.00 

1 

4.00 

Total  . 

1,390 

1,230 

88.49 

160 

11.51 

1  WTien  returned  as  a  percentage  replies  less  than  5  per  cent  were  classed  as  “occasional”  and  5  per 
cent  and  over  as  “ considerable.”  Expressions  such  as  “once  in  a  while,”  “seldom,”  “about  one-fourth,” 
“a  great  deal,”  “a  large  amount,”  etc.,  were,  of  course,  classified  readily  under  the  one  or  the  other  head. 
A  few  schedules  where  the  replies  were  too  vague  to  be  thus  definitely  classified  were  rejected  and  are  not 
here  included. 

About  39  per  cent  of  the  elevators  answering  this  inquiry  report 
direct  shipping  by  farmers,  the  proportions  ranging  from  8.37  per 
cent  in  Wisconsin  to  75.83  per  cent  in  North  Dakota.  As  with  eleva¬ 
tion,  the  great  bulk  of  the  elevators  report  farmer  shipping  as  “  occa¬ 
sional  ”  and  less  than  12  per  cent  report  it  as  “  considerable.” 

Comparison  of  elevation  with  farmer  shipping  and  the  size  of 
1  ARMS.— The  folloAving  table  compares  the  proportions  of  elevators 
reporting  farmer  shipping  in  the  nine  States  for  which  the  inquiry 
was  tabulated,  with  the  proportion  reporting  elevation  and  also  with 
the  size  of  farms : 


154 


COUNTRY  GRAIN  MARKETING. 


Table  53. — Comparison  of  the  proportions  of  elevators  in  specified  States  report¬ 
ing  direct  shipping  ivith  the  proportions  reporting  elevation  and  loith  the 
average  acreage  of  improved  land  per  farm. 


State. 

Proportion 
of  elevators 
reporting 
direct 
shipping 
by  farmers. 

Proportion 
of  elevators 
reporting 
elevation 
for  others. 

Acreage  of 
improved 
land  per 
farm.i 

. . 

8. 37 

1.89 

67.22 

Ai’if'hip'an 

10.31 

1.29 

62.00 

OlrlahoTTiJi, . 

23.48 

2. 74 

92.28 

TlHnni*!  . . 

24. 11 

34. 32 

111.35 

SmifVi  . 

30.61 

40.29 

203.84 

MirmP-sntn.  _ _ _ . 

35.02 

37.66 

125.80 

MfiTitn.Tia  . . . ^ . 

40. 51 

57.49 

138. 87 

46.28 

10.15 

88.66 

North  DaVota  . . 

75.83 

67.18 

275.08 

Total,  nine  States . 

38.60 

38.07 

107. 45 

1 1910  census.  These  figures  are  the  latest  available  at  this  writing. 


An  examination  of  the  foregoing  table  indicates  that,  with  the 
exception  of  Missouri,  the  proportion  of  elevators  doing  direct  load¬ 
ing  tends  to  vary  directly  with  the  proportion  reporting  direct  ship- 
ping. 

Although  some  farmers  shipping  upon  their  own  account  may  load 
directly  into  cars,  the  bulk  of  the  grain  thus  shipped  is  probably 
handled  through  the  elevators,  so  that,  other  things  being  equal,  ele¬ 
vation  tends  to  vary  directly  with  direct  shipping  by  farmers. 

Causes  or  direct  shipping. — There  are  some  indications  that  in 
earlier  days  direct  shipping  by  farmers  was  due  in  no  small  meas¬ 
ure  either  to  the  fact  that  the  elevators  bought  on  too  wide  a  margin 
or  that  the  farmers  believed  such  to  be  the  case.  Even  to-day  a  good 
deal  of  direct  shipping  may  be  traced  to  the  dissatisfaction  of  the 
farmer  with  the  prices  or  grades  or  dockage  offered  by  the  elevator. 
In  other  cases  the  condition  of  the  grain  may  be  such  that  the  ele¬ 
vators  are  unwilling  to  receive  it  except  in  order  to  load  the  same,  or 
perhaps  in  exceptional  cases  for  special  bin  storage.® 

Although  some  direct  shipping  is  unquestionably  due  to  these  fac¬ 
tors,  it  is  probable  that  the  practice  is  more  than  anything  else  de¬ 
pendent  upon  production  conditions.  An  examination  of  the  fore¬ 
going  table  reveals  the  fact  that  there  is,  on  the  whole,  a  considerable 
tendency  for  the  reported  extent  of  direct  shipping  (and  hence  ele¬ 
vation)  to  increase  with  the  increase  in  the  average  acreage  of  im¬ 
proved  land  per  farm,  although  the  correlation  is  not  exact.  The 
larger  the  acreage  of  improved  land  per  farm  the  greater,  presum¬ 
ably,  the  tendency  to  extensive  cultivation  and  a  lack  of  diversifica¬ 
tion  in  the  crops  raised.  The  smaller  the  area  under  cultivation  the 
more  intensive  such  cultivation  is  likely  to  be  and  the  greater  the 
tendency  to  mixed  farming.  As  a  result  the  individual  farms  with 
large  improved  areas  frequently  raise  several  carloads  of  the  same 
kind  of  grain,  and  such  farmers  are  in  a  position  to  do  a  good  deal 
of  direct  shipping,  either  loading  themselves  or  loading  through  the 
elevators.  Although  intensive  cultivation  results  in  a  much  higher 

3  Obviously,  if  special  binned,  its  bad  condition  will  not  affect  the  condition  or  grade 
of  other  grain  bought  by  the  elevator. 


155 


INCIDENTAL  FUNCTIONS  OF  COUNTRY  HOUSES. 

yield  per  acre  than  in  those  regions  where  extensive  cultivation  pre¬ 
vails,  the  diversification  of  crops  on  more  intensively  pltivated  land 
and  the  entrance  of  mixed  farming  results  in  the  individual  farmer 
])r()(lucing  less  of  a  single  kind  of  grain,  and  as  a  consequence  there 
are  probably  fewer  farmers  in  a  position  to  ship  directly. 

Section  4.  Variations  in  elevation  by  type  of  house. 

Results  of  tabulation. — The  following  table  presents  the  propor¬ 
tions  of  different  types  of  elevators  reporting  elevation  and  no  eleva¬ 
tion  for  others : 

Table  54. — Number  and  proportion  of  elevators  of  different  types  reporting 

elevation  and  no  elevation  for  others} 


TjT©  elevator. 


UNE. 

Commercial . . 

Cooperative . . . 

Mill . 

Maltster . 

Total  lines . 

INDIVIDUAL. 

Cooperative . 

Independent . 

Mill . 

Maltster . 

Total  individual . 

Grand  total . 


Proportion  of  elevators  reporting  elevation. 

Elevation  for  others-. 

No  elevation  for  others. 

Total 

elevators 

reporting. 

Number. 

Per  cent 
of  total. 

Number. 

Per  cent 
of  total. 

1,560 

870 

55.77 

690 

44.23 

23 

9 

39.13 

14 

60.87 

250 

32 

12.80 

218 

87. 20 

26 

26 

100.00 

1,859 

911 

49.00 

948 

51.00 

770 

287 

37.27 

483 

62.73 

1,190 

322 

27.06 

868 

72. 94 

199 

12 

6.03 

187 

93. 97 

9 

1 

11.11 

8 

88.89 

2,168 

622 

28.69 

1,546 

71.31 

4,027 

1,533 

38.07 

2,494 

61.93 

1  In  nine  States  as  follows:  Wisconsin,  Michigan,  Oklahoma,  Illinois,  South  Dakota,  Miimesota.  Mon¬ 
tana,  Missouri,  and  North  Dakota. 


Something  over  one-half  the  commercial  lines,  one-third  of  the 
cooperatives,  and  one- fourth  of  independents  report  elevation  or 
loading  for  others,  whereas  only  about  13  per  cent  of  the  mill  lines 
and  6  per  cent  of  the  individual  mill  elevators  report  performing 
this  operation. 

Elevation  by  mills. — The  very  small  proportions  of  the  mill 
elevators  which  report  elevation  for  others  is  readily  comprehended. 
As  previously  pointed  out  in  other  chapters,  the  mill  elevator  is 
operated  primarily  for  the  purpose  of  providing  the  mill  with  a 
supply  of  grain,  and  as  a  rule  only  incidentally  for  profit  as  a  mer¬ 
chandising  undertaking.  Being  interested  chiefly  in  procuring  grain 
for  the  mill,  it  either  refuses,  in  consequence,  to  elevate  for  others, 
or  does  so  only  to  a  limited  extent.  This  latter  supposition  is  sub¬ 
stantiated  by  the  fact  that  not  one  of  the  40  mill  elevators  which 
replied  as  to  the  extent  of  elevation  or  loading  for  others  reported  it 
to  be  anything  more  than  occasional.  The  higher  proportion  of 
mill  lines  doing  elevation  as  compared  with  individual  mill  elevators 
is  possibly  due  to  the  fact  that  the  mill  line  company,  owing  to  the  large 
volume  of  grain  which  it  handles,  tends,  on  the  whole,  more  fre¬ 
quently  to  engage  in  commercial  operations.  In  consequence  a  larger 


156  COUNTRY  GRAIN  MARKETING. 

})roportion  of  these  houses  than  of  individual  mills  are  willing  to  do 
elevation. 

Elevation  by  other  types. — The  explanation  of  the  variations  in 
elevation  reported  by  the  independent  (27.06)  and  commercial  line 
types  (55.77)  is  probably  to  be  found  in  the  geographical  distribu¬ 
tion  of  these  types  with  reference  to  the  extent  of  direct  shipping 
and  the  size  of  farms  discussed  above  in  explaining  the  State  vari¬ 
ations  in  elevation.  Reference  to  Appendix  Table  2  shows  that 
of  the  group  of  nine  States  here  considered,  the  proportion  of  inde¬ 
pendent  elevators  is  highest  in  Michigan  and  Wisconsin,  which 
States  have  the  lowest  percentages  of  elevators  reporting  eleva¬ 
tion.  Missouri,  also  reporting  a  low  percentage  of  this  operation, 
is  likewise  an  important  independent  elevator  State.  On  the  other 
hand,  North  Dakota  and  Montana,  relatively  the  most  important 
line  elevator  States,  are  the  ones  with  the  largest  percentages  of 
elevators  doing  direct  loading,  while  South  Dakota  and  Minnesota, 
also  important  line  elevator  States,  rank  third  and  fourth,  re¬ 
spectively,  in  the  proportion  of  elevators  reporting  loading  for 
others.  This  concentration  of  the  independents  in  areas  where  few 
of  the  elevators  elevate  or  load  for  others,  and  of  commercial  lines 
where  many  elevators  perform  this  service,  would  appear  to  ac¬ 
count  for  the  wide  variations  in  independent  and  commercial  line 
practice  in  respect  to  this  operation.  A  much  smaller  percentage 
of  the  cooperatives  than  of  the  commercial  lines  (about  37  per  cent, 
as  compared  with  nearly  56  per  cent)  elevate  for  others.  Since  both 
the  commercial  line  and  cooperative  types  are  highly  concentrated 
in  the  area  in  which  elevation  for  others  is  most  frequently  reported, 
i.  e.,  the  four  northwestern  States,  it  would  be  logical  to  expect  that 
the  proportions  of  these  two  types  reporting  elevation  would  ap¬ 
proach  much  more  closely  to  one  another.  It  is  possible  that  elevation 
is  more  frequently  reported  by  the  lines  than  the  cooperatives,  because 
the  dissatisfaction  of  the  farmer  with  the  prices  offered  is  probably 
more  frequent  in  the  case  of  the  commercial  line  than  in  the  case 
of  the  cooperative,  in  which  the  farmer  frequently  holds  stock  or 
from  which,  if  the  elevator  is  truly  cooperative,  he  may  receive  a 
patronage  dividend.  This,  perhaps,  causes  a  larger  proportion  of 
direct  shipping  by  the  farmer  customers  of  line  companies,  Avith 
the  result  that  a  relatively  higher  proportion  of  commercial  lines 
than  of  cooperatives  report  elevation.  It  is  also  possible  that 
the  cooperatives  are  more  disposed  to  refuse  to  elevate  than  are 
the  lines,  and  that  at  competitive  points  the  farmers  are  obliged 
to  resort  to  the  commercial  line  to  load  cars  because  of  the  refusal 
of  the  cooperative  to  perform  this  service.  As  previously  shown  in 
connection  with  the  discussion  of  purchases  (Ch.  V,  sec.  8),  the 
cooperative  type  of  house  buys,  on  the  average,  about  tAvice  the 
volume  of  grain  purchased  by  the  commercial  line  house.  Owing 
to  this  fact  the  cooperative  is  on  the  whole  less  in  a  position  to  do 
loading  for  others  than  is  the  commercial  line,  more  especially  dur¬ 
ing  the  rush  season.  Theoretically,  at  least,  these  facts  would  ac¬ 
count  for  the  larger  proportion  of  the  cooperatives  which  do  not 
elevate  as  compared  with  commercial  line  houses,  although  the 
relative  importance  of  each  type  is  high  in  the  States  where  eleva¬ 
tion  is  most  common. 


INCIDENTAL  FUNCTIONS  OF  COUNTRY  HOUSES. 


157 


Section  5.  Elevation  or  loading  charges. 

Over  99  per  cent  of  the  elevators  in  the  nine  States  for  which  the 
inquiry  regarding  terms  for  elevating  (Appendix  2,  inquiry  19)  was 
tabulated  reported  that  a  charge  w'as  made  for  this  service.  Only 
J39  elevators  reported  their  rates,  however.  These  varied  in  differ¬ 
ent  sections  of  the  country,  with  local  competitive  conditions,  and 
with  the  kind  of  grain  handled.  The  average  of  the  rates  reported 
hv  the  139  houses  was  between  1  and  2  cents,  as  follows : 


Grain. 

Number 

reporting. 

Average 
loading  or 
elevating 
charge. 

41 

1.94 

100 

1.98 

18 

1.21 

3 

1.50 

8 

1.31 

The  charges  for  elevating  sometimes  include  the  cleaning  of  grain 
when  the  elevator  is  equipped  for  such  treatment  and  the  owner  of 
the  grain  desires  it.  When  such  is  the  case  the  charges  are  usually 
higher  than  the  charges  for  elevating  only. 

Section  6.  Mixing. 

Intentional  mixing  operations. — The  mixing  of  grain  by  country 
elevators  is  either  of  an  intentional  or  an  involuntary  character. 

Intentional  mixing  is  done  primarily  for  profit,  through  the  im¬ 
proving  of  one  grade  of  grain  by  mixing  it  with  another  grade,  or 
the  mixing  of  damp  grain  with  a  quantity  of  dry  grain  to  prevent 
heating  and  increase  the  value  of  the  former.  (Sec.  7.) 

Involuntary  mixing,  on  the  other  hand,  while  sometimes  deliberate,  ^ 
is  not  usually  done  with  the  expectation  of  making  a  profit.  Instead, 
it  either  occurs  accidentally  or  is  a  more  or  less  unavoidable  incident 
of  the  operation  of  the  local  house. 

When  mixing  is  undertaken  for  profit  the  usual  method  is  to  run 
together  into  the  pit  the  grains  that  are  to  be  mixed,  the  flow  of  each 
grain  from  its  bin  being  so  regulated  that  the  desired  proportions  are 
obtained.  From  the  pit  the  grain  is  then  elevated  and  spouted  to  a 
bin.  The  elevation  operation  tends  to  mix  the  grain  quite  thoroughly, 
but  in  case  the  agent  is  not  satisfied  and  believes  the  mixture  to  be 
uneven,  the  mixed  grains  may  be  run  through  the  house  several  times, 
i.  e.,  dropped  into  the  pit,  elevated,  and  again  dropped  into  the  pit 
and  elevated. 

Instead  of  the  above  process,  and  in  case  the  mixed  grain  is  to  be 
shipped  immediately,  the  tAvo  grades  of  grain  to  be  mixed  may  be 
spouted  into  the  car  and  there  shoveled  about  by  the  agent  until  the 
ei^enness  of  grade  deemed  necessary  is  obtained. 

The  necessity  of  obtaiifmg  an  even  mixture  lies  principally  in  two 
facts.  In  the  fir§t-place^-if  the  mixing  is  not  thoroughly  done,  the 
samplers  at  the  terminal  may  strike  a  “  spot  ”  of  the  poorer  grain, 
with  the  result  that  the  entire  car  Avill  be  graded  on  the  basis  of  this 
low  grade.  should  the  samplers  probe  only  the  good  spots 

in  the  car  and  the  grade  be  given  on  the  basis  of  this  sample,  the  pur¬ 
chaser  might  possibly  refuse  to  accept  the  car  when  the  spots  of  low 


158 


COUNTRY  GRAIN  MARKETING. 


grade  were  discovered.  In  addition,  in  the  latter  case,  a  charge  of 
“  setting  up  ”  or  “  plugging  ”  cars  might  perhaps  be  lodged  against 
the  shipper.^ 

Smutty  or  bin-burned  grain  (Ch.  V.,  sec.  3.)  is  not  mixed,  because 
it  is  easily  detected  by  the  inspection  department  and  the  presence  of 
such  grain  lowers  the  grade. 

Some  26  of  the  country  elevators,  or  about  one-seventh  of  those 
visited  by  the  Commission’s  agents  in  the  Northwest,  reported  mixing 
grain  for  profit.  One  independent  elevator  mixed  most  of  its  wheat 
to  improve  the  grades  and  reported  good  profits  from  such  mixing. 
Good  No.  2  wheat  was  mixed  with  No.  1  wheat  with  profit  by  one 
Minnesota  cooperative  elevator,  and  another  elevator  mixed  its  good 
oats  with  wild  oats  and  sold  the  mixture  as  sample  grade.  Still 
another  elevator  mixed  about  75  per  cent  of  its  grain  and  estimated 
that  these  mixing  operations  had  added  10  per  cent  to  the  profits. 
Several  elevators  reported  the  mixing  of  light-weight  wheat  with 
heavy  wheat  as  being  very  profitable.  Other  elevators  reported  that 
they  mixed  whenever  it  was  possible  to  do  so,  and  one  concern 
claimed  mixing  had  been  its  only  source  of  profit.  The  mixing  of  a 
small  quantity  of  damp  grain  with  a  like  grade  of  dry  grain  when 
loading  cars  is  also  a  practice  of  some  elevators,  the  damp  grain  be¬ 
coming  dry  by  the  time  the  car  reaches  the  terminal.  This  opera¬ 
tion,  however,  is  perhaps  conditioning  rather  than  mixing.  (Sec.  7.) 

Cooperative  and  independent  elevator  operators  are  sometimes 
abetted  and  assisted  in  the  mixing  of  grain  by  commission  houses,  and 
the  elevator  may  receive  advice  either  from  the  commission  firm’s 
office  or  its  traveling  solicitors  as  to  the  making  of  mixtures.  For  ex¬ 
ample,  in  one  case,  a  commission  firm  advised  a  country  elevator 
operator  that  he  could  mix  25  to  30  bushels  of  rye  in  a  car  of  No.  1 
northern  wheat  and^  still  have  it  “  stand  up  ”  to  grade.  Again,  in 
^  August,  1916,  when  it  was  apparent  that  the  new  crop  in  the  North¬ 
west  was  going  to  be  very  light  in  weight,  the  traveling  solicitor  of 
one  large  commission  firm  wrote  to  his  head  office  at  Minneapolis 
that  he  had  advised  one  of  the  country  elevator  operators  on  whom 
he  had  called  that  it  would  be  very  profitable  to  hold  back  as  much 
of  the  No.  1  and  No.  2  northern  wheat  from  the  1915  crop  as  possible 
for  use  in  mixing  with  the  new  crop.  The  head  office  informed  the 
solicitor  that  this  would  undoubtedly  be  a  wise  move  and  that  any 
company  doing  so  would  probably  make  good  profits. 

Line  elevator  agents,  while  frequently  encouraged  by  their  em¬ 
ployers  to  mix  when  it  is  possible  to  do  so,  are  also  cautioned  to 
use  extreme  care  in  the  making  of  mixtures.  One  company  advised 
one  of  its  agents -that  he  need  have  no  fear  of  criticism  from  the  com¬ 
pany  on  account  of  his  attempt  in  this  direction  and  that  the  company 
was  greatly  pleased  to  find  the  agent  using  his  head  in  such  matters. 
At  the  same  time  the  company  suggested  that  he  make  no  more 
mixtures  until  it  was  determined  how  his  initial  effort  was  treated 
by  the  terminal  inspection  department. 

Another  line  elevator  company  instructed  one  of  its  agents  to  de¬ 
vise  a  plan  whereby  he  could  mix  a  part  of  his  No.  4  with  lower 
grades  of  wheat.  It  also  suggested  if  he  had  any  soft  bleached 
wheat  testing  57  to  58  pounds  which  he  knew  would  grade  onlv  No. 


*Cf.  Ch.  VI,  sec.  1. 


INCIDENTAL  FUNCTIONS  OF  COUNTRY  HOUSES. 


159 


2,  that  it  would  be  lietter  to  work  a  little  li^ht  wei<>:ht  wheat  into  it 
and  brin^  the  sifted  test  weight  down  to  5(5  pounds  rather  than  to 
ship  the  heavier  grain  by  itself.  At  the  same  time  the  agent  was 
cautioned  not  to  attempt  to  mix  without  carefully  figuring  the 
result. 

At  times  the  line  country  agent  is  assisted  in  making  mixtures 
by  his  traveling  superintendent,  as  is  evidenced  by  a  letter  from  the 
traveling  superintendent  of  a  large  line  company  to  his  head  office 
advising  it  that  he  had  helped  an  agent  mix  some  300  bushels  of  No. 
2  wheat  into  a  car  so  that  the  whole  car  would  “  stand  up  ”  for  No. 
1  wheat. 

Involuntary  mixing. — The  involuntary  mixing  of  grain  is  usually 
the  result  of  (1)  an  error  of  the  operator  in  binning  grain  after  it 
has  been  received  in  the  elevator;  (2)  leaks  in  bins  which  cause  a 
small  amount  of  mixing;  (3)  the  placing  of  grain  in  a  bin  containing 
grain  of  another  variety  or  grade  because  of  the  lack  of  bins;  (4)  the 
addition  of  a  quantity  of  grain  to  make  up  the  minimum  capacity 
of  a  car. 

A  frequent  occurrence  in  the  operation  of  a  country  elevator  is  the 
mixing  of  grains  by  mistake  when  binning  grain  which  has  been 
unloaded  into  the  pit.  Twenty-five  per  cent  of  the  elevators  visited 
by  the  Commission’s  agents  reported  that  this  had  happened.  This 
error  in  spouting  the  grain  from  the  elevator  leg  to  the  bin  in  many 
instances  is  a  cause  of  loss,  unless  the  elevator  is  equipped  for  clean¬ 
ing.  In  the  latter  event  the  loss  is,  of  course,  only  the  cost  of  the 
cleaning  or  separation  if  the  mixture  is  separable. 

Quite  often  levator  agents  have  been  able  to  rectify  mistakes 
similar  to  the  above  before  a  great  deal  of  grain  has  been  so  mis¬ 
directed.  By  use  of  a  scoop  or  shovel  the  grain  thus  wrongly  binned 
has  been  largely  removed.  When  such  a  mistake  occurs  some  con¬ 
cerns  not  equipped  to  clean  or  separate  grain  have  even  shipped  the 
mixed  grain  to  the  terminal  and  had  it  cleaned  and  separated  there 
before  selling.  All  concerns  following  this  practice  that  were  visited 
by  the  Commission’s  agents  reported  that  they  had  received  very  good 
service  from  the  elevators  at  the  terminal  markets  and  that  the 
charges  had  been  reasonable.  Such  a  procedure  usually  pays  for 
itself,  for  without  separation  the  grain  would  be  sold  as  mixed  and 
at  a  discount  under  the  grade  often  much  greater  than  the  cleaning 
charge.  Thus  those  elevators  that  did  not  separate  mixed  grain 
reported  that  such  shipments  had  been  sold  as  mixed  grain,  and  that 
as  a  rule  losses  had  resulted.  Of  course  there  are  certain  mixtures 
which  it  is  practically  impossible  to  separate  and  in  such  cases  loss 
can  not  be  avoided.  IVheat  and  durum  wheat  can  not  be  separated, 
and  one  agent  claimed  a  loss  of  19  cents  per  bushel  on  a  shipment  of  a 
car  containing  such  a  mixture. 

A  form  of  involuntary  mixing,  which  rarely  occurs,  is.that  due  to 
leakage.  An  old  elevator,  or  one  so  constructed  that  its  bin  walls 
are  weak,  may  find  that  the  pressure  of  grain  in  a  iDin  will  cause 
the  seams  in  the  walls  to  open  and  thus  permit  grain  to  sift  into 
another  bin  containing  a  different  variety  or  grade  of  grain.  This 
would  not  occur  in  new  elevators  of  proper  construction,  nor  will  it 
happen  as  a  rule  if  the  bins  are  equally  filled,  as  the  pressure  is  then 
practically  the  same  on  both  sides  of  the  walls. 


160 


COUNTRY  GRAIN  MARKETING. 


Mixing  through  lack  of  sufficient  bins  frequently  occurs  and  is  ac¬ 
centuated  by  car  shortages,  the  variety  of  crops  grown,  and  by  the 
number  of  the  different  grades. 

In  the  fall,  when  the  grain  is  moving  from  farms  in  large  quantities 
and  cars  are  not  readily  procurable,  it  is  difficult  for  an  elevator 
operator  to  avoid  mixing.  Such  mixtures  are  usually  of  grades  only 
and  are  not  apt  to  cause  a  considerable  loss  if  a  manager  uses  care  not 
to  be  caught  in  such  a  position  that  he  will  be  compelled  either  to  mix 
very  low-grade  grain  with  relatively  much  higher  grades  or  else  to 
refuse  to  receive  the  load.  Thus,  one  line  elevator  agent,  forced  to 
put  some  turkey  wheat  in  on  top  of  his  durum  because  his  house 
was  blocked,  shipped  the  mixture  and  the  same  was  inspected  and  sold 
as  mixed  wheat  at  a  discount  under  the  price  at  which  either  the 
turkey  or  the  durum  would  have  sold  separately. 

At  times  an  elevator  operator  will  add  a  quantity  of  grain  to  a  car 
of  grain  that  is  about  to  be  shipped  in  order  to  make  up  a  quantity 
equal  to  the  minimum  capacity  of  the  car,  on  which  minimum  he  is 
obliged  to  pay  freight.  Obviously,  this  is  likely  to  be  done  only  in 
those  cases  where  the  difference  between  the  quantity  of  the  grade 
originally  designed  for  shipment  and  the  minimum  capacity  of 
the  car  is  deemed  great  enough  to  warrant  the  expense  of  the  mixing 
process. 

Section  7.  Conditioning. 

Conditioning  grain  by  country  elevators  is  practically  limited  to 
the  treatment  of  heated  or  heating  grain  and  grain  that  is  wet  or 
damp. 

None  of  the  elevators  in  the  Northwestern  grain  States — Minne¬ 
sota,  Montana,  North  Dakota,  and  South  Dakota — visited  by  the 
Commission’s  agents  were  equipped  with  special  machinery,  such  as 
driers,  for  treating  grain.  Only  one  of  the  elevators  in  Iowa  and 
Illinois  visited  by  the  agents  of  the  Bureau  of  Markets  was  equipped 
with  conditioning  machinery.  This  elevator  had  installed  a  drier  in 
1917,  when  it  became  apparent  that  the  corn  crop  was  going  to  be 
very  moist. 

Some  conditioning  can  be  done  with  the  ordinary  elevator  ma- ' 
chinery,  and  this  is  frequently  employed  for  this  purpose  when  the 
occasion  demands.  Grain  that  is  heated,  or  heating,  can  be  run  from 
bin  to  bin,  and  this  aerating  is  of  considerable  effectiveness  in  cooling 
grain.  It  thus  becomes  a  method  of  preventing  serious  loss  to  the 
elevator,  since  heated  grain  is  severely  penalized  at  the  terminal 
markets.  Country  elevator  managers  keep  a  close  watch  on  their 
bins  of  grain  to  detect  signs  of  heating,  and  line  agents  are  con¬ 
stantly  instructed  by  their  employers  to  watch  out  for  heating  grain, 
and  when  discovered  either  to  ship  it  out  immediately  or  run  it 
through  the  house  until  it  is  cooled. 

Another  practice  that  may  properly  be  classed  as  conditioning  is 
that  already  referred  to  in  discussing  mixing  where  a  relatively 
small  quantity  of  wet  grain  is  mixed  with  a  much  larger  amount  of 
dry  grain  of  a  like  grade  as  the  grain  goes  into  the  car.  By  the 
time  the  car  reaches  the  terminal  the  damp  grain  is  usually  well  dried 
out,  the  moisture  having  been  absorbed  and  distributed  throughout 
the  dry  grain. 


INCIDENTAL  FUNCTIONS  OF  COUNTRY  HOUSES. 


161 


Section  8.  Cleaning. 

Advantages. — Prior  to  the  institution  of  any  Federal  grades  there 
was  probably  not  as  much  inducement  for  cleaning  grain  in  the 
country  as  there  is  to-day,  for  the  reason  that  dockage  did  not 
usually  affect  the  grade  as  it  does  under  the  Federal  system.  For¬ 
merly,  if  equipped  to  do  so,  the  elevator  might  clean  gram  either  tor 
the  farmer’s  or  its  own  account,  because  in  some  cases  the  foreign 
material,  .or  dockage,  was  largely  composed  of  seeds,  other  grains, 
etc.,  having  a  market  value  as  screenings.®  In  the  case  of  the  gram 
bought  by  the  elevator,  or  in  the  case  of  gram  which  the  farmer 
intends  to  ship  directly  for  his  own  account,  a  further  inducement 
to  country  cleaning  is  found  in  the  fact  that  if  shipped  uncleaned 
the  farmer  or  elevator  is  obliged  to  pay  freight  on  the  dockage  m 
question.  Neither  of  these  nor  other  possible  reasons  for  cleaning 
have  in  the  past  been  sufficient  to  induce  country  elevators  generally 
to  install  cleaning  machinery  and  facilities,  although  about  50  per 
cent  of  those  reporting  to  the  Commission  in  regard  to  this  matter 

are  so  equipped.  ^  .....  , 

Extent  of  cleaning  facilities. — ^The  Commission  s  inquiry  as  to 

cleaning  facilities  was  answered  by  6,882  elevators  in  the  14  principal 
grain-producing  States  (Appendix  2,  inquiry  16),  and  the  following 
table  presents  by  type  of  house  the  percentages  with  and  without 
such  facilities: 


Table  55. — Percentages  of  elevators  of  different  types  with  and  without  cleaning 
faciities  in  Ik  principal  grain-producing  States. 


Type  of  elevator. 

Total 

elevators 

reporting. 

Per  cent 
with 
cleaning 
facilities. 

Per  cent 
without 
cleaning 
facilities. 

LINE. 

2,415 

65 

512 

28 

32.55 

67.69 

30.66 

17.86 

67.45 

32.31 

69.34 

82.14 

3,020 

32.85 

67. 15 

INDIVIDUAL. 

1,313 

2,176 

369 

4 

59.86 

60.02 

82.93 

75.00 

40. 14 
39.98 
17.07 
25.00 

3,862 

62. 17 

37.83 

6,882 

49.30 

50.70 

1  For  States  included  see  Ch.  II,  sec.  5. 


According  to  this  table  only  about  one-third  of  all  types  of  line 
elevators  are  equipped  with  cleaning  facilities,  as  compared  with 
about  two-thirds  of  the  individual  elevators. 

Section  9.  Variations  of  different  types  of  elevators  in  cleaning  facilities. 

Commercial  line  houses.— Commercial-line  elevator  operators 
have  assigned  a  variety  of  reasons  for  the  lack  of  country  cleaning 
facilities  which  is  reported  by  that  type  of  house.  If  cleaning  tacil- 

»  The  farmer  or  elevator  might,  of  course,  ship  to  the  terminal  market  also  and  have  the 
grain  cleaned  there. 

9964“— 20 - 11 


162 


COUNTRY  GRAIN  MARKETING. 


ities  are  installed  in  a  commercial-line  house,  it  is  claimed,  in  the  first 
place,  that  it  is  impossible  for  the  company  to  hold  its  agent  for  short¬ 
ages,  since  discrepancies  may  be  assigned  to  cleaning.  As  a  result, 
therefore,  the  company  has  a  less  satisfactory  check  on  the  local  agent 
than  would  otherwise  be  the  case.  Some  of  the  smaller  lines  have 
found  it  fairly  satisfactory  to  clean,  but  in  these  cases  the  smallness 
of  the  line  has  made  it  possible  for  the  management  to  control  their 
agents  better  than  is  possible  in  the  case  of  a  large  company. 

Secondly,  it  is  asserted  by  the  line  operators  that  cleaning  can  be 
done  much  more  cheaply  and  economically  in  the  terminal  market 
than  is  possible  in  the  country.  It  is  claimed  that  there  are  very  few 
country  houses  which  have  the  capacity  to  install  proper  cleaning 
machinery.  To  clean  grain  so  as  to  conserve  the  largest  possible  pro¬ 
portion  of  good  grain,  it  is  necessary  to  install  cleaners  of  different 
types,  and  the  average  country  elevator  is  not  large  enough  to 
afford  the  space  for  all  these  different  types.  Necessarily,  they  are 
compelled  to  use  fewer  or  smaller  machines  and  it  is  difficult  to  oper¬ 
ate  these  so  as  to  do  the  best  work  and  save  all  the  grain. 

It  is  also  claimed  that  to  secure  the  most  economical  cleaning,  it  is 
necessary  to  have  a  fixed  stream  of  power  for  operating  the  cleaning 
machinery.  If  grain  is  brought  to  the  country  elevator  during  the 
time  when  the  cleaning  machinery  is  in  operation,  it  is  necessary  to 
transfer  a  portion  of  the  power  which  is  being  used  to  operate  the 
cleaners  to  the  elevating  machinery.  This  necessarily  slows  dowm  the 
cleaning  machinery  and,  in  turn,  is  likely  to  cause  the  sieves  to  run 
over  and  to  throw  good  grain  into  the  screenings.  The  possible  un¬ 
evenness  of  the  power  load,  therefore,  may  frequently  result  in  uneven 
and  wasteful  cleaning.  It  has  been  stated  by  one  line  elevator  opera¬ 
tor  that  he  has  taken  from  single  cars  of  screenings  bought  from  coun¬ 
try  elevators  equipped  with  cleaning  facilities  as  high  as  100  bushels 
of  good  wheat. 

Moreover,  the  operators  of  the  large  commercial  line  companies 
believe  themselves  to  be  better  judges  than  their  agents  of  the  neces¬ 
sity  for  cleaning  and  whether  it  can  be  done  economically.  Such 
companies,  especially  in  Minneapolis,  are  also  frequently  connected 
in  one  way  or  another  with  terminal  elevators  which  clean  grain  on 
a  large  scale  and  under  the  supervision  of  men  experienced  in  this 
work.  In  consequence  there  is  a  considerable  tendency  among  com¬ 
mercial  line  elevators  to  have  grain  cleaned  in  the  terminal  markets, 
either  at  a  plant  affiliated  with  their  own  or  at  some  other  large  ter¬ 
minal  elevator  which  makes  a  specialty  of  handling  this  class  of 
business. 

Mill  houses. — The  low  proportion  of  cleaning  facilities  reported 
by  mill-line  elevators  may  be  accounted  for  on  somewhat  different 
grounds  than  those  explaining  a  similar  situation  in  the  case  of  the 
commercial  lines.  Milling  concerns,  whether  located  in  the  terminal 
market  or  not,  are  usually  equipped  with  such  cleaning  machinery  as 
is  necessary  to  prepare  the  grain  for  grinding.  In  consequence  there 
is  a  considerable  tendency  for  the  mill  lines  not  to  install  cleaning 
machinery  but  to  ship  the  grain  to  the  mill  for  cleaning.  As  a  re¬ 
sult,  this  type  reports  a  relatively  low  percentage  of  these  facilities. 
The  individual  mill  elevator,  on  the  other  hand,  is  as  a  rule  either 
physically  connected  with  the  mill  or  else  an  integral  part  of  it. 
Since  nearly  all  mills  find  at  least  a  certain  proportion  of  cleaning 


INCIDENTAL  FUNCTIONS  OF  COUNTRY  HOUSES. 


163 


machinery  necessary,  more  than  80  per  cent  of  the  individual  mill 
elevators  report  such  facilities,  though  in  most  cases,  probably,  the 
machinery  belongs  rather  to  the  mill  than  to  the  elevator.  That  an 
even  higher  percentage  is  not  reported  is  probably  due  to  the  fact  that 
certain  individual  mill  elevators  reporting  regarded  the  cleaning 
apparatus  as  a  mill  and  not  an  elevator  facility. 

Cooperatives  and  independents. — According  to  the  foregoing 
table  about  60  per  cent  of  both  the  independent  and  individual  co¬ 
operative  elevators  are  equipped  with  some  cleaning  machinery. 
Neither  of  these  types  is  in  any  way  affiliated  with  mills,  nor  as  a 
rule  have  they  any  terminal  market  connections.  The  result  is  that 
a  considerably  larger  proportion  of  them  are  equipped  with  cleaning 
facilities  than  are  either  the  commercial  or  mill  line  types,  although 
both  report  a  much  lower  percentage  of  these  facilities  than  do  the 
individual  mills. 

Section  10.  State  variations  in  cleaning  facilities. 

The  following  table  shows  the  number  and  percentage  of  elevators 
reporting  cleaning  facilities  in  each  of  the  14  principal  grain-produc¬ 
ing  Stares  of  the  Central  West : 

Table  56. — Number  and  percentages  of  elevators  in  specified  States  reporting 

cleaning  facilities. 


Michigan . 

Indiana . 

Ohio . 

Missouri . 

Kansas . 

Oklahoma. . . . 
North  Dakota. 
Wisconsin.... 

Nebraska . 

Montana . . 

Illinois . . 

Minnesota . . . . 
South  Dakota. 
Towa . . 


14  States 


State. 


Number  of 
elevators. 


Percentage 

reporting 

cleaning 

facilities. 


232 

401 

321 

204 

682 

159 

902 

215 

571 

277 

790 

860 

674 

694 


96.98 
91.77 
87.54 
63.73 
58.42 
53.46 
48.56 
47.91 
46.76 
46.21 
44.18 

31.98 
31.75 
27.38 


6,882 


49.30 


The  variations  shown  range  all  the  way  from  27  per  cent  in  Iowa 
to  96  per  cent  in  Michigan.  Most  of  these  variations  are  explainable 
in  terms  of  type  variations  just  discussed  with  reference  to  the  loca¬ 
tion  of  the  various  types  in  the  States  in  question. 

As  indicated  in  the  preceding  section  the  commercial  and  mill-line 
types  report  the  lowest  proportions  of  cleaning  facilities  and  the 
individual  mills  the  highest,  the  independents  and  cooperatives  occu¬ 
pying  an  intermediate  position  between  the  lowest  and  highest  and 
considerably  above  the  average. 

Of  the  six  States  where  the  proportion  of  elevators  haying  cleaning 
facilities  is  above  the  average,  five,  i.  e.,  Indiana,  Ohio,  Michigan, 
Missouri,  and  Oklahoma,  are  above  the  average  in  the  proportion  of 
individual  mill  elevators  located  within  their  bordera,  and  the  first 
four  of  these  States  are  among  the  five  leading  States  in  their  propor¬ 
tions  of  this  type  of  house.  Kansas,  the  sixth  State  in  the  group 
whose  elevators  report  higher  than  average  proportions  of  cleaning 
facilities,  is  an  important  independent  and  cooperative  State. 


164 


COUNTRY  GRAIN  MARKETING. 


In  the  balance  of  the  14  principal  grain  States  where  the  propor¬ 
tions  of  elevators  with  cleaning  facilities  are  below  average,  5  out 
of  8  States,  i.  e.,  Minnesota,  the  Dakotas,  Montana,  and  Nebraska, 
are  the  most  important  commercial  line  States.  Iowa,  Illinois,  and 
Wisconsin,  however,  arc  important  either  as  independent,  individual, 
cooperative,  or  mill  States,  and  are  below  average  in  their  propor¬ 
tions  of  mill  and  commercial  line  elevators.  The  low  proportions  of 
elevators  with  cleaning  facilities  in  these  States  thereiore  can  not  be 
satisfactorily  explained  on  this  ground.  (Appendix  Table  2.) 

Section  11.  Warehouse  cleaning  facilities. 

No  tabulations  of  warehouse  cleaning  facilities  were  made  owing 
to  the  small  number  of  such  concerns  reporting  on  this  matter.  It 
should,  however,  be  pointed  out  that  in  the  Pacific  Coast  States,  where 
the  flat  warehouse  is  found  to  such  a  large  extent,  country  cleaning 
facilities  are  very  limited.  The  country  warehouse,  as  previously 
indicated,  is  most  important  in  this  region  on  account  oi  the  sack¬ 
handling  method  which  prevails  there.  The  grain  is  brought  to  the 
warehouses  already  sacked  by  the  farmer  and  cleaning  would  involve 
the  opening  of  all  these  individual  sacks,  dumping  them,  and  finally 
re-sacking  after  the  cleaning  process  was  completed.  The  expense  of 
such  an  operation,  needless  to  say,  would  be  very  considerable,  and 
as  a  result  country  cleaning  facilities  are  usually  extremely  limited 
wherever  sack  handling  exists. 

Some  of  the  large  line  companies  on  the  Pacific  coast  have  working 
houses  at  the  terminal  points  where  cleaning  machinery  is  installed 
and  the  mills  also  have  facilities  of  this  character  at  their  plants.  In 
certain  sections  of  the  Pacific  coast,  moreover,  smutty  grain  is  found 
to  a  very  large  extent  and  must  be  put  through  a  cleaning  process  to 
get  rid  of  this  smut  at  some  time  or  other.  This  cleaning,  however,  is 
usually  done  at  the  mills  when  the  grain  is  used  for  milling  purposes, 
or  at  terminal  points  if  handled  by  exporters  or  grain  dealers.  It  is 
reported  to  the  Commission  that  before  the  installation  of  Federal 
grades  only  uncleaned  grain  could  be  sold  in  the  State  of  Washington 
as  “  country-run  ”  grain,  the  State  inspection  department  requiring 
that  mixed  or  cleaned  grain  must  be  so  graded. 

Section  12.  Summary  of  interviews  in  regard  to  cleaning. 

Northwest  territory. — Practically  all  the  cooperative  and  inde¬ 
pendent  elevators  in  the  Northwest  equipped  with  cleaning  machines 
which  were  visited  by  the  Commission’s  agents,  reported  that  they 
cleaned  all  grain  which  showed  a  certain  amount  of  dockage,  usually 
2  per  cent  or  more,  provided  their  machines  could  handle  the  grain. 
Some  machines  that  will  clean  one  grain — say  wheat — can  not  clean 
another  efficiently.  During  the  rush  season  cleaning,  even  though 
desirable,  does  not  always  take  place,  partly  because  the  capacity  of 
the  cleaning  machine  is  not  as  a  rule  great  enough  to  furnish  a 
sufficiently  large  flow  of  grain  through  the  elevator  and  partly  be¬ 
cause  the  managers  have  not  the  time  both  to  buy  grain  and  operate 
the  cleaning  machines.  In  such  cases  it  is  the  practice,  when  possible, 
to  ship  only  the  cleanest  grain  and  hold  the  dirty  grain  until  the  rush 
slackens  sufficiently  to  permit  cleaning  it. 

Some  concerns  reported  cleaning  only  two  or  three  grains,  such 
as  wheat  and  rye,  while  others  only  one  grain,  usually  wheat.  Other 
elevators  clean  all  kinds  of  grains. 


INCIDENTAL  FUNCTIONS  OF  COUNTRY  HOUSES.  165* 

Iowa  and  Illinois. — Of  95  of  the  elevators  visited  by  the  agents  of 
the  Bureau  of  Markets  in  Iowa  and  Illinois,  64  stated  that  they  did 
not  clean  their  grain  at  all;  21  reported  that  they  did  to  some  extent; 
and  10  that  they  cleaned  all  their  grain. 

Some  of  these  elevators  attempted  to  estimate  the  number  of 
bushels  of  grain  which  they  clean  each  year,  as  set  forth  in  the  fol¬ 
lowing  statement : 


Estimated  bushels  cleaned. 

Number 
of  eleva¬ 
tors  re¬ 
porting. 

Estimated  bushels  cleaned. 

Numl)cr 
of  eleva¬ 
tors  re¬ 
porting. 

WHEAT. 

CORN — continued. 

5,000 . 

1 

125,000 . 

1 

10,000 . 

4 

150^000 . 

1 

25' 000 . 

1 

iso'ooo . 

1 

50'000 . 

2 

0.4TS. 

CORN. 

18,000 . 

1 

25,000 . 

2 

75,000 . 

2 

50,000 . 

1 

125,000 . 

1 

60,000 . 

1 

150',000 . 

1 

100,000 . 

2 

200' 000 . 

1 

Section  13.  Cleaning  for  farmers  by  country  elevators. 

Type  variations. — The  proportions  of  country  elevators  which 
clean  grain  for  farmers  (Appendix  2,  inquiry  16)  were  separately 
tabulated  for  only  eight  States;  i.  e.,  Nebraska,  Iowa,  Kansas,  Minne¬ 
sota,  South  Dakota^  Indiana,  Montana,  and  Michigan.  Of  the  1,732 
elevators  in  these  States  which  reported  as  to  whether  they  did  or 
did  not  clean  for  farmers  740,  or  about  43  per  cent,  answered  in  the 
affirmative  and  992,  or  about.  57  per  cent,  in  the  negative. 

The  following  table  presents  the  number  and  percentages  of 
elevators  cleaning  and  not  cleaning  in  these  eight  States  according  to 
the  type  of  elevator.  It  should  be  borne  in  mind  that  these  numbers 
and  percentages  are  those  of  elevators  having  cleaning  machinery. 


Table  57. — Proportions  of  different  types  of  elevators  with  cleaning  facilities 
reporting  cleaning  and  not  cleaning  for  farmers  in  eight  ^  grain  producing 
States  of  the  Central  West. 


T3rpe  of  elevator. 

Total 

elevators 

reporting. 

Percentage 
cleaning  for 
farmers. 

Percentage 
not  clean¬ 
ing  for 
farmers. 

LTNE, 

CnTnTnercifil  . . . 

373 

45. 31 

54.69 

Coop)erative . 

33 

30.30 

69. 70 

Mill . 

61 

39.34 

60.66 

Maltster ..  . . . 

1 

100.00 

Total  line . 

.  468 

43.38 

56.62 

iNDivrouAL. 

Coop)erative . 

458 

44.54 

55.46 

Independent . 

666 

41.59 

58.  41 

MilL . 

140 

40.00 

60.00 

Maltster . 

Total  individual . 

1,264 

42.  48 

57. 52 

Grand  total . 

1,732 

42.73 

57.27 

^  Nebraska,  Iowa,  Kansas,  Minnesota,  South  Dakota,  Indiana,  Montana,  and  Michigan. 


166 


COUNTRY  GRAIN  MARKETING. 


The  variations  in  the  proportion  of  cleaning  for  farmers  reported 
by  the  five  principal  types  of  elevators  are  too  small  to  be  significant, 
the  variations  from  the  average  for  any  one  of  the  five  principal  types 
being  relatively  slight.  The  returns  made  by  cooperative  line  and 
maltster  line  elevators  are  so  few  that  the  variations  may  be  dis¬ 
regarded. 

State  variations. — The  percentage  of  elevators  cleaning  for  farm¬ 
ers  shows  a  high  degree  of  variation  among  the  different  States,  run¬ 
ning  all  the  way  from  25.59  per  cent  in  Nebraska  to  81.48  per  cent  in 
the  State  of  Michigan.  The  following  table  presents  by  States  the 
number  and  percentages  of  elevators  reporting  cleaning  for  farmers. 


Table  58. — Proportions  of  elevators  with  cleaning  facilities  cleaning  and  not 
cleaning  for  farmers  in  eight  principal  grain-producing  States. 


state. 

Total 

elevators 

reporting. 

Per  cent 
cleaning  for 
farmers. 

Per  cent 
not  cleaning 
for  farmers. 

Nebraska . 

211 

25.59 

74.41 

166 

26.51 

73.49 

TCansas  . . . 

307 

28. 66 

71.34 

Minnesota . 

250 

29.20 

70.80 

Snnt.h  Daknt.a  .  . 

186 

33.33 

66. 67 

Tnriiana  .  . . 

302 

57. 95 

42.05 

Montana  . 

121 

74.38 

25.62 

Miehipan . . . 

189 

81.48 

18.52 

Total.  .  .  . 

1,732 

42.73 

57.27 

In  view  of  the  fact  that  there  is  no  particular  variation  as  between 
types,  the  State  variations  can  not  be  accounted  for  on  this  ground, 
and  no  explanation  of  the  variations  is  apparent  other  than  the 
possibility  that  custom  may  be  largely  responsible  for  the  situation 
prevailing. 

Terms  and  conditions. — A  few  hundred  elevators  reported  to  the 
Commission  the  terms  and  conditions  upon  which  grain  was  cleaned. 
(Appendix  2,  inquiry  16.)  In  the  great  bulk  of  cases  grain  is  appar¬ 
ently  cleaned  at  a  flat  rate  of  so  many  cents  per  bushel.  A  consid¬ 
erable  proportion  of  those  elevators  reporting,  however,  stated  that 
cleaning  was  done  without  charge,  and  in  a  few  cases  that  it  was 
done  free  if  the  elevator  purchased  the  grain.  The  rates  for  this 
service  reported  by  those  elevators  malring  a  charge  in  cents  per 
bushel  for  the  service  range  from  as  low  as  one-half  of  a  cent  per 
bushel  to  as  high  as  10  cents  per  bushel. 

The  following  summary  statement  presents  the  average  and  range 
of  charges  in  cents  per  bushel  reported  by  elevators  of  different  types 
supplying  information  as  to  rates  for  cleaning : 


Type  of  elevator. 

• 

Number 

of 

quotations. 

Range  of 
rates 
reported 
(cents  per 
bushel). 

Average 

rate 

reported 
(cents  per 
bushel). 

Commercial  line . 

89 

1-10 

2. 13 

Mill  line . 

17 

1-  5 

2.35 

Individual  mill . 

38 

1-  7 

2.53 

Individual  cooperative . 

164 

i-10 

1.98 

Tndp.ne.ndp.nt.  * . . . . 

152 

i-10 

2.62 

Total _ _ 

460 

i-10 

2.28 

INCIDENTAL  FUNCTIONS  OF  COUNTRY  HOUSES.  167 

The  charge  per  bushel  is  usually  uniform  for  all  grains,  althouf^h 
in  some  instances  it  varies  as  between  the  different  "rains.  For 
example,  one  cooperative  elevator  of  Indiana 'stated  that  its  charges 
were  5  cents  per  bushel  for  wheat  and  rye  and  2  cents  for  oats;  an 
independent  elevator  of  the  same  State  charged  4  cents  per  bushel 
for  oats  and  5  cents  for  wheat ;  a  commercial  line  elevator  of 
Nebraska,  three-fourths  cent  per  bushel  for  corn  and  cents  for 
wheat.  If  a  difference  in  rates  by  grains  prevails,  the  charge  for 
wheat  is  usually  higher  than  that  of  the  other  grains. 

The  charges  per  bushel  for  cleaning  grain  made  by  some  elevators 
are  contingent  upon  the  disposition  of  the  screenings,  i.  e.,  whether 
or  not  the  elevator  retains  them.  (Ch.  V,  sec.  3.) 

Three  elevators  reported  a  rate  per  hour  as  the  basis  for  cleaning 
the  grain  of  farmers,  although  the  rate  was  not  indicated. 

Disposition  of  screenings  by  elevators. — The  elevators  which 
keep  the  screenings  either  as  a  part  or  all  of  their  remuneration  for 
cleaning  grain  usually  sell  them  locally  as  feed  or  else  ship  them  to 
some  market.®  If  the  elevator  is  equipped  with  a  feed  mill,  the 
screenings  are  ground  before  they  are  sold.  A  few  elevators  reported 
that  screenings  are  given  away  or  destroyed.  The  farmers  in  some 
instances  carry  the  screenings  back  to  the  farm  to  be  used  as  feed, 
provided,  of  course,  they  do  not  contain  too  many  noxious  weed 
seeds. 

In  Iowa  and  Illinois  several  of  the  elevators  visited  indicated  their 
policy  with  respect  to  the  disposition  of  screenings  as  shown  by  the 
following  summary : 


Number. 

Answer. 

4  elevators . 

No  disposition. 

Sold. 

Made  into  feed. 

Given  away. 

Burned. 

Sold  and  given  away. 

Given  back  to  farmers. 

Mixed  with  sample  grade  oats. 

7  elevators . 

6  elevators . 

6  elevators . 

4  elevators . 

2  elevators . 

1  elevator . 

1  elevator . 

Amounts  realized  irom  disposition  of  screenings  secured  from 
cleaning  were  estimated  as  follows: 


Number. 

Answer. 

20  elevators . 

No  value. 

$100  per  year. 

$50  per  year. 

$150  per  year. 

$75  per  year. 

$300  in  1916  and  $800  in  1917. 

25  cents  per  hundredweight. 

One-half  value  of  wheat. 

45  cents  per  bushel. 

3  elev^ators . 

2  elevators . 

1  elevator . 

1  elevator . 

1  elevator . 

T  elevator . 

1  elevator . 

1  elevator . 

« This,  of  course,  assumes  that  if  taken  as  remuneration,  such  screenings  are  not 
composed  of  dirt  or  noxious  weed  seeds  or  other  material  of  no  value. 


168 


COUNTRY  GRAIN  MARKETING. 


Section  14.  Side-line  business  of  country  elevators. 

Extent  of  business. — A  considerable  proportion  of  country  ele¬ 
vators  and  warehouses  transact  a  merchandising  business  in  com¬ 
modities  other  than  grain,  and  these  different  commodities  thus 
handled  are  commonly  known  and  referred  to  in  the  trade  as  side 
lines  and  the  business  itself  as  side-line  business.  The  extent  to 
which  the  practice  of  handling  side  lines  is  prevalent  among  country 
elevators  is  indicated  by  the  replies  to  the  Commission’s  inquiry  on 
this  subject  (Appendix  2,  inquiry  16),  which  were  made  by  6,97a 
elevators  in  the  14  large  grain-producing  States  of  the  Central  West. 
Out  of  this  number,  5,520,  or  nearly  80  per  cent,  reported  the  han¬ 
dling  of  side  lines,  as  against  1,453,  or  slightly  over  20  per  cent, 
which  did  not  engage  in  such  operations.  This  appears  from  the 
following  table,  which  presents  the  number  and  percentages  of 
elevators  of  the  various  types  which  handle  and  which  do  not  handle 
side  lines,  together  with  the  average  number  handled  in  the  14  States 
which  were  separately  tabulated  by  the  Commission.^ 


Table  59. — Number  and  percentages  of  elevators  of  different  types  handling  side 
lines  and  average  number  handled  per  elevator  in  14  principal  grain-producing 
States. 


Total 

Total 

Per  cent 

Average  number  of  side 
lines  handled  by — 

Type  of  elevators. 

elevators 

answering 

inquiry. 

elevators 
handling 
side  lines. 

handling 

sidelines. 

All  report¬ 
ing 

elevators. 

Elevators 

handling 

sidelines. 

LINE. 

Fnmmp.rnial  . 

2,442 

1,698 

69.53 

1.41 

2.02 

3.22 

2.38 

1.67 

Pnnnprativfi  . 

73 

67 

91.78 

2.96 

Mill  . 

498 

357 

71.69 

1.71 

Maltster . 

24 

6 

25.00 

.42 

All  line . 

3,037 

2,128 

70.07 

1.48 

2.12 

INDIVIDUAL. 

Fnn'nprat.ive  . . . 

1,357 

1,242 

91.53 

3.01 

3.29 

T'nHpnpTiHpTit.  .  . 

2,244 

1,901 

84.71 

2.24 

2.64 

2.30 

2.00 

Mill  .  . 

332 

248 

74.70 

1.72 

Maltster . 

3 

1 

33.33 

.67 

All  individual . 

3,936 

3,392 

*  86. 18 

2.46 

2.85 

Tntal 

6,973 

5,520 

79.16 

2.04 

2.57 

Type  variations  in  side-line,  business. — The  average  number  of 
side  lines  handled  by  the  different  types  of  elevators  tends  to  vary 
directly  with  the  proportion  of  elevators  of  such  types  reporting  the 
handling  of  side  lines.®  This  is  more  clearly  shown  by  the  following 
statement  which  compares  the  proportion  of  elevators  of  the  five  prin¬ 
cipal  types  handling  side  lines  with  the  average  number  of  side  lines 
handled. 


7  For  States  separately  tabulated  see  Ch.  II,  sec.  5. 

®  Disregarding  cooperative  line  and  all  maltster  elevators,  tne 
inconsiderable. 


number 


of 


which 


is 


INCIDENTAL  FUNCTIONS  OF  COUNTRY  HOUSES. 


im 


Tabu:  60. — Comparison  of  the  proportions  of  different  types  of  elevators  handling 
sides  lines  with  the  average  number  handled  per  elevator. 


Type  of  elevator. 

Proportion 
of  elevators 
handling 
side  lines. 

.  Average 
number  of 
side  lines 
handled  by 
elevators 
reporting 
side-line 
handling. 

Average 
number  of 
side  lines 
handled  by 
all  elevators- 
answering 
inquiry. 

TnHi\n#^nal  r>nnnorA.t.ivA  .  .  . . . . . 

91.53 

3.29 

3.01 

TnHATV'nHpnt;  .  . . . 

84. 71 

2.64 

2.24 

1  mill  .  .  .  . . . . 

74.70 

2.30 

1.72 

Milllirio  . . . . . . . . . . . 

71.69 

2.38 

1.71 

69.53 

2.02 

1.41 

T.inpc  oil  . . 

70.07 

2.12 

1.48 

86.18 

2.  85 

2.46 

A  11  plpi'-of nrc  rpnnrtino^  . . . . 

79.16 

2.57 

2.04 

While  practically  80  per  cent  of  the  elevators  answering  the  Com¬ 
mission’s  inquiry  regarding  side  lines  are  engaged  in  this  business, 
barely  TO  per  cent  of  all  the  lines  report  operations  of  this  character 
as  compared  with  over  86  per  cent  of  all  individual  elevators.  All 
elevators  dealing  in  side  lines  average  about  two  and  a  half  lines  per 
elevator,  but  all  types  of  line  elevators  handle  only  a  little  over  two 
side  lines  per  elevator,  while  all  individual  types  combined  handle 
nearly  three.  Similarly,  all  reporting  elevators  handle  on  the  aver¬ 
age  about  two  side  lines  as  compared  with  about  one  and  a  half  for 
the  line  elevators  and  two  and  a  half  for  the  individual  elevators. 

The  individual  cooperatives  lead  both  in  the  proportion  of  eleva¬ 
tors  handling  side  lines  and  in  the  average  number  reported.  Over 
90  per  cent  of  such  elevators  handle  side  lines,  and  the  average  re¬ 
ported  is  3.29  lines  for  those  houses  doing  a  side-line  business,  or  3.01 
lines  for  all  the  houses  of  this  type  reporting.  Commercial  line 
elevators,  on  the  other  hand,  rank  lowest  in  the  proportion  handling 
side  lines  and  in  the  average  number  of  side  lines  handled.  Slightly 
less  than  70  per  cent  do  any  of  this  business,  and  the  average  number 
of  side  lines  handled  is  barely  two  for  such  houses  and  less  than  one 
and  a  half  for  all  reporting  elevators  of  this  type. 

Section  15.  Explanation  of  type  variations  in  side  lines. 

CooPERATi\^s. — The  reasons  for  these  variations,  both  in  the  pro¬ 
portion  of  different  types  of  elevators  handling  side  lines  and  in  the 
number  of  side  lines  handled,  is  to  be  found  in  the  particular  charac¬ 
teristics  and  business  methods  of  the  different  types. 

The  high  percentages  of  cooperatives  which  engage  in  the  handling 
of  side  lines  and  the  high  average  number  of  lines  handled  by  such 
elevators  is  due  in  large  measure  to  the  cooperative  idea  itself. 
There  is  every  reason  to  believe  that  in  many,  if  not  most,  cases  the 
farmer  stockholders,  or  patrons  of  the  cooperative,  wish  to  buy  their 
coal,  lumber,  or  farm  machinery  through  their  own  organization. 
They  are  naturally  inclined  to  feel  that  if  cooperation  is  a  good  thing 


170 


COUNTKY  GKAIN  MAEKETING. 


in  the  handling  of  grain  it  is  also  a  good  thing  in  the  purchasing  of 
commodities.  Both  the  stockholders  and  the  management  figure  that 
they  can  save  the  middleman’s  profit  and  that  the  stockholders  will 
thus  get  the  goods  cheaper,  either  at  the  time  of  purchase  or  ulti¬ 
mately  through  the  distribution  of  the  elevator’s  profits.  These 
ideas  have,  moreover,  been  fostered,  so  the  Commission  is  informed, 
by  the  promotion  work  of  the  cooperatives,  a  good  deal  of  which  has 
been  devoted  to  the  proposition  that  the  cooperative  elevator  will  not 
only  handle  the  farmer’s  grain  but  will  also  supply  him  advanta¬ 
geously  with  other  things  which  he  requires.  The  handling  of  side 
lines  has  also,  according  to  the  information  obtained,  been  advocated 
by  the  cooperative  and  other  journals,  and  the  farmers  have  been 
urged  to  handle  side  lines  as  an  adjunct  to  their  business  and  as  an 
additional  source  of  profit.  The  agents  of  the  Commission  were  also 
informed  by  one  of  the  large  line  operators  that  the  cooperatives  in 
the  Northwest  frequently  employ  two  or  more  men  and  are,  in  con¬ 
sequence,  often  in  a  better  position  to  handle  this  business  than 
are  those  elevators  employing  a  smaller  force  like  the  line  com¬ 
panies. 

^  Finally,  by  reason  of  the  cooperative  principle,  the  volume  of  side¬ 
line  business  transacted  by  a  cooperative  ought,  theoretically,  to  be 
very  much  greater  than  the  amount  which  would  be  handled  by  ele¬ 
vators  of  other  types,  and,  other  things  being  equal,  this  should  result 
in  its  being  done  at  a  lower  cost. 

Commercial  lines. — In  the  case  of  the  commercial-line  companies, 
the  situation  is  decidedly  different  than  it  is  with  the  cooperatives. 
Although  the  latter,  for  reasons  stated,  are  probably  able  to  find  a 
good  profit  in  the  side-line  business,  the  commercial-line  operators 
say  that  they  do  not  find  side  lines  particularly  profitable.  Where 
they  are  handled,  it  is  claimed  that  it  is  chiefly  or  largely  in  order  to 
help  pay  expenses.  At  certain  line  stations  the  grain  business  would 
scarcely  justify  the  salary  paid  the  agent  were  it  not  for  the  side-line 
business  done.  It  is  stated  that  at  such  stations  side  lines  tend  to 
keep  the  agent  busy  and  enable  the  line  company  to  pay  him  a  living 
salary,  which  might  otherwise  be  impossible. 

The  business  of  the  line  company  is  primarily  grain  merchandis¬ 
ing,  however,  and  this  must  not  be  neglected  on  account  of  any  side 
lines.  As  a  rule  the  line  station  employs  but  one,  or  at  most  two 
men.  As  these  can  attend  to  only  about  so  many  duties  efficiently, 
either  the  handling  of  a  considerable  volume  of  business  in  one  or 
two  side  lines,  or  the  handling  of  a  considerable  number  of  such  lines 
would  be  likely  to  necessitate,  in  many  cases,  the  employment  of  addi¬ 
tional  help.  The  greatest  demand  for  certain  side  lines,  especially 
coal  and  lumber,  comes  during  the  busiest  part  of  the  crop  year — 
fall  and  winter— when  the  full  time  of  the  manager  is  needed  to  at¬ 
tend  to  the  grain  business,  a  situation  which  always  makes  for  the 
employment  of  an  additional  man. 

An  objection  to  the  handling  of  a  great  variety  of  sides  lines  which 
is  advanced  by  some  of  the  larger  line  companies  is  the  large  amount 
of  detail  work  which  this  throws  upon  the  head  office.  The  greater 
the  number  of  side  lines  handled,  the  greater  the  volume  of  detail  in¬ 
volved  and  the  more  difficult  it  becomes  to  manage  the  numerous 
stations  satisfactorily. 


INCIDENTAL  FUNCTIONS  OF  COUNTRY  HOUSES. 


171 


Independents. — IVhile  a  very  much  higher  proportion  of  inde¬ 
pendents  than  of  commercial  line  or  mill  elevators  merchandise  side 
lines,  the  prevalence  of  this  business  among  such  organizations  is 
considerably  less  than  it  is  among  the  cooperatives.  While  a  definite 
explanation  of  the  position  of  this  type  of  elevators  in  the  side-line 
business  can  not  be  given,  several  probable  reasons  may  be  advanced. 
In  the  fiT§t.-phrci&y  while  the  independent  is  like  the  line  elevator,  a 
purel/merchandising  proposition,  it  is  entirely  dependent  upon  local 
patronage  for  its  existence  and,  unlike  the  line,  does  not  secure  its 
business  from  a  number  of  localities.  In  consequence,  it  probably 
handles  side  lines  with  a  view  to  accommodating  its  patrons  to  a 
greater  extent  than  do  the  line  stations.  Again,  it  often  has  farmer 
stockholders  and  farmer  connections,  and  iiv-eohsequence  inclines  to 
a  liberal  policy  in  this  matter.  Custom  and  the  age'  of  the  territory 
also  play  a  part,  probably,  in  this  connection. 

Moreover,  as  the  independent  elevator  is  in  most  cases  locally  con¬ 
trolled  and  operated,  there  is  a  certain  tendency  to  expand  its  busi¬ 
ness.  As  elsewhere  pointed  out,  the  independent  elevator  often  con¬ 
stitutes  both  the  business  and  livelihood  of  some  one  or  more  persons 
or  individuals  in  its  locality  and  the  natural  result  is  probably  that 
such  persons  in  an  endeavor  to  develop  its  business  invest  their  capi¬ 
tal  in  it  instead  of  turning  their  profits  into  other  channels  of 
investment. 

Mill  elevators. — A  somewhat  higher  proportion  of  mill  elevators, 
both  line  and  individual,  than  of  commercial  lines  are  engaged  in 
the  side-line  business.  Mill  establishments  also  handle  a  higher  aver¬ 
age  number  of  lines  than  does  the  commercial  line  house.  Both  mill 
types,  however,  rank  much  below  either  the  independents  or  the 
cooperatives  in  the  proportion  of  establishments  handling  side  lines 
and  also  in  the  average  number  of  side  lines  handled.  The  nature  of 
the  mill-elevator  business,  which,  as  repeatedly  explained,  is  pri¬ 
marily  to  serve  as  a  feeder  for  the  mill,  is  probably  sufficient  to 
account  both  for  the  low  proportions  of  these  elevators  handling  side 
lines  and  the  low  average  number  handled.  Since  the  mill  elevator 
serves  primarily  as  a  source  of  grain  supply  to  the  mill,  a  large  num¬ 
ber  of  them  either  do  not  do  any  grain  merchandising  or  are  engaged 
in  it  only  to  a  small  degree,  except  in  flour  and  feed  (sec.  17).  In  so 
far,  therefore,  as  this  is  the  case,  the  number  of  mill  elevators  handling 
side  lines  is  probably  limited  to  merchandising  elevators,  and  from  the 
nature  of  the  business  it  is  not  to  be  expected  that  the  number  of  lines 
handled  would  be  as  great  as  in  the  case  of  either  the  cooperatives  or 
independents. 

Section  16.  State  variations  in  side-line  business. 

The  following  table  shows  the  percentage  of  elevators  handling 
side  lines  in  each  of  the  14  States  for  which  returns  were  separately 
tabulated,  together  with  the  average  number  of  side  lines  handled 
both  by  elevators  which  report  such  business  and  by  all  elevators 
reporting : 


172 


COUNTRY  GRAIN  MARKETING. 


Table  61. — Proportion  of  elevators  in  specified  States  handling  side  lines  and 

average  number  handled  per  elevator. 


state. 

Percentage 
of  elevators 
handhng 
side  lines 

Average 
number  of 
side  lines 
handled, 
all  eleva¬ 
tors  doing 
this 

business. 

Average 
niunber  of 
side  lines 
handled, 
aU  eleva¬ 
tors  an¬ 
swering 
inquiry. 

Michigan . 

94. 2C 

3.99 

3.75 

Indiana . 

90.86 

3.01 

2.73 

Wisconsin . 

84.58 

3.22 

2.72 

South  Dakota . 

83.96 

2.24 

'088 

Iowa . 

83.77 

2.76 

2.31 

Ohio . 

82.46 

3.81 

3.14 

Minnesota . 

80.05 

2.41 

1.93 

Oklahoma . 

77.78 

2.10 

1.63 

Ilhnois . 

77.73 

2. 51 

1.95 

Kansas . 

77.54 

2. 49 

1.93 

Missouri . 

75.00 

2. 25 

1.69 

North  Dakota . . . 

73.95 

2.01 

1.-18 

Nebraska . 

73.23 

2.14 

1.57 

Montana . 

55.15 

2. 48 

1.37 

Average,  14  States . 

79.16 

2.57 

2.04 

The  proportion  of  elevators  of  all  types  handling  side  lines  ranges 
from  about  55  per  cent  in  Montana  to  about  94  per  cent  in  Michigan. 
For  all  elevators  reporting,  the  average  number  of  side  lines  handled 
per  elevator  ranges  from  1.37  per  cent  in  Montana  to  3.75  per  cent  in 
Michigan,  and  for  elevators  engaged  in  this  business  from  2.01  per 
cent  in  North  Dakota  to  3.99  per  cent  in  Michigan.  These  variations 
are  presumably  due  chiefly  to  the  geographical  distribution  of  the 
different  types. 

Section  17.  Relative  importance  of  different  side  lines. 

Results  of  tabulation. — Appendix  Table  12  presents  in  detail  for 
each  type  of  elevator  in  the  14  States  separately  tabulated  the  pro¬ 
portions  of  those  elevators  handling  side  lines  which  deal  in  each  of 
13  specific  lines. 

Coal  is  reported  by  a  far  larger  proportion  of  elevators  than  is 
any  other  side  line,  nearly  72  per  cent  of  the  elevators  handling  side 
lines  reporting  this  commodity.  Feeds  are  reported  by  47.63  per 
cent  of  the  elevators,  flour  by  32.43,  building  material  by  18.80,  and 
seed  by  14.67.  Fencing  materials,  farm  implements,  forage,  live 
stock,  fertilizer,  country  produce,  merchandise,  and  beans  follow  in 
the  order  named.  Each  of  these  commodities,  however,  is  reported 
as  being  handled  by  less  than  7  per  cent  of  the  elevators  handling 
side  lines,  so  that  the  five  commodities  first  mentioned  are  easily  the 
most  important. 

Type  variations. — The  distribution  of  the  five  principal  side  lines 
by  type  of  elevator  (excluding  cooperative  lines  and  all  maltster  ele¬ 
vators  on  account  of  scanty  data)  is  as  follows: 


INCIDENTAL  FUNCTIONS  OF  COUNTRY  HOUSES. 


173 


Table  62. — Proportion  of  different  types  of  elevators  handling  side  lines  which 

deal  in  the  five  principal  side  lines. 


Type  of  elevators. 

Coal. 

Feeds. 

Flour. 

Building 

material. 

Seed. 

Commercial  line . 

83.57 

32.86 

24.73 

20.26 

12.01 

Mill  line . 

51.26 

83. 75 

79. 27 

3.64 

4.76 

Individual  cooperative . 

82.69 

55. 39 

41.87 

17.55 

14. 17 

Independent . 

63.39 

46.29 

24.04 

22. 67 

19.36 

Indi^dualmill . 

30.24 

65. 32 

37.90 

6. 45 

12. 10 

All  types  1 . 

71.94 

47.63 

30.43 

18.80 

14.67 

1  Including  all  maltster  and  cooperative  line  elevators. 


Commercial  line  and  cooperative  elevators  lead  easily  in  the  han¬ 
dling  of  coal,  the  two  mill  types  in  feeds  and  the  mill  lines  in  flour. 
The  independent,  commercial  line,  and  cooperative  type  all  handle 
building  material  and  seeds  to  an  extent  somewhat  comparable  with 
the  average,  while  the  operations  of  both  mill  types  in  these  com-  - 
modities  and  in  coal  are  much  below  average. 

The  low  proportions  of  mill  elevators  handling  these  last  three  side 
lines  is  presumably  to  be  explained  by  the  fact  that  mill  elevators 
are  so  largely  feeders  for  the  mill  and  are  frequently  not  engaged  in 
the  grain  merchandising  business.  In  so  far,  therefore,  as  they  do 
not  merchandise  grain,  it  would  appear  somewhat  less  likely  that  they 
would  take  on  side  lines  for  merchandising  and  to  this  extent,  there¬ 
fore,  except  in  flour  and  feed,  that  their  merchandising  operations 
would  tend  to  be  more  limited  than  those  of  other  types.  In  the  case  of 
flour  and  feed,  however,  the  situation  is  somewhat  different.  The  one 
is  the  product  and  the  other  the  by-product  of  the  mill’s  operations 
and  these  two  commodities,  therefore,  are  handled  very  extensively  by 
these  types. 

There  are  at  least  two  possible  explanations  of  the  fact  that  mill 
lines  handle  flour  and  feeds  more  frequently  than  do  the  individual 
mill  elevators.  One  is  that  since  individual  elevators  are  usually  an 
integral  part  of  the  mill,  sales  of  feed  and  flour  are  regarded  as  mill 
sales  and  not  elevator  sales,  and  were  not,  in  consequence,  returned.^ 

’  The  other  is  that  a  considerably  larger  proportion  of  mill  line  ele¬ 
vators  are  engaged  in  merchandising  operations  than  are  individual 
mill  elevators. 

The  relatively  high  frequency  with  which  coal  and  lumber  are 
handled  by  the  commercial  line  is  probably  to  be  found,  at  least  in 
part,  in  the  fact  that  these  commodities  are  reported  to  be  much  easier 
for  the  head  office  to  keep  a  check  on  than  are  many  of  the  other  side 
lines.  Coal  and  lumber  are  bought  and  sold  on  a  weight  and  measure¬ 
ment  basis  and  there  is  also  less  office  detail  involved  in  the  handling 
of  these  commodities.  Coal,  especially,  so  the  Commision  is  in¬ 
formed,  takes  .comparatively  little  of  the  time  of  the  manager,  for  the 
reason  that  the  farmer  generally  loads  the  coal  into  his  wagon  and 
all  that  the  elevator  man  has  to  do  is  to  weigh  it  in.  It  thus  adds  but 
little  to  the  expense  and  something  to  the  profits. 

*  This  may  also  explain  the  wide  variations  In  individual  mill  elevator  sales  of  flour 
and  feed,  the  former  being  regarded  as  mill  sales  in  a  larger  proportion  of  cases  than  the 
latter. 


174 


COUNTRY  GRAIN  MARKETING. 


Lumber  differs  considerably  in  grade,  and  to  handle  it  requires  a 
considerable  amount  of  capital.  The  fact  that  the  commercial  line 
elevator  companies  usually  command  ample  funds  is  probably  one  of 
the  explanations  for  the  extent  to  which  building  material  is  reported 
as  a  line  elevator  side  line.  It  is  to  be  noted,  however,  that  one  line 
company  in  Minneapolis  reported  that  it  w’^as  dropping  lumber  be¬ 
cause  of  the  fact  that  it  required  special  men  to  handle  it  properly. 

The  high  proportion  of  commercial  line  elevators  and  also  of  coop¬ 
eratives  reporting  coal  as  a  side  line,  is  in  all  probability  partly  influ¬ 
enced  by  the  fact  that  in  the  Northwest,  where  both  these  types  are 
relatively  very  important,  the  average  town  has  been  reported  to  the 
Commission  to  sell  so  small  a  quantity  of  coal  that  it  will  scarcely 
support  a  dealer  handling  this  commodity  alone. 

A  considerably  higher  proportion  of  the  cooperatives  handle  coal, 
flour,  and  feeds  than  the  average,  and  the  proportion  handling  the 
other  two  principal  side  lines,  lumber  and  seeds,  is  about  average. 

State  variations  in  different  side  lines  handled. — ^Appendix 
Table  13  presents  the  proportions  of  elevators  handling  13  specified 
side  lines  in  each  of  the  14  States  separately  tabulated.  This  appen¬ 
dix  may  be  consulted  for  the  details  of  side-line  handling  in  different 
sections. 


Cani:cic^II- 


MAROINa,  tatADES,  DOCiSGBg,  AND  WEIGIITB. 


.  Sources  of  price  information. 


General  statement. — As  the  bulk  of  the  grain  bought  by  the 
country  elevators  is  shipped  to  the  terminal  market Ch.  '■  W )  and 
sold  at  prices  prevailing  there,  country  prices  are  ordinarily  based 
upon  the  terminal  market  prices  for  the  corresponding  kind  and 
grade  of  grain. 

The  country  elevators  are  informed  as  to  the  terminal  market 
price  changes  from  a  wide  variety  of  sources  through  the  medium  of 
the  mails,  the  telephone,  and  telegraph.  Practically  all  of  the  large 
daily  newspapers  in  the  grain  territory  supply  price  quotations — 
the  opening  and  closing  and  sometimes  high  and  low  of  the  market. 
Through  the  mails  there  come  to  the  elevator  these  daily  newspapers 
with  their  market  news  sections,  circular  letters,  grain  trade  publi¬ 
cations  of  various  kinds,  commission  men’s  circulars,  price  cards,  etc. 
These  media  furnish  in  many  instances  market  information  other 
than  prices,  including  demand  and  supply  conditions,  daily  receipts, 
car  supply,  and  other  trade  gossip.  The  telephone  and  telegraph, 
of  course,  offer  quicker  service  than  the  mails.  This  is  especially  im¬ 
portant  if  the  country  elevators  are  situated  so  far  from  the  market 
that  price  information  sent  through  the  mails  can  not  reach  them  in 
time  for  use  in  making  the  next  day’s  purchases. 

In  most  cases  the  price  information  obtained  by  the  country  eleva¬ 
tors  is  the  prices  prevailing  at  the  terminal  market,  from  which  the 
T^uyer  must  deduct  his  gross  margin--4^.,  freight  and  gross  profit. 

SPtl!."  The  most  important  sources  of  price  informa¬ 
tion  reported  by  country  elevators  are  daily  price  cards,  market  tele- 
or  private  wire  services,  C.  N.  D’s,  terminal  market  price  cur- 
“  on-track  ”  nnr]  ‘‘ f.n-nrrivp  ”  birl«,  pprl  mnin  nfflpA 

LY  PRICE  CARDS. — Ordinarily  the  daily  price  card  is  a  post  card 
upon  the  back  of  which  are  printed  the  terminal  market  price  quota¬ 
tions  for  various  kinds  and  grades  of  grain.  Sometimes  future  as 
well  as  cash  prices  are  quoted  and  often  the  cards  carry  some  other 
items  of  market  information  and  occasionally  market  gossip.  Such 
cards  are  sent  out  chiefly  by  the  receivers  in  the  various  markets. 
Form  3  is  an  example  of  such  a  card. 


175 


176 


COUNTRY  GRAIN  MARKETING. 


FORM  3.— DAILY  PRICE  CARD. 
Becher-LaBree  Co. 

IS  THE  ANSWER  TO  THE  QUESTION  OF 
“Good  Service” 

(U.  S.  FOOD  ADMINISTRATION  LICENSE  NO.  G-20997) 


Minneapolis.  Jan.  10, 1918.  Duluth. 


Month. 

Minne¬ 

apolis. 

Duluth. 

Chicago. 

Oats. 

Flax. 

Corn. 

Oats. 

May . 

74i 

351J. 

12415 

761-76 

July . 

344 

Jan . 

350 

127i 

00 

Minneapolis. 

Cash. 

Duluth. 

Track. 

To  arrive. 

Close. 

Track. 

To  arrive. 

165-68 

3  y.  Corn . 

78^79^ 

78-79 

3  W. Oats . 

79^80J 

79i 

184i-85^ 

184i-85i 

2  Rye . 

183 

183 

131-56 

Barley . 

127-59 

356^591 

354^-56^ 

Flax . 

352-65 

350 

Further  peace  rumors  today  were  responsible  for  a  very  nervous  oat  market 
with  the  May  selling  up  to  76fc  and  then  breaking  sharply.  While  we  cannot 
conceive  of  peace  at  this  time,  the  situation  is  such  that  these  rumors  are  bound 
to  affect  the  market  and  we  therefore  advise  you  to  cinch  your  profits  on  bulges. 
Barley  market  was  still  slow  and  draggy,  the  medium  grades  possibly  selling 
off  Ic.  Rye  was  strong,  showing  a  slight  advance  over  yesterday’s  sales 
The  corn  market  was  easy,  being  unchanged  to  3c  lower;  the  white  mixtures 
slow  to  move. 


Receipts. 

Wheat. 

Corn. 

Oats. 

Rye. 

Barley. 

Flax. 

Mmneapolis . . . 

214 

49 

75 

30 

Ill 

24 

Duluth . 

15 

1 

4 

6 

Chicago . 

3 

101 

40 

3 

5 

B-A-Bechek-LaBree-Shipper 


In  the  case  of  the  ordinary  daily  price  card,  service  it  is  neces¬ 
sary  to  deduct  from  the  terminal  prices  the  gross  margin,  i.  e.,  freight, 
operating  expenses,  and  a  net  profit,  in  order  to  arrive  at  the  price 
to  be  paid  for  grain  by  the  local  elevator.  The  most  important  ex¬ 
ception  to  this  rule  is  the  Grain  Bulletin  service  which  is  used  by 
several  thousand  elevators  in  the  four  northwestern  grain  States. 
The  Grain  Bulletin  (Vol.  HI),  and  certain  other  services  as  well, 
send  out  quotations  on  cards  giving  not  the  terminal  market  prices 
but  instead  prices  which  may  be  actually  used  by  the  elevator  agent 
in  making  grain  purchases;  in  other  words,  prices  less  freight  from 
the  local  station  to  the  terminal  and  also  less  a  certain  amount  to 
cover  costs  of  operation  and  a  margin  of  profit.  The  Grain  Bulle- 


PRICES,  MARGINS,  GRADES,  DOCKAGES,  WEIGHTS. 


177 


tin  ^ice  card  is  familiarly  known  throughout  the  entire  Northwest 
as  “  T  he  Card.”  It  is  also  sometimes  referred  to  as  “  Durant’s  Card,” 
since  the  service  is  operated  by  one  F.  K.  Durant  as  a  private  busi¬ 
ness  undertaking. 

Form  4  is  a  sample  of  one  of  these  cards. 


FORM  4. — GRAIN  BULLETIN  DAILY  PRICE  CARD. 

Minneapolis,  Minn.,  May  5,  1920. 


No.  1  NOR.  SPRING  58#  test _ 291 

No.  2  “  “  57#  “ _ 286 

No.  3  “  “  55#  “ _ 276 

No.  4  “  “  53#  “ _ 256 

No.  5  “  “  50#  “ _ 246 


40-49#  otherwise  No.  5,  30  per  pound  less  than  No.  5  ;  other 
light  weight  wheat  depends  on  quality.  No.  1  DARK  NOR.  50  ; 
#2  50  3&4  50 ;  lower  grades  20  more  than  Nor.  DURUM  in 
SPRING  100  less  SPG.  Grade. 


DURUM  Winter 


No.  1  60#  test _ _ 

- 266 

:  1 _ 

- 276 

No.  2  58#  “ _ 

- 263 

:  2 _ 

-  _  271 

No.  3  56#  “ _ 

-  258 

:  3 _ 

261 

No.  4  .54#  “  . 

_  251 

:  4 

_  251 

No.  5  .51#  “ 

_ 247 

:  5 _ 

241 

40—50#  otherwise  o. 

5,  30  per  pound  less  than  No. 

5 ;  other 

light  weight  DURUM  depends  on  quality.  AMBER  2  cents 
more  than  DURUM.  SPRING  in  DURUM  40  less  DURUM  grade. 
RED  DURUM  70  less  than  DURUM. 


No.  1  FLAX  426  No.  2  421  N.  G _ _ 411 

No.  3  OATS  26#  test _  91 

No.4  “  23#  “ _  88 

10  disc,  per  pound  under  26# 

55#  Yel.  Shell.  CORN _ 154 

50  disc,  per  pound  under  55# 

White  10  ;  Mix.  20  ;  Ear  50  discount. 

No.  2  BARLEY  46#  test _ 151 

No.  3  “  44#  “ _ 147 

No.  4  “  41#  “ _ 141 

20  disc,  per  pound  under  46# 

No.  2  RYE  54#  test _ 190 

10  disc,  per  pound  under  54# 

Timothy  Cwt  800  :  Speltz  Cwt _ 260 

Buckwheat  Cwt _ 260 

#227  Int.  12 


THE  GRAIN  BULLETIN 


Market  telephone  and  private  wire  services. — The  Grain  Bulle¬ 
tin  daily  card  service  is  supplemented  by  a  telephone  and  telegraph 
service.  Immediately  after  the  close  of  the  Minneapolis  Chamber  of 
Commerce,  the  changes  necessary  on  the  card  due  to  a  fluctuation 
in  price,  are  telephoned,  or  sometimes  telegraphed,  from  Minneapolis 
to  specified  central  points  and  from  there  relayed  to  various  country 
points  at  which  are  elevators  subscribing  to  the  supplementary  service. 
Likewise,  information  of  any  sudden  or  important  change  in  the 

9964°— 20 - 12 


178 


COUNTRY  GRAIN  MARKETING. 


market  is  similarly  communicated.^  All  of  the  subscribers  to  the 
^  (rrain  Bulletin  receive  the  card  daily,  but  only  a  portion  receive  the 
supplementary  service.  Out  of  2,928  elevators  replying  to  the  Com¬ 
mission’s  questionnaire  who  used  the  Grain  Bulletin  daily  price  cards, 
1,630  used  the  supplementary  service.  • 

In  market  telephone  and  private  wire  service,  there  is  also  in¬ 
cluded  all  price  information  sent  out  over  the  telephone  by  various 
other  price-reporting  organizations  and  all  telegraphic  information 
of  the  same  character  sent  over  private  wires  by  cash  or  future  grain 
dealers  owning  or  leasing  private  wires. 

C.  N.  D’s. — C.  N.  D.  is  the  abbreviated  expression  commonly  em¬ 
ployed  to  designate  the  telegraphic  service  of  the  Western  Union’s 
commercial  news  department.  Messages  giving  the  prevailing 
market  prices  at  an  exchange  are  sent  out  by  this  company  over  its 
own  wires  at  regular  intervals  during  the  trading  hours -to  the  eleva¬ 
tor  subscribers  to  the  service.  The  telegraph  company  has  branch 
stations  on  the  various  exchange  floors,  so  that  information  as  to 
price  changes  can  be  sent  to  the  country  elevators  practically  direct. 
The  messages  are  sufficiently  numerous  to  reflect  all  of  the  important 
changes.^ 

Terminal  market  price  currents  or  price  reporters. — Price  cur¬ 
rents  or  reporters  are  printed  and  mailed  to  subscribing  country 
elevators  from  all  the  important  terminal  grain  markets,  for  ex¬ 
ample,  Minneapolis,  Chicago,  Kansas  City,  St.  Louis.  These  pub¬ 
lications,  in  some  cases,  consist  of  a  single  sheet  about  one-half  the 
size  of  a  newspaper  sheet,  on  which  appear  the  prevailing  prices 
at  the  terminal  market  from  which  it  is  issued,  and  also  prices  at 
othqr  markets.® 

In  other  cases,  as,  for  example,  the  Daily  Market  Eecord  of  Minne¬ 
apolis  and  the  Daily  Trade  Bulletin  of  Chicago,  these  publications 
are  of  newspaper  size  and  contain  a  considerable  amount  of  informa¬ 
tion  other  than  mere  price  quotations.  All  these  publications  are 
conducted  by  private  interests  and  not  by  the  exchanges  themselves, 
though  the  quotations  may  have  some  official  standing.  ’ 

“  On-track  ”  and  “  to-arrive  ”  bids.— “  On-track  ”  bids  are  offers 
by  mail  or  wire  to  buy  grain  on-track  in  the  country,  made  by  termi¬ 
nal  market  organizations  or  local  buyers  or  their  agents ;  “  to-arrive  ” 
bids  are  offers  usually  from  terminal  market  concerns  for  grain  for 
shipment  to,  or  to-arrive  ”  at,  the  terminal  market  within  a  specified 
period  of  time.  Since  bids  of  either  character  are  bona  fide  offers  for 
grain  which  may  be  accepted,  they  constitute  a  most  satisfactory 
source  of  information  for  the  elevator  in  determining  the  prices  which 
it  will  pay  for  grain. 


^  For  further  details,  see  Vol,  III. 

2  For  details  regarding  these  services,  consult  Vols.  II  and  V. 
For  an  example  of  these  price  currents,  see  Appendix  9. 


179 


. 

•  » 

PKICES,  MARGINS,  GRADES,  DOCKAGES,  WEIGHTS. 

F orm  5  is  a  sample  of  an  “  on-track  ”  bid. 

FORM  5.— ON-TRACK  ”  BID. 

United  States  Food  Admtnistkation 
License  Numbee  G-33419 

THE  PADDOCK  HODGE  CO. 

Toledo,  Ohio,  Ape.  16,  1918. 


For  acceptance  to  reach  us  by  9 : 15  a.  m.  to¬ 
morrow  or  next  business  day,  we  bid  you,  less 
weighing  and  inspection  at  Toledo,  any  part 
of  5,000  bushels  of  each  kind  of  grain,  accept¬ 
ance  of  more  than  5,000  bushels  each  kind  of 
grain  subject  to  our  inTmediate  wire  confirma¬ 
tion.  Specify  amount  of  acceptance  in  bushels. 
Apparent  errors  excepted. 


F;  O.  B.  YOUE  TEACK 

If  there  is  more  than  one  railroad  at  your 
station  we  are  to  have  selection  of  route.  Do 
not  ship  until  you  receive  billing  instructions. 


Geade 

Shipment  Peice 

Stand.  White  Oats 

5  DAYS  86 1 

3  White  Oats 

5  DAYS  86| 

Stand.  White  Oats 

30  DAYS  85t 

3  White  Oats 

30  DAYS  85i 

TEACK  TOLEDO 

Loaded  in  any  kind  of  cars  and  shipped  on 
any  road., 


THE  PADDOCK  HODGE  CO.  24 

OATS - SPOT  PEICES  AEE  ATTEACTIVE. 

DEMAND  GOOD.  WHY  NOT 

CONSIGN  US  A  CAE. 

Form  6  is  a  sample  of  a  “  to-arrive  ”  bid. 

FORM  6.—“  TO-ARRIVE  ”  BID.  ^ 

Philadelphia,  Pa.,  Feb.  19,  1917. 

Gentlemen  :  For  acceptance  before  10.30  a.  m.  next  business  day,  we  will  give 
delivered  here,  for  No.  2  Red  Wheat  195  Free  from  garlic  * 

Clean,  Dry  Milling  Wheat _ 

No.  2  Yellow  Corn _ _ 

Cool  and  Sweet  Yellow  Corn _ 

Prime  Yellow  Cob  Corn _ 

Shipment  within  ten  days.  Off  grades  accepted  at  market  difference  on  day" of 
arrival.  In  accepting,  state  quantity  in  bushels,  and  await  shipping  directions, 
which  will  be  furnished  promptly. 

E.  &  O.  E. 

Address,  304  Bourse  Yours,  truly. 

Bell  Telephone,  Lombard  19-55 
Keystone  “  Main  16-94 

>■  • 

L.  G.  Geaff  &  Son. 

I 


0 


180 


COUNTRY  GRAIN  MARKETING. 


Main  office.— In  many  cases  line  companies,  especially  those  with 
headquarters  in  the  large  terminal  markets,  send  out  from  their  cen¬ 
tral  offices,  either  by  mail  or  by  wire,  price  quotations  or  instructions 
which  their  local  elevators  are  to  follow  in  buying  grain.  For  exam¬ 
ple,  one  line  company,  with  its  main  office  in  Chicago,  sends  a  daily 
price  letter  to  each  elevator  agent,  while  any  sudden  or  wide  changes 
in  prices,  due  to  a  rapidly  fluctuating  market,  are  telegraphed  to  a 
central  point  and  from  there  telephoned  to  each  agent.  Another 
Chicago  company  employs  an  evening  letter  and  supplements  this 
letter  with  information  by  telephone  or  telegraph  when  necessary, 
while  others  use,  primarily,  the  telephone  or  telegraph  and  confirm 
or  supplement  this  service  with  more  detailed  instructions  by  mail. 
Another  Chicago  company  telegraphs  daily  at  1.30  p.  m.  to  its  ele¬ 
vators  the  Chicago  Board  of  Trade  closing  prices.  These  prices 
form  the  basis  for  buying  in  the  country  for  the  rest  of  the  day.  In 
the  morning  additional  price  information  is  sent  out,  to  be  in  effect 
until  1.30. 

Other  sources. — “  Other  sources  ”  includes  any  other  means  than 
the  above  of  transmitting  market  information  to  the  country  ele¬ 
vators,  as,  for  example,  through  private  letters  sent  by  grain  dealers 
in  the  terminal  markets,  newspapers,  traveling  representatives  of 
grain  dealers,  etc. 

Section  2.  Average  number  of  services  employed. 

A  considerable  variation  is  found  among  the  different  country  ele¬ 
vators  in  the  number  of  price  information  services  received.  An  ele¬ 
vator  may  use  any  one  source  of  information  enumerated  above. 
Each  of  the  different  services  is  used  exclusively  by  at  least  a  few 
elevators.  The  majority  of  elevators,  however,  receive  more  than 
one  service.  The  number  of  services  received  by  single  elevators 
ranges  all  the  way  from  one  to  seven.  Two  sources  of  information 
only  are  used  most  commonly,  but  a  substantial  number  of  elevators  ’ 
in  some  States  reported  as  high  as  five,  six,  or  seven  price  information 
services. 

One  reason  that  so  many  elevators  receive  more  than  one  price 
information  service  is  the  fact  that  certain  price-quotation  media  are 
free  to  them,  being  sent  out  by  terminal-market  grain  interests  as 
advertisements.^  Another  reason,  and  an  important  one,  is  that  ' 
freight-rate  structure  is  frequently  such  that  many  elevators  ship  to 
more  than  one  market  and  desire  price  quotations  from  each  in  order 
to  sell  most  advantageously. 


It  should  also  be  noted  that  some  elevators  not  only  receive  more  than  one  service 
there  is  a  duplication  «f  the  same  service.  For  example,  Price  Currents 
and  the  Daily  Market  Records  or  bulletins  are  subscribed  for  by  different  grain  interests 
in  the  terminal  markets — commission  firms,  terminai  elevators,  etc. — and  sent  to  elevators 
specified  on  mailing  lists  submitted  by  these  subscribers.  Thus  many  elevators  are  on  the 
inailing  lists  of  more  than  one  subscriber.  The  amount  of  the  resuiting  duplication  is 

1  following  table,  based  on  44  mailing  lists  of  as  many  subscribers  containing 

4,yoy  ii0.ni0s  t  * 

7  elevators  each  receiving  7  copies. 

14  elevators  each  receiving  6  copies. 

32  elevators  each  receiving  5  copies. 

98  elevators  each  receiving  4  copies. 

252  elevators  each  receiving  3  copies. 

646  elevators  each  receiving  2  copies. 

Thus,  the  total  number  of  duplications  is  1,684,  and  the  net  number  of  elevators 
reached  is  only  3,285. 

In  Minneapolis  the  attempt  has  been  made  to  eliminate  this  duplication  bv  having 
the  mailing  lists  go  through  some  central  organization  where  all  duplicated  names  are 
eliminated. 


181 


PRICES,  MARGINS,  GRADES,  DOCKAGES,  WEIGHTS. 

The  number  of  services  used  by  an  elevator  may,  and  often  does 
change  during  a  year.  It  may  feel  justified  in  paying  the  charges’ 
of  a  service  dunng  the  period  of  heavy  crop  movement,  but  feel  com- 
pellecl  to  drop  it  during  the  season  of  light  movement. 

The  following  table  presents  the  average  number  of  price  informa¬ 
tion  sepices  reported  by  7,944  elevators  in  the  14  principal  grain- 
producing  States.  (Appendix  2,  inquiry  13.) 

Table  63.  Average  number  of  price  information  services  reported  by  elevators 

in  specified  States. 


State. 


Montana . • 

Wisconsin.. . . . 

Oklahoma . 

Michigan . 

Missouri . . 

Minnesota . 

North  Dakota . 

Ohio . 

South  Dakota  . 

Nebraska . 

Indiana . 

Kansas . 

Iowa . 

Illinois . 

Total . 


Number  of 
elevators 
reporting. 

Number  of 
price  infor¬ 
mation 
services  re¬ 
ported. 

Average 
number  of 
price  infor¬ 
mation 
services. 

401 

683 

1.70 

204 

396 

1.94 

154 

298 

1.94 

208 

415 

2. 00 

187 

402 

2  15 

1,111 

2,433 

2. 19 

1,249 

2,769 

2. 22 

328 

772 

2  35 

809 

1, 908 

2. 36 

582 

1, 378 

2,37 

392 

956 

2. 44 

586 

1,506 

2.57 

736 

2,209 

3.00 

997 

,3, 028 

3.04 

7,944 

19, 153 

2.41 

Section  3.  Relative  extent  of  use  of  different  sources. 

j.  following  table  presents  the  relative  importance  of 

different  sources  of  price  information  as  indicated  by  the  ratio  of 
times  reported  to  total  number  of  elevators  reporting : 


Table  64.  Ratio  of  times  specified  price  information  services  are  reported  to 

total  elevators  reporting. 


-  ,  Sources. 

V 

•  .  -  N 

Times 

reported. 

Ratio  of 
times  re¬ 
ported  to 
number  of 
elevators 
reporting. 

Daily  price  cards . 

5,082 
3,735 
2, 728 
2, 220 
1,606 
1,597 
876 
1,249 

63.97 
47. 02 
34.34 
27. 95 

20.97 
20. 10 
11.03 
15.72 

Market  telephone  or  private-wire  service . . . 

Terminal  market  price  currents .....  ^ 

"On-track”  bids . 

C.  N.  D..... .  . 

Bids,  "to-arrive” . 

Main  office . 

All  other  sources . 

Total . 

19, 153 
7, 944 

Total  elevators  reporting . 

From  this  table  it  appears  that  approximately  two-thirds  of  the 
country  elevators  in  arriving  at  country  buying  prices  make  use  of 
some  one  or  another  form  of  daily  price  cards  and  about  half  are 
also  recipients  of  some  form  of  market  telephone  or  private  wire 
service.  Price  currents,  “on-track”  bids,  C.  N.  D’s,  “to-arrive” 
bids,  and  main  office  follow  in  the  order  of  importance. 


182 


COUNTKY  GKAIN  MARKETING. 


Price  cards. — Appendix  Table  14  presents  the  proportion  of  ele¬ 
vators  in  the  14  specified  States  reporting  the  use  of  the  foregoing 
specified  sources  of  price  information  in  arriving  at  their  buying 
prices.  (Appendix  2,  inquiry  13.) 

Daily  price  cards  are  most  important  in  the  four  northwestern 
States,  which  are  the  only  ones  reporting  the  use  of  this  Qlass  of 
service  to  a  greater  extent  than  the  average  for  all  14  States.  As 
high  as  96  per  cent  of  the  elevators  in  North  Dakota  and  95  per  cent 
in  Montana  report  the  use  of  daily  price  cards,  and  above  three- 
fourths  of  the  elevators  in  Minnesota  and  South  Dakota.  The  great 
importance  of  daily  price  cards  in  this  area  as  compared  with  any 
other  section  of  the  country  or  any  other  States  is  unquestionably 
to  be  found  in  the  widespread  use  of  the  Grain  Bulletin  card.  For 
example,  in  North  Dakota,  out  of  1,201  elevators  reporting  daily 
price  cards,  1,163,  or  96.84  per  cent,  used  the  Grain  Bulletin,  and  in 
Minnesota,  out  of  935  reporting,  825,  or  88.24  per  cent. 

Price  currents. — Both  daily  price  cards  and  price  currents  are 
mail  services  and,  except  for  the  Grain  Bulletin  and  possibly  one 
or  two  other  services,  the  information  they  supply  is  in  essence 
the  same.  These  services,  therefore,  tend  to  compete  with  one 
another  and  to  some  extent  apparently  this  is  responsible  for  the 
variations  in  the  use  of  these  services.  Price  currents,  for  exam¬ 
ple,  are  least  employed  in  Ohio,  Oklahoma,  Michigan,  and  in  the 
four  northwestern  States.  In  these  four  northwestern  States,  as 
stated,  the  Grain  Bulletin  is  in  almost  universal  use,  and  the  lack 
of  use  of -price  currents  in  this  area,  therefore,  can  probably  be 
accounted  for  on  this  ground.  As  explained  in  a  preceding  section, 
the  Grain  Bulletin  card  gives  a  base  buying  price,  which  can  actually 
be  used  for  grain  buying,  and  it  is  therefore  in  no  way  remarkable 
that  price  currents  are  not  in  extensive  use  in  the  Northwest  merely 
from  the  fact  that  they  are  much  less  convenient,  since  they  merely 
give  the  terminal  market  prices.  The  low  percentages  of  use  of  price 
currents  in  Ohio,  Oklahoma,  and  Michigan,  especially  the  two  latter, 
is  probably  explainable  by  the  facts  set  out  in  connection  with  the 
direction  of  grain  movement — ^that  these  States,  because  of  their  loca¬ 
tion  do  not  feel  the  pull  of  the  terminal  markets,  the  great  bulk  of 
their  grain  going  to  small  local  points,  to  feeders,  interior  brokers, 
etc.  (Ch.  VI,  secs.  4-8.) 

JdARKET  TELEPHONE  AND  PRIVATE  WIRE  SERVICES.  JN  Ortll  anCl  oOUtn 

Dakota,  Minnesota,  Illinois,  and  Iowa  are  the  only  States  reporting 
the  use  of  market  telephone  and  private  wire  services  to  a  greater 
extent  than  the  average,  and  South  Dakota  is  barely  average. 

The  importance  of  this  class  of  service  in  the  first  three  of  these 
States  may,  with  a  good  deal  of  certainty,  be  attributed  to  the  Grain 
Bulletin.  This  source,  as  previously  indicated,  consists  of  daily  price 
cards  and  a  supplementary  telephone  service,  the  former  being  used 
by  the  great  bulk  of  the  elevators  in  the  four  Northwestern  States. 
While  the  supplementary  wire  service  is  not  nearly  so  frequptly 
employed  as  is  the  card  service,  the  bulk  of  the  elevators  in  Minne¬ 
sota  and  the  Dakotas  reporting  market  telephone  and  private  wire 
service  reported  the  Grain  Bulletin  supplementary  service  as  that 
•employed.  This  appears  from  the  following  figures : 


PRICES,  MARGINS,  GRADES,  DOCKAGES,  WEIGHTS.  183 


State. 

Number  of 
elevators 
reporting 
market 
telephone 
or  private 
wire 
services. 

Elevators  reporting 
Grain  Bulletin 
wire  service. 

Number. 

Percent¬ 

age. 

North  Dakota . 

927 

577 

381 

854 

429 

273 

92.13 
74. 30 
71.65 

Minnesota . 

South  Dakota . 

In  Illinois  and  Iowa  the  high  proportions  of  this  class  of  service 
may  be  readily  accounted  for  by  the  private  wires  of  the  various  Chi¬ 
cago  wire  houses.  Of  all  the  large  grain-producing  States,  Iowa  and 
Illinois  easily  lead  in  the  number  of  branch  offices  and  correspond¬ 
ents  of  wire  houses.^  The  following  figures  show  the  number  of 
branches,  correspondents,  and  towns  served  in  these  two  States : 


\ 

State. 

Branches. 

Corre¬ 

spondents. 

Total 
branches 
and  corre¬ 
spondents. 

Towns 

served. 

Illinois . 

49 

46 

95 

46 

29 

14 

43 

24 

# 

,  As  it  is  not  at  all  unusual  for  a  single  branch  or  correspondent  to 
serve  as  high  as  40  or  more  country  elevators,  the  high  concentration 
of  these  stations  in  these  two  States  probably  explains  the  importance 
of  this  service  in  this  area.  -  ^ 

“  On-track  ”  AND  “  TO-ARRivE  ”  BIDS. — The  relative  extent  of  use  of 
^‘on-track”  and  “to-arrive”  bids  is  probably  governed  in  large 
measure  by  the  method  of  selling  grain  prevailing  in  different  sec¬ 
tions  of  the  grain-growing  area.  An  examination  of  the  statistics  of 
the  method  of  sale  in  comparison  with  the  reported  use  of  “to- 
arrive  ”  and  “  on-track  ”  bids  leads  to  the  acceptance  of  this  as  perhaps 
the  fundamental  explanation  of  the  variations  reported  in  different 
States. 

As  set  out  previously  (Ch.  YI),  country  elevators  and  warehouses 
reported  as  to  whether  sales  of  about  three-quarters  of  a  million  cars 
sold  to  terminal  and  smaller  markets  were  on  consignment  or  were 
direct — i.  e.,  sold  “to-arrive”  in  the  terminal  or  smaller  markets 
or  “  on-track  ”  in  the  country  to  representatives  of  dealers  in  such 
markets. 

The  following  table  presents  the  proportion  of  elevators  in  the  14 
principal  grain-producing  States  reporting  the  use  of  “  on-track  ”  and 
“  to-arrive  ”  bids  in  comparison  with  the  proportion  of  direct  selling 
reported : 

ecf.  Vol.  V,  Ch.  3. 


j^g4  COUNTRY  GRAIN  MARKETING. 

Table  Qn.—Cmtvparison  of  ‘‘on^track^^  mid  to-arrive”  Uds  in  U  specified 
States,  loith  direct  sales  to  terminal  and  smaller  markets. 


State. 

rroportion 
of  direct 
sales  to 
terminal 
and  smaller 
markets. 

Percentapre 
of  elevators 
reporting 
“to-arrive” 
bids. 

Percentage 
of  elevators 
reporting 
“on-track” 
bids. 

8.*).  37 

9.09 

35.06 

78. 16 

11.06 

31. 25 

67. 64 

18.60 

53. 96 

51.41 

23.21 

54.85 

39. 67 

37. 71 

63. 06 

37. 06 

25.77 

27. 15 

29.47 

25. 77 

41*  98 

28.14 

38. 45 

51. 90 

19.13 

7.98 

3. 49 

17.37 

10. 16 

21.93 

3.60 

10.78 

10. 13 

8.09 

8.  70 

10.  29 
11.79 

8.01 

11.07 

7.41 

17. 80 

18.42 

26.47 

20.10 

27.95 

The  lowest  proportions  of  direct  selling  are  found  in  the  four  North¬ 
west  States  and  Wisconsin  and  Missouri,  all  of  which  are  consider¬ 
ably  below  average  in  their  proportions  of  sales  by  this  method.  ^a(m 
of  the  other  eight  States  under  consideration,  on  the  other  h^d, 
reports  a  much  higher  than  average  proportion  of  direct  sales,  ihe 
States  in  the  former  area  all  report  a  less  than  average  ernployment  oi 
both  “on-track”  and  “to-arrive”  bids,  and  all  those  in  the  latter 
area  (except  Nebraska)  a  higher  than  average  use  of  onTrack 
bids,  and,  with  the  exception  of  Oklahoma,  Michigan,  and  Ohio,  a 
higher  than  average  proportion  of  “to-arrive”  bids.  The  low  pro¬ 
portion  of  “  to-arrive  ”  bidding  from  these  States  may  be  assigned 
to  facts  previously  discussed  in  connection  with  shipments.  An  ex¬ 
amination  of  Table  36  reveals  the  fact  that  these  three  States  are  the 
smallest  shippers  to  terminal  and  smaller  markets,  the  bulk  ot  their 
grain  going  to  interior  brokers,  mills,  feeders,  etc.  MTiile,  therefore, 
extremely  large  proportions  of  the  grain  from  these  States  moving  to 
the  terminal  and  smaller  markets  is  sold  direct,  the  total  volume 
disposed  of  in  this  fashion  is  relatively  not  great,  and  to-arrive 

bidding  is  not  in  consequence  extensive.  ^ 

Main  office.— The  main  office  is  relatively  very  important  as  a 
source  of  price  information  only  in  the  States  of  Oklahoma  and  -Me- 
braska,  in  each  of  which  it  is  far  more  frequently  reported  than  in 
any  other  State.  It  would  naturally  be  expected  that  this  source 
of  information  would  vary  in  importance  with  the  relative  impor¬ 
tance  of  the  line  elevators  of  all  types  in  the  various  States,  but 
such  does  not  seem  to  be  particularly  the  case.  Thus  the  four  North- 
we'stern  States,  all  of  which  report  very  large  proportions  of  line 
elevators  of  all  types,  are  relatively  low  in  the  proportion  of  elevators 
reporting  main  office.  The  explanation  of  this  fact  lies  in  the  large 

use  of  the  Grain  Bulletin  service  in  this  area.  ^ 

The  fact  is  that  the  commercial  lines  in  the  Northwest  use  the 
Durant  or  Grain  Bulletin  card  probably  as  extensively  as  do  the 
other  types,  and  these  elevators  are,  under  normal  competitive  con-,^ 


PRICES,  MARGINS,  GRADES,  DOCKAGES,  WEIGHTS.  185 

ditions,  frequently,  if  not  usually,  under  instructions  to  “  follow 
the  card.” 

Outside  of  thes^  four  States  and  Nebraska  and  Oklahoma  there 
are  practically  no  States  which  report  a  proportion  of  total  line 
elevators  anywhere  near  the  equal  to  the  average  for  the  United 
States,  which  probably  explains  the  relatively  low  use  of  this  source 
of  information  as  reported  for  other  States  than  these  six. 

C.  N.  D’s. — For  the  variations  in  the  use  of  C.  N.  D.  service  no 
plausible  explanation  was  found. 

Section  4.  Type  variations  in  the  use  of  price-information  services. 

Results  or  tabulation. — Table  66  presents  the  relative  impor¬ 
tance  of  different  price-information  services  among  the  five  princi¬ 
pal  types  of  elevators.  Appendix  Table  15  may  be  consulted  for 
further  details  regarding  the  other  three  types,  the  number  of  ele¬ 
vators  reporting,  etc. 


Table  66. — Ratio  of  instances  different  sources  of  price  information  are  re¬ 
ported  to  number  of  elevators  of  different  types  reporting  in  the  IJf  principal 
grain-producing  States. 


Price  information  service. 

All 

types.i 

Individ¬ 
ual  coop¬ 
erative. 

Commer¬ 
cial  line. 

Inde¬ 

pendent. 

Individ¬ 
ual  mill. 

Mill  line. 

Daily  price  cards . 

Market  telephone  and  private  wire . 

Price  current . 

On-track  bids . 

C.  N.  D . 

To-arrive  bids . 

Main  office . 

63.97 
47.02 
34.34 
27. 95 

20.97 
20. 10 
11.03 

71.82 
54.74 
36. 45 
31.00 
■  27.34 
26. 16 

68. 91 

48.72 
22. 96 

'  17. 21 

15.88 
13.00 

23.73 

59. 55 
46.29 
47. 10 

41.78 
23.25 

26.79 

« 

52.98 
23. 15 
42. 00 
27.21 
26.25 
13.84 

43.20 
37.80 
18.79 
9.07 
9.72 
12.31 
37. 15 

Average  number  of  sources  per  elevator. . . 

2.41 

\ 

2.63 

¥ 

2.21 

2.66 

2.11 

1.76 

1  Including  cooperative  line  and  all  maltster  elevators.  These  are  excluded  from  the  type  tal5ulations 
on  accoimt  of  the  small  number  reporting. 


The  most  important  of  the  foregoing  variations  as  between  types 
of  houses  are  explainable  in  the  light  of  the  discussion  of  the  varia¬ 
tions  in  different  States  set  out  in  the  last  preceding  section,  provided 
the  following  facts  are  borne  in  mind;  that  Nebraska  and  the  four 
Northwestern  States  are  relatively  the  most  important  commercial 
line  States ;  that  the  same  five  States,  together  with  Iowa  and  Kansas, 
are  the  most  important  cooperative  elevator  States;  that  the  States 
east  of  the  Mississippi,  together  with  Iowa  and  Missouri,  are  the 
important  independent  elevator  States;  and  that  those  States  east 
of  the  Mississippi,  except  Illinois,  together  with  Oklahoma,  Missouri, 
and  Kansas  to  the  west,  are  the  important  mill  elevator  States. 

Price  cards  and  telephone  and  private  wire  services. — Bearing 
in  mind  these  facts  and  those  set  out  in  the  preceding  section,  the 
relatively  high  use  of  daily  price  cards  by  the  individual  cooperative 
and  commercial  line  types  is  no  doubt  due  to  the  high  concentration 
of  these  types  in  the  four  Northwestern  States  where  the  Grain 
Bulletin  service  is  so  generally  employed.  The  relatively  large  use 
of  market  telephone  and  private  wire  service  by  these  two  types  may 
similarly  be  attributed  to  the  importance  of  the  Grain  Bulletin  sup¬ 
plementary  wire  service  in  the  same  area,  while  the  comparatively 


186 


COUNTRY  GRAIN  MARKETING. 


high  proportion  of  independents  reporting  this^  class  of  service  is 
attributable  to  the  extensiveness  of  private  wires  in  the  territory  sur¬ 
rounding  Chicago,  especially  Iowa  and  Illinois.  In  most  of  the 
States  in  this  area  the  proportion  of  independent  elevators  is  rela¬ 
tively  high. 

Price  currents. — The  use  of  price  currents  is  relatively  high  for 
independents  and  individual  mills  and  relatively  low  for  the  co¬ 
operatives  and  commercial  lines.  This  is  to  be  attributed  probably 
to  the  fact  that  in  the  Northwest,  where  the  two  latter  types  are 
most  important,  the  competition  of  the  Grain  Bulletin  unfavorably 
affected  the  development  of  this  class  of  service.  In  the  States  to  the 
south  and  east,  which  are  high  in  independent  and  individual  mill 
elevators,  there  is  no  Grain  Bulletin  service  and  the  competition 
encountered  by  the  price  currents  is  only  that  of  the  ordinary  daily 
price  card,  with  the  result  that  the  former  is  much  more  largely 
used  by  the  independents  and  individual  mills  than  by  the  commercial 
lines  and  cooperatives. 

“  On-track  ”  and  “  to-arrive  ”  bids. — “  On-track  ”  and  “  to-arrive  ” 
bids  are  relatively  little  used  by  the  commercial  line  type,  chiefly  be¬ 
cause  these  elevators  are  highly  concentrated  in  the  Northwest,  where 
the  great  bulk  of  the  grain  is  sold  on  the  consignment  basis  and  very 
little  either  “  on-track  ”  or  “to-arrive.”  “  On-track  ”  bids  are  employed 
to  a  far  greater  extent  by  the  independents  than  by  any  other  type,  this 
being  due  chiefly  to  the  fact  that  the  bulk  of  the  grain  in  areas  where 
the  independents  are  relatively  important  is  sold  either  “  on-track  ”  or 
on  a  “  to-arrive  ”  basis  and  is  not  consigned.  That  the  independents 
do  not  report  a  very  much  larger  use  of  “  to-arrive  ”  bids  is  probably 
to  be  found  in  the  fact  that  some  of  the  important  independent 
States,  notably  Michigan  and  Ohio,  ship  so  largely  to  feeders,  local 
mills,  interior  brokers,  etc.,  and  not  to  the  terminal  and  smaller  mar¬ 
kets,  with  the  result  that  there  is  less  “  to-arrive  ”  bidding  in  such  areas. 

The  reported  variation  in  the  use  of  “  on-track  ”  and  “  to-arrive  ” 
bids  by  individual  mills  corresponds  roughly,  though  on  a  somewhat 
lower  scale,  with  the  variations  shown  by  independent  elevators,  a 
much  larger  proportion  reporting  “on-track”  bids  than  report  “to- 
arrive  ”  bids.  The  lower  use  of  the  latter  as  a  source  of  information 
is  attributable  probably  to  the  large  proportion  of  local  shipping 
done  in  certain  important  individual  mill  States,  notably  Oklahoma, 
Michigan,  and  Ohio. 

As  compared  with  the  other  types  the  cooperatives  report  a  little 
above  the  average  use  of  “  on-track  ”  and  “  to-arrive  ”  bids,  though  the 
commercial  lines,  with  a  somewhat  similar  territory,  are  relatively 
.  low  in  their  employment  of  each  of  these  two  sources.  The  explana¬ 
tion  lies  perhaps  in  the  fact  that  elevators  in  both  Kansas  and  Iowa, 
which  are  important  cooperative  States,  sell  to  a  considerably  greater 
extent  “  on-track  ”  or  “  to-arrive  ”  than  do  any  of  the  important  com¬ 
mercial  line  States,  except  Nebraska. 

Main  office. — The  main  office  is,  of  course,  a  source  of  price  in¬ 
formation  only  for  line  companies.  In  consequence  this  is  reported 
only  by  mill  and  commercial  lines  out  of  the  five  principal  types  of 
elevators.  Mill  lines,  it  will  be  noted,  report  a  much  larger  employ¬ 
ment  of  the  main  office  than  do  commercial  lines,  which  is  explainable 


I 


187 


PKICES,  MARGINS,  GRADES,  DOCKAGES,  WEIGHTS. 


by  facts  already  referred  to  in  discussing  the  State  variations.  In  the 
four  Northwestern  States,  which  are  relatively  so  important  in  com¬ 
mercial  line  elevators,  the  Grain  Bulletin  service  is  used  extensively 
by  the  commercial  lines,  and  the  stations  are  frequently  if  not  usually 
under  instructions  to  “follow  the  card.”  In  consequence  there  is  rela¬ 
tively  much  less  buying  upon  price  information  from  the  main  office 
I  than  in  the  case  of  the  mill  lines,  which  are  very  important  in  other 
States  than  the  Northwest. 

Determinatiom  of-cojintry-prices. 

J  A  T  — Prices  paid  by  country  elevators 

are  greatly  affected  by  the  competition  of  other  local  elevators  and 
buyers  and  also  by  that  of  elevators  and  buyers  in  near-by  towns. 
The  farmers  are  quick  to  take  advantage  of  any  situation  which  will 
permit  the  pitting  of  buyers  against  each  other  in  bidding  for  grain, 
and  as  a  result  sharp  competition  frequently  develops. 

Tales  of  the  higher  prices  being  paid  at  near-by  competitive  points 
or  by  other  local  elevators  or  buyers  are  repeated  by  the  farmers  to 
the  various  buyers  and  elevator  agents,  with  the  proposal  to  take  their 
business  elsewhere  unless  the  prices  are  met.  WTiile  these  rumors  are 
often  not  well  founded,  they  frequently  have  the  desired  effect. 
Similar  bartering  in  reference  to  grades,  dockage,  elevating,  and 
storage  charges  occurs  at  times,  and  in  instances  affects  the  grading 
and  dockage  or  fees  charged  for  elevating  and  storage  service.  (iSh. 

Calculation  of  country  price. — Subject  to  these  local  competitive 
conditions,  the  prices  paid  in  the  country  for  grain  are,  as  previously 
stated,  based  largely  upon  the  terminal  market  price,  since  the  great 
bulk  of  the  grain  bousrht  by  the  country  elevators  moves  to  the  term- 
I  inal  markets  and  is  ultimately  sold  there.  The  price  usually  offered 
\  the  farmer  is  the  price  being  paid  in  the  terminal  market  for  grain  of 
\  a  like  grade,  less  the  amount  of  freight  and  the  gross  profit,  the  latter 
including  operating  and  other  expenses,  such  as  insurance,  taxes,  etc., 
^d  the  buyer’s  n^t  profit. — - - 

^io  Illustrate,  iF the  Minneapolis  price  for  No.  1  northern  wheat 
was  $1.20  per  bushel,  the  freight  to  Minneapolis  from  a  country  point 
14  cents  per  bushel,  and  the  gross  profit  which  the  buyer  of  that  grain 
in  the  country  desired  to  obtain,  6  cents  per  bushel,  he  would  bid 
$1  per  bushel  for  that  grade  of  grain,  i.  e.,  $1.20,  the  terminal  market 
price  less  14  cents  freight  and  6  cents  gross  profit.  This  difference  of 
20  cents — that  is,  the  gross  difference  between  the  terminal  market 
I  price  and  the  country  price — is  usually  called  the  gross  margin.® 

Owing  to  local  competitive  conditions,  gross  margins  may  fre¬ 
quently  fail  to  show  a  net  profit.  In  fact  at  times  the  competition 
in  the  country  market  may  be  of  such  a  character  as  to  compel  the 
buyer  so  to  narrow  his  margin  by  advancing  the  price  that  the  dif- 

'  ®  In  the  case  of  line  companies,  the  term  “margin,”  when  used,  would  frequently  refer 

I  to  the  spread  without  the  freight,  since  this  latter  item  would  vary  from  station  to 
station.  The  terms  “  buying  margin,”  “  gross  margin,”  “  margin,”  etc.,  therefore,  may 
be  said  to  refer  to  either  class  of  spread.  In  this  discussion  the  terms  “  margin  ”  and 
“  buying  margin  ”  are  employed  to  designate  the  spread  between  country  and  terminal 
prices,  making  allowance  for  freight,  and  the  terms  “gross  margin”  or  “gross  buying 
i  margin  ”  are  employed  to  indicate  the  total  spread. 


188 


COUNTRY  GRAIN  MARKETING. 


ference  between  the  country  price  and  that  at  the  terminal  market 
will  be  insufficient  to  pa}^  the  freight. 

Conversely,  and  in  the  absence  of  competition,  the  buyer  might  j 
widen  his  gross  margin  by  reducing  his  buying  prices  to  such  an  ex¬ 
tent  that  his  net  profit  per  bushel  would  be  entirely  out  of  proportion 
to  the  service  performed.  ^  | 

Pacific  coast. — While  Pacific  coast  prices  are  necessarily  based  to  J 
a  certain  extent  on  prices  prevailing  at  Seattle,  Portland,  and  other 
terminals,  this  does  not  mean  precisely  the  same  thing  as  in  the  big 
grain  markets  of  the  Central  West.  While  the  coast  cities  of  Seattle,  ' 
Tacoma,  Portland,  San  Francisco,  and  perhaps  Spokane  may  be  ] 
regarded  as  terminal  markets  in  the  sense  that  they  are  grain  con-  * 
centration  points,  there  can  scarcely  be  said  to  be  an  organized  market  | 
existing  at  any  one  of  these  places,  at  least  in  the  sense  in  which  that  I 
term  is  understood  in  Chicago,  Minneapolis,  Kansas  City,  and  other  j 
large  grain  markets.  -  I 

While  certain  of  the  exchanges  in  the  coast  cities  have  a  trading  I 
floor  it  is  little  used.  There  is  no  continuous  market  nor  continuous  J 
quotations,  and  most  of  the  business,  as  in  some  of  the  eastern  markets 
like  New  York,  is  transacted  in  the  offices  of  the  various  buyers  and  | 
sellers.  The  country  prices  for  grain  on  the  coast,  therefore,  are  not  jj 
based  on  the  prices  made  in  an  organized  market  which  represent  a 
collective  rather  than  individual  valuation,  but  rather  upon  indi- 
vidual  bids  and  offers.  | 

The  prices  paid  on  the  Pacific  coast  by  line  company  agents  are  I 
usually  determined  by  the  head  office.  These  prices  are  sent  to  the  J 
district  managers,  if  any,  and  then  on  to  the  country  agent,  or  sent  I 
to  the  country  agents  direct.  One  line  company  mails  post  cards  I 
daily  to  the  various  stations,  stating  prices  and  shipping  instructions.  , 
A  cooperative  line  in  Washington  notifies  its  agents  daily  by  tele-  ' 
phone  of  prices  to  be  paid.  A  number  of  the  individual  cooperative  ( 
elevators  obtain  prices  by  telephone  and  telegraph  from  a  grain-  ^ 
marketing  agency  for  cooperative  companies,  the  Tri-State  Terminal 
Co.  Many  independent  elevators  or  warehouses  apparently  bas^/ 
their  prices  solely  upon  those  paid  by  competing  concerns.  -j 


ly  efTiTgH.'gTns. 

[ethod  or  oBTAiNiNCL-EELCE  DATA. — The  buying  margins  exacted  by 
couhfry~eIevators'  generally,  and  also  by  the  different  types,  have 
always  been  a  much  debated  subject.  The  partisans  of  each  type  have 
argued  in  favor  of  their  elevators,  the  cooperatives  claiming,  for 
example,  that  their  entrance  into  the  field  has  forced  the  other  types 
-to  narrow  their  buying  margins  and  thus  to  pay  the  farmers  a  higher 
price  for  their  grain;  the  line  companies  asserting  that  grain  was 
formerly  handled  on  a  much  narrower  margin  than  in  recent  years, 
and  that  country  elevator  competition  has  resulted  in  widening  the 
margin  and  lowering  the  prices  through  the  fact  that  the  volume 
rrain  handled  by  the  individual  elevator  has  been  decreased..^^ 
it  i^‘ imposbIUl'e  lu  sec! me  IjUilii^lical  proot  as  icrany 
these  points  on  account  of  the  fact  that  country  elevators  do  not  keep 
their  price  records  for  more  than  a  very  few  years  at  most.  Statistical 
comparisons,  therefore,  of  margins  at  different  periods  are  practically 


PRICES^  MARGIITS,  GRADES,  DOCKAGES,  WEIGHTS. 


out  of  the  question.  For  the  purpose  of  obtaining  concrete  informa¬ 
tion  on  this  subject,  however,  representatives  of  the  Commission  made 
a  study  of  con^ry  elevator  buying  margins  in  the  States  of  North 
JJakota,  South  Dakota,  Montana,  and  Minnesota,  covering  the  period 
^ 1912,  to^  June  30,  1917.  The  types  of  elevators  included  in 
this  study  are  the  commercial "  and  mill  lines,"'  the  individual  mill, 
the  individual  cooperative,  and  the  independent.  The  elevators 
studied  were  distributed  over  the  four  States  on  the  basis  of  the 
nunaber  of  elevators  within  each  State,  more  elevator  accounts  from 

orth  Dakota  being  examined  than  any  other  State  because  it  is  the 
State  with  the  largest  number  of  elevators.  Conversely,  fewer  ele¬ 
vators  were  studied  in  Montana.  -  ^ 

The  attempt  was  also  made  to  allot  each  State  a  number  of  ele- 
ya tors  of  each  type  approximately  proportional  to  the  total  number- 
ordhat  type  of  elevator  in  the  State,  though  this  distribution  was  not 
entYely  satisfactory,  owing  to  the  very  poor  lists  of  elevators  which 
are  to  be  had.® 


Within  the  State  the  effort  was  made  so  to  scatter  the  points  se¬ 
lected  as  to  obtain  prices  in  all  sections,  and  in  order  to  obtain  rep¬ 
resentative  competitive  conditmns  a  further  distribution  of  the  ele¬ 
vators  was  made  upon  the  basis  of  whether  one,  two,  three,  four  or 
m^e  than  four  elevators  were  located  at  the  points  selected. 

Representative  character  of  data.— In  all,  country-price  data 
were  obtained  from  340  country  elevators,  of-  which  208  were  of  the 
commercial  and  mill  line  type  and  132  of  the  individual.  The  prices 
for  the  former  stations  were  obtamed  from  the  Minneapolis  head 
offices  and  the  latter  stations  were  visited  by  the  Commission’s  agents 
and  the  prices  taken  directly  from  the  books  and  records.®  The  prices 
taken  off  were  those  for  the  different  varieties  and  grades  of  grain 
on  each  day  that  such  varieties  and  grades  were  purchased,  and  no 


’These  two  types  are  considered  as  one,  all  the  mill  lines  included  being  onerated  as 
merchandisers  like  any  commercial  line.  uemg  opeiateu  as 

8As  the  returns  to  the  Commission’s  country  elevator  schedule  had  not  been  made  at 
the  time  this  s^dy  was  undertaken,  the  results  as  to  the  proiportion  of  different  types  of 
f  different  States  later  obtained  could,  not  be  usSi  and  the  varies  lists  of 

elevators  w^re  tiie  sole  source  of  information  available.  The  distribution  of  margins  or 
spr^ds  obtemed  and  found  usablo  as  botwoon  dififoront  tvp^  of  olovators  as  oomnarpri 
foflow?:  "0?tCe?tern  SmS,  as 


Tjqie  of  elevator. 

Per  cent  of 
type  to 
total  in 

4  States. 

Per  cent  of 
prices  of 
No.  1 
northern 
wheat. 

Per  cent  of 
prices  of 
No.  3 
northern 
wheat. 

Per  cent  of 
prices  of 
No.  3 

white  oats. 

Per  cent  of 
prices  of 
No.  2  rye. 

Commercial  line  ’ . 

Individual  cooperative . 

Independent . 

Individual  npll . 

55.34 
23.07 
18. 54 
3. 05 

53.16 
32.83 
9. 93 
4.08 

53. 96 
35. 57 
9. 66 
.81 

56.35 
36. 44 
7. 21 

71.95 
24.  43 
3.62 

-p  1  X  ^  ^  price  quotations  in  comparison  with  the  dis- 

types  were  less  so,  and  not  all  prices  were  entirely  legible. 


190 


COUOTRY  GRAIN  MARKETING. 


prices  were  taken  except  where  the  date  and  the  kind  and  grade 
were  also  recorded.  A¥here  more  than  one  price  for  a  particular 
kind  and  grade  was  found  in  a  single  day,  as  occasionally  happened, 
all  the  prices  were  taken.  While,  therefore,  only  340  elevators  are 
'included  in  the  study,  the  prices  represent  those  at  which  practically 
all  their  grain  was  bought  by  these  elevators  during  the  years  in 
question,  and  considering  this  fact  and  the  care  employed  in  obtain¬ 
ing  a  representative  distribution,  it  is  believed  that  the  country  prices 
obtained  are  fairly  representative  of  the  prices  of  grain  at  country 
points  in  the  Northwest  during  the  crop  years  of  191^13  to  1916-17. 

Method  of  computing  margin. — The  data  obtained  as  set  out  above 
were  then  surveyed  for  errors  and  obviously  incorrect  figures  thrown 
out.  The  daily  margin,  or  spread,  was  then  computed  hj  subtracting 
the  daily  country  price  (or  simple  average  of  these  prices  in  those 
few  cases  where  more  than  one  price  was  reported  on  the  same  day) 
from  the  price  (less  freight)  at  which  the  greatest  number  of  cars 
of  the  same  kind  and  grade  of  grain  was  sqld  in  the  Minneapolis, 
market  on  the  same  days,  as  such  prices  for  the  greatest  number  of 
cars  were  reported  in  the  Minneapolis  Market  Record. 

After  the  computation  of  the  daily  price  spreads  on  the  four  grades 
tabulated,  the  yearly  and  five-year  averages  were  computed  by  divid¬ 
ing  the  sum  total  of  the  plus  and  minus  spreads  by  the  total  number 
of  daily  spreads  computed  for  the  month,  year,  and  five  years. 

Grains  selected. — While  the  daily  prices  obtained  from  the  ele¬ 
vators  included  practically  every  kind  and  grade  of  grain,  final 
results  are  presented  for  only  two  grades  of  wheat  and  one  grade 
each  of  oats  and  rye— i.  e..  No.  1  and  No.  3  northern  wheat,  No.  3 
white  oats,  and  No.  2  rye. 

No.  1  northern  wheat.  No.  2  rye,  and  No.  3  white  oats  are,  respec¬ 
tively,  the  most  important  grades  of  wheat,  rye,  and  oats  in  the 
Minneapolis  market.^®  They  were,  in  consequence,  those  grades  for 
which  the  largest  number  of  prices  were  obtained  in  the  country, 
and  likewise  the  grades  for  which  the  daily  record  of  terminal  market 
prices  was  the  most  complete  and  representative.  Wheat  is  by  far 
the  most  important  grain  in  the  four  Northwestern  States.  Partly 
for  this  reason  and  partly  also  in  order  to  get  a  comparison  of  mar¬ 
gins  as  between  high  and  low  grades.  No.  3  northern  was  also  tabu¬ 
lated.^^  The  margins  for  other  grades  of  these'‘thi?ee'grains  were  not 
computed  owing,  with  one  or  two  exceptions,  either  to  the  few  country 
prices  obtained  or  to  the  lack  of  a  continuous  daily  price  record  for 
the  grade  at  Minneapolis. 

No  margins  were  computed  either  for  corn  or  barley.  The  north¬ 
western  grain  territory  markets  comparatively  little  corn  and  a  suffi¬ 
cient  number  of  prices  therefore  was  not  obtained  to  warrant  tabu¬ 
lation.  Considerable  study  was  given  to  the  question  of  barley  mar¬ 
gins,  and  it  is  regretted  that  it  has  been  found  impossible  to  present 
any  figures  for  this  grain.  No  accurate  or  satisfactory  comparison 
between  the  country  and  terminal  grades  on  barley  in  the  Northwest 
could  be  made,  because  until  very  recently  buying  in  the  country  in 


I'J  Except  for  occasional  crop  failures,  disease,  etc.  .  ,  .  .  x  xt, 

“  A  lower  grade  than  No.  3  would  have  been  desirable  for  this  purpose,  but  the  number 
of  country  prices  on  the  lower  grades  was  too  scanty. 


PRICES,  MARGINS,  GRADES,  DOCKAGES,  WEIGHTS.  191 

pnf  T  *5®  majority  of  cases  based  upon  an  entirely  differ¬ 

ent  set  of  grades  from  those  used  in  the  terminal  market,  and  these 
two  sets  of  grades  were  lacking  in  comparability. 

It  IS  undisputed,  however,  that  the  margins  on  which  barlev  was 
fntimrm^^  least  prior  to  the  establishment  of  a 

other  grains.  The  reasons  given  by  the  trade  were  numerous,  the 
being  (a)  the  lack  of  a  hedging  market;  (51  the  fact 
that  barley  could  not  be  accurately  graded;  (c)  the  fact  that  each 
malster  desired  a  particular  type  ''oftarley  Ld  that  ^leLver  he 

If  least  'the 

iri  ^  reasons  has  been  removed, and  it 

would  be  highly  interesting  to  determine  statistically  whether  the 

T  formerly.  It  is  probably  safe  to  state 

that  the  chances  are  that  the  margin  has  not  been  narrowed  at  least 
until  very  recently,  owing  to  the  very  unsettled  condition  of  the 

prohibition,  the  use  of  barley  as  a 
substitute  for  wheat  during  the  war,  etc.  In  spite  of  the  future 
market,  moreover,  some  doubt  of  the  margins  becoming  much  nar¬ 
rower  may  be  expressed  because  of  the  probability  that  country 

X?  this  grain  much  more  correctly  then 
than  they  have  been  in  the  past.^^ 

^^^Section  7.  Analysis  of  results  of  study  of  margins. 

Average  margiks  found. — Table  67  presents  the  average  buying 
.>-jnargIlls  bv  tvne  of  bn.,.p  the  foreo-oino-  kiud.s  anrl 

In  coMideriSglW  margins  it  is  ne~ry  Th  bear  in  minTTlf^ 
that  the  margin  does  not  reflect  accurately  the  spread  between  coun- 
*  prices.  Grain  in  the  country  is  bought  on  the  basis 

of  the  judgnient  of  each  individual  elevator  operator  as  to  o-rades 
dockages,  and  weights.  In  the  terminal  it  is  sold  on  the  basis  of 
.  grades  and  docka^s  and  weights  determined  by  an  expert  inspec¬ 
tion  department.^  Owing  particularly  to  competition  in  grading  and 
dockage  oimi.  0  uiid  16) ,  grain  bought  in  the  countr/ may 

be  overgraded  or  underdocked,  or  the  reverse.  In  the  former  case 
the  spread  is  actually  much  narrower  than  is  shown  by  the  compari- 
sonof^t^  terminal  and  country  prices;  in  the  latter  much  wider. 


future  market  was  established  in  1918. 

during  and  since^th^  w\^r  ^^e  ^a^lUn"^^emand\or  malting  demand 

to  prohibition,  the  difficulties  in  sradin^  wilf  inpwft/hftr  largely  curtailed  owing 

the  principal  ’  demand  will  th?n^  be  ??r  feedTnT^^^^^^^  ^hat 


192 


COUNTRY  GRAIN  MARKETING. 


Table  67 


—Average  buying  margins  ^  of  different  types  of  elevators  on  specified 
grades  of  grains  during  the  erop  years  1912-13  to  1916  17. 


Type  and  period. 

No.  1  northern. 

No.  3  nofthern. 

No.  3  white  oats. 

No.  2  rye. 

Number 
of  daily 
margins. 

A-verage 
margin 
In  cents 
per 

.bushel. 

Number 
of  daily 
margins. 

Average 
margin 
in  cents 
per 

bushel. 

Number 
of  daily 
margins. 

Average 
margin 
in  cents 
per 

Dushel. 

Number 
of  daily 
margins. 

Average 
margin 
ji  cents 
per 
mshel. 

1912-13. 

Individual  cooperatives .... 

Commercial  lines  * . 

Independent . 

Individual  mill . 

949 

2,394 

339 

195 

+  4.35 
+  4.82 
+  4.72 
+  3.79 

176 

29 

49 

+  5.79 

6. 56 
+  5.56 

162 

62 

34 

+3.00 

+2.63 

+4.53 

10 

47 

+  7.66 
+  5.74 

Total . 

3,877 

+  4.64 

254 

+  5.83 

258 

+3.11 

57 

+  5.86 

1913-14. 

Individual  cooperatives . 

Commercial  lines  * . 

Independent . 

1,334 

3,044 

641 

131 

+  3.46 
+  3.02 
+  3.91 
+  2.86 

7 

74 

+  4.79 
+  3.39 

155 

391 

+3.09 

+3.19 

96 

+  4.87 

Individual  mill . 

Total . 

5,150 

+  3.24 

81 

+  3.52 

546 

305 

521 

75 

+3.16 

96 

+  4.87 

1914-15. 

Individual  cooperatives . 

Commercial  lines  * . 

Independent . 

Individual  mill . 

1,482 

2,4.30 

503 

277 

+  6.38 
+  5.02 
+  8.27 
+  8.28 

617 

1,102 

303 

+  8.44 
+  8.67 
+  9.34 

+3.62 
+3.93 
+3.  70 

77 

252 

+  6.37 
+  6.66 

Total . 

4,692 

+  5.99 

2,022 

•f*  8.  /O 

901 

+3.81 

329 

+  6.59 

1915-16. 

Individual  cooperatives . 

Commercial  lines  2 . 

Independent . 

Individual  mill . 

3,669 

6,211 

1,094 

350 

+  5.29 
-t-  5.32 
+  6.54 
+  7.58 

356 

830 

111 

+  7.46 
+  7.12 
+  7.66 

322 

639 

56 

+3.67 

+3.57 

+2.72 

166 

510 

39 

+  5.52 
+  5.63 
+  .5.94 

Total . 

11,. 324 

+  5.50 

1,297 

+  7.26 

1,017 

+3.55 

715 

+  5.62 

1916-17. 

Individual  cooperatives . 

Commercial  lines  2 . 

Independent . 

Individual  mill . 

2, 197 
1,519 
337 
244 

+10.92 

+11.87 

+15.17 

+10.22 

649 

703 

27 

41 

+15.38 
+15.08 
+  7.08 
+14.09 

415 

488 

104 

+3.08 

+1.45 

+2.63 

233 

526 

33 

+■8.40 
+  6.90 
+12.13 

Total . 

4,297 

+11.55 

1,420 

+15.03 

1,007 

+3.21 

792 

+  7.56 

1912-1917. 

Individual  cooperatives . 

Commercial  lines  2 . 

Independent . 

Individual  mill . 

9,631 
15,598 
2,914 
.  1, 197 

+  6.  .39 
+  5.39 
+  7.04 
+  7,15 

1,805 

2,738 

490 

41 

+10. 47 
+  9.68 
+  8.46 
+14.09 

1,359 

2,101 

269 

+3.33 

+3.53 

+3.19 

486 

1,431 

72 

+  7.08 
+  6.22 
+  8.78 

Total,  . . 

.  29,340 

+  5.95 

5,074 

+  9.88 

3,729 

+3.44 

1,989 

+  6.52 

1  Difference  between  the  average  daily  prices  paid  by  country  elevators  and  the  terminal  market  pnce 

(less  freight)  at  which  the  greatest  number  of  cars  was  sold  on  the  onerate 

2  Includes  a  certain  proportion  of  northwestern  hnes  owned  by  or  affihated  with  mills,  but  which  op 

&s  merchandisers  in  all  essential  respects  like  the  commercial  line  ... 


Margins  by  grains.— Subject  to  the  foregoing  qualifications  of  the 
figures  it  appears  that  of  the  four  grades  of  grain  quoted,  No.  6 
northern  wheat  is  bought  on  the  widest  margin.  No.  2  rye,  JNo.  1 
northern  and  No.  3  white  oats  follow  in  the  order  mentmned.  ihe 
hio-h  margins  for  the  two  wheat  grades  as  compared  with  the  oats 
may  be  attributed  largely  to  the  high  wheat  prices  prevailing 
after  the  outbreak  of  the  European  war,  especially  in  As 

subsequently  shown  in  this  section,  under  the  analysis  by  mont  s, 
the  higher  the  prices  the  wider  the  margin  (in  cents)  on  which  the 

grain  is  bought. 


PRICES,  MARGINS,  GRADES,  DOCKAGES,  WEIGHTS.  193 

f 

The  generally  higher  margins  on  No.  3  as  compared  with  No.  1 
are  attributable  in  part  to  smaller  volume  and  also  to  the  fact  that 
the  grade  is  lower.  As  a  general  rule  the  higher  the  grades,  the 
greater  the  uniformity  and  the  easier  accurate  grading,  and  vice 
versa.  There  is,  therefore,  a  greater  chance  of  loss  on  the  lower 
grades  than  on  the  higher  and  in  consequence  a  wider  margin  is 
frequently  if  not  usually  found. 

Neither  rye  nor  barley  are  handled  in  sufficient  volume  by  the 
average  elevator  to  warrant  buying  them  on  as  narrow  margin  as 
wheat,  according  to  grain  men,  though  in  certain  sections  either  of 
these  grains  may  be  extensively  grown  and  the  volume  handled  by 
the  elevators,  in  consequence,  sufficient  to  warrant  a  narrower  margin 
than  is  generally  true  for  a  large  group  of  elevators.  It  is  not  to 
be  expected  that  an  elevator  will  work  on  as  narrow  margin  in 
handling  a  few  hundred  bushels  of  rye,  for  example,  as  it  would 
in  the  case  of,  say  50,000  or  75,000  bushels  of  wheat.  The  higher 
margin  of  No.  2  rye  as  compared  with  No.  1  wheat  may  therefore  be 
explained  partly  by  the  comparatively  small  volume  of  rye  raised 
in  this  territory  as  compared  with  wheat.  The  volume  factor  also 
ex:plains  in  part  the  higher  margin  on  rye  as  compared  with  oats. 
A  contributory  factor  is  probably  the  fact  that  rye  prices  tend  to  run 
somewhat  higher  than  oats  prices. 

Margins  by  types  of  elevators. — Despite  the  care  used  to  obtain  a 
representative  basis  for  the  study  of  margins  and  despite  the  fact  that 
the  number  of  quotations  obtained  was  statistically  well  distributed 
as  between  types,  the  results  by  types  are  decidedly  unsatisfactory 
for  the  reason  that  there  is  an  uneven  distribution  of  the  quotations 
obtained  from  different  types  as  between  the  various  years  so  that  a 
disproportionate  weight  is  given  to  the  high  margins  in  the  case  of 
mills  and  cooperatives  in  1916-17  and  to  the  low  margins  of  the  first 
two  years  in  the  case  of  the  lines  and  independents.  This  clearly 
appears  from  the  following  distribution  of  quotations  as  between 
different  periods  of  the  study  for  the  different  types : 


Percentage  of  total  quotations. 


Cooperatives.. 

Mills . 

Independents 
Lines . 


Low 
margin 
years 
(first  and 
second). 

Medium 
margin 
years 
(tmrd  and 
fourth). 

High 

margin 

years 

(fifth). 

24 

53 

23 

27 

55 

20 

33 

55 

12 

35 

53 

10 

In  addition,  experimentation  with  the  figures  indicated  that  the 
margins  as  between  the  various  types  would  vary  considerably  ac¬ 
cording  to  the  method  of  analysis  used.  For  example,  using  either 
a  simple  or  a  weighted  average  for  five  years  the  line  shows  ^  lower 
margin  than  the  cooperative  on  both  wheat  and  rye  and  the  co¬ 
operative  a  slightly  lower  margin  on  oats.  Yet  in  the  19  grain  years 
in  which  comparisons  between  these  two  types  are  possible  the  coop- 

9964  20 - 13 


COUNTRY  GRAIN  MARKETING. 


194 


erative  shows  a  lower  margin  than  the  line  in  a  majority  of  cases. 
Again,  on  a  weighted  average  basis  the  mills  show  the  highest  buying 
margin  for  the  five-year  period.  On  a  simple  average  basis,  how¬ 
ever,  the  mills  show  more  than  a  cent  lower  buying  margin  than  the 
independents.  Moreover,  in  three  years  out  of  the  five,  i.  e.,  the  first, 
second,  and  fifth,  the  mill  margin  is  lower  than  that  of  any  other 

type.  .  ^  1  i.- 

The  foregoing  facts  have  necessarily  led  to  more  or  less  negative 

conclusions  regarding  margins :  .  ,  x 

(1)  That  the  differences  in  the  buying  margins  between  types  are 

probably  not  great.  *  ^  i  i  xi 

(2)  Some  doubt  may  be  expressed  that  on  the  whole  the  coopera¬ 
tives  or  the  mills  buy  on  much  narrower  margins,  or,  in  other  words, 
pay  the  farmer  appreciably  more  for  his  grain  than  do  the  other  types. 

(See,  however,  Ch.  XI,  secs.  9-11.)  ,  n-  ,  xi 

(3)  That,  in  so  far  as  the  farmers  do  better  by  selling  to  the  co¬ 
operative  or  farmers’  elevator,  it  is  probably  due  to  the  returns  de- 
Wed  by  the  customers  in  the  form  of  dividends  either  on  patronage 
or  stock  owned  rather  than  to  better  prices  paid  the  farmer  at  the 

time  the  grain  is  sold.  ^ 

Margins  by  months. — The  following  table  presents  the  monthly 
average  buying  margin  for  the  grades  of  wheat  and  oats  studied 
during  the  five  crop  years,  1913-1917.^^  The  detail  figures  by  years 
appear  in  Appendix  Tables  16  to  18. 

Table  68. — Average  monthly  per  hushel  margins  on  specified  g'rades  of  grain 

during  the  five  crop  years  1912-1 S  to  1916-11. 


Month. 

No.l 

northern 

wheat. 

No.  3 
northern 
wheat. 

No.  3  white 
oats. 

$0.0558 

$0.1080 

$0. 0356 

.0755 

.1216 

.0335 

.0492 

.0883 

.  U316 

.0536 

.0724 

.0321 

.0484 

.0746 

.0484 

.0870 

.0306 

.0585 

.1281 

.0554 

.0950 

.0344 

.0609 

.1070 

.0407 

.0781 

.1500 

.0346 

.0465 

.1185 

.2196 

.0599 

.1888 

There  is  apparently  some  slight  tendency  for  margins  to  be  higher 
in  the  last  six  months  of  the  crop  year,  when  prices  are  usually 
higher,  than  in  the  first  six  months,  when  prices  are  usually  lower. 
As  the  appendix  tables  show,  however,  the  wheat  margins  in  the 
latter  part  of  the  crop  year  are  considerably  affected  by  the  figure 
for  1916-17,  in  the  latter  part  of  which  year  a  tremendous  increase 
in  wheat  prices  took  place,  owing  largely  to  heavy  buying  by  the 
.A-llies 

Other  things  being  equal,  the  higher  the  prices  the  greater  the  in¬ 
vestment  in  the  grain  and  the  wider  the  fluctuation  of  prices.  This 
situation  carries  with  it  greater  possibilities  of  large  profits  or  losses, 
and  the  buying  margin  usually  tends  to  widen  accordingly. 

14  Figures  for  rye  are  not  presented,  the  uneven  distribution  of  these  quotations  ren¬ 
dering  the  monthly  average  figures  practically  valueless. 


i. 

ii 

c: 

l: 

[ 

1 

I 

\ 

i 

! 

J 


I 

.F 

i 

I 

.1 


PEICES,  MARGINS,  GRADES,  DOCKAGES,  WEIGHTS. 


195 


This  appears  very  clearly  from  the  following  table,  which  shows 
the  average  buying  margin  in  comparison  with  the  average  price  and 
as  a  percentage  of  the  average  price : 


Table  69. — Average  buying  margins  in  comparison  loitli  average  Minneapolis 
prices'^  and  as  a  percentage  of  average  Minneapolis  prices. 


Period. 

No.  1  northern 
wheat. 

No.  3  northern 
wheat. 

No.  3  white  oats. 

No.  2  rye. 

Aver¬ 

age 

price 

for 

year  in 
cents 
per  -• 
bushel. 

Aver¬ 
age 
mar¬ 
gins  in 
cents 
per 

bushel. 

Aver¬ 
age 
mar'f 
gin  as 
per 
cent  of 
aver¬ 
age 
yearly 
price. 

Aver¬ 

age 

price 

for 

year  in 
cents 
per 

bushel. 

Aver¬ 
age 
mar¬ 
gins  in 
cents 
per 

bushel. 

Aver¬ 
age 
mar¬ 
gin  as 
per 

cent  of 
aver¬ 
age 
yearly 
price. 

Aver¬ 

age 

price 

for 

year  in 
cents 
per 

bushel. 

Aver¬ 
age 
mar¬ 
gins  in 
cents 
per 

bushel. 

Aver¬ 
age 
mar¬ 
gin  as 
per 
cent  of 
aver¬ 
age 
yearly 
price. 

Aver¬ 

age 

price 

for 

year  in 
cents 
per 

bushel. 

Aver¬ 
age 
mar¬ 
gins  in 
cents 
per 

bushel. 

Aver¬ 
age 
mar¬ 
gin  as 
per 
cent  of 
aver¬ 
age 
yearly 
price. 

1912-13 . 

90.50 

4.64 

5.1 

85.86 

5.83 

6.8 

32.45 

3.11 

9.6 

59.73 

5.86 

9.8 

1913-14 . 

89. 16 

3.24 

3.6 

85.18 

3.52 

4.1 

37.10 

3. 16 

8.5 

57.26 

4.87 

8.5 

1914-15 . 

129.79 

5.99 

4.6 

123.61 

8.70 

7.0 

49. 15 

3.81 

7.8 

100. 76 

6.59 

6.5 

1915-16 . 

118. 71 

5.50 

4.6 

112.23 

7. 26 

6.5 

39.90 

3.55 

8.9 

94.48 

5.62 

5.9 

1916-17 . 

199. 15 

11.55 

5.8 

186.63 

\ 

15.03 

8. 1 

56.90 

3.21 

5.6 

151. 73 

7.56 

5.0 

^Computed  by  taking  a  simple  average  of  monthly  average  prices  computed  from  daily  modal  prices. 


Section  8.  Summary  of  interviews  on  buying  margins. 

‘According  to  interviews  with  elevator  operators  margins  vary 
according  to  a  wide  variety  of  conditions — as  between  different  terri¬ 
tories,  different  grains,  different  seasons,,  with  changing  competi¬ 
tive  conditions,  car  shortages,  and  numerous  other  influences. 

In  determining  the  margin  the  different  factors  entering  into  the 
cost  of  the  elevator  operation  probably  have  some  effect.  Many  of 
the  items  entering  into  the  cost  of  operation  are  fairly  constant ;  for 
example,  the  salary  of  the  agent.  Agents  are  most  frequently  hired 
for  the  entire  year,  even  in  one-crop  sections,  where  most  of  the 
grain  is  brought  to  the  elevator  within  a  few  months.  In  all  such 
cases  the  item  of  labor  expense  remains  the  same  for  all  months  of 
the  year,  except  in  the  case  of  those  elevators  which  employ  extra 
labor  during  the  busiest  season  or  which  close  during  a  portion  of  the 
year.  In  addition,  such  items  as  insurance,  taxes,  etc.,  are  fairly  con¬ 
stant  from  year  to  year. 

Perhaps  the  most  important  factor  affecting  buying  margins  is  the 
volume  of  grain  handled  or  the  rate  of  utilization.  In  general  the 
greater  the  volume  of  grain  handled  the  lower  the  per  bushel  cost, 
because  the  fixed  expenses,  which  constitute  so  large  a  part  of  the 
country  elevator’s  costs,  are  distributed  over  a  larger  volume  of 
grain. 

Another  factor  that  probably  affects  the  buying  margin  is  the 
hedging  policy  of  the  elevator.  The  manager  of  an  elevator  which 
insures  itself  against  market  fluctuations  by  selling  futures,  bushel  for 
bushel,  against  its  cash  purchases  will  perhaps  feel  that  he  can  handle 
grain  on  a  narrower  margin  than  those  who  do  not  hedge  in  this 
fashion,  because  he  can  calculate  more  closely  on  all  the  elements 
affecting  the  profit  on  each  transaction. 


196 


COUNTRY  GRAIN  MARKETING. 


Wide  fluctuations  in  terminal  market  prices  (cash  or  future)  will 
also  affect  the  margin.  It  then  becomes  less  possible  for  the  ele¬ 
vator  operator  to  figure  what  the  grain  will  be  likely  to  bring  when 
it  arrives  at  the  terminal  market.  To  be  reasonably  sure  of  a 
profit  he  will  be  inclined  to  widen  the  margin  to  allow  for  these 
fluctuations.  Other  factors  which  affect  the  margin  are  the  relative 
ease  of  grading  accurately,  the  necessity  of  cleaning,  and  the  like. 
Within  the  same  grain  standard  grades  require  less  margins  than  off- 
grades,  due,  no  doubt,  to  less  risk  of  loss. 

'Margins  do  not  always  remain  the  same  throughout  a  year,  even 
for  the  same  grain.  Forty  of  the  cooperative  and  mill-owned  ele¬ 
vators  in  the  Northwest  visited  by  the  agents  of  the  Commission  re¬ 
ported  that  they  bought  on  the  same  margin  throughout  the  year, 
but  12  reported  that  during  the  months  of  heavy  receipts  they  pur¬ 
chased  grain  on  a  narrower  margin  than  during  a  period  of  light 
receipts.  Eleven  elevators  in  Iowa  and  eight  in  Illinois  interviewed 
by  agents  of  the  Department  of  Agriculture  reported  they  usually 
purchased  wheat  and  oats  on  a  narrower  margin  during  the  five 
months  from  August  to  December  than  in  other  months  of  the  year, 
while  28  and  42  elevators,  respectively,  in  the  two  States  reported  no 
change  in  the  margins.  Eleven  elevators  in  Iowa  and  seven  in  Illi¬ 
nois  reported  the  purchase  of  corn  on  a  narrower  margin  during  the 
four  months  November  to  February  of  each  year  than  during  other 
months,  as  against  28  and  43  elevators  in  the  same  States,  respectively, 
which  reported  no  change  in  the  margin. 

Conversely,'  the  margin  may  be  widened  during  months  when  the 
flow  of  grain  is  slow.  A  yery  few  elevators  stated  that  it  was  neces¬ 
sary  for  them  to  widen  the  margin  during  the  months  of  light  deliv¬ 
eries  because  of  the  time  necessary  to  obtain  enough  grain  to  hedge 
and  the  increased  risk  resulting  therefrom. 

Another  factor  in  changing  the  margins  during  a  crop  year  is  the 
availability  of  sufficient  railroad  cars  to  transport  the  grain.  When 
the  supply  of  cars  is  scarce  and  uncertain  the  margins  tend  to  be 
widened. 

Margins  also  vary  from  year  to  year.  Many  elevators  reported^ 
an  increase  in  margins  of  late  years,  most  of  them  explaining  the’ 
increase  on  the  ground  of  the  higher  prices  of  grain,  or  the  higher 
operating  costs  of  the  elevator,  or  both. 

Section  9.  Scope  of  study  of  grades,  dockages,  and  weights. 

Eeasons  for  study. — For  many  years  it  has  been  contended  by 
farmers  and  their  supporters  that  country  elevators,  except  the  co¬ 
operatives,  have  undergraded,  overdocked,  and  underweighed  the 
grain  purchased  by  them ;  in  fact,  many  of  the  present  cooperative 
concerns  were  organized  with  a  view  to  correcting  these  alleged 
conditions,  as  well  as  other  grievances.  Because  of  these  charges 
considerable  effort  was  made  to  ascertain  the  actual  facts  in  re¬ 
gard  to  all  three  of  these  matters.  In  general,  the  results  of  the 
many  interviews  had  were  thoroughly  unsatisfactory.  Thus  many 
elevator  managers  maintained  that  they  either  graded,  docked,  and 
weighed  their  purchases  with  absolute  accuracy  or  with  a  tendency 
to  favor  the  farmer,  while  farmers  and  their  supporters  insisted  that 
undergrading,  excessive  dockage,  and  fraudulent  weighing  were  fre¬ 
quent,  especially  upon  the  part  of  the  line  elevator  companies.  In 


PRICES,  MARGIITS,  GRADES,  DOCKAGES,  WEIGHTS.  197 

interviews  with  line  elevator  operators— that  is,  the  officials  of  the 
companies— the  Commission’s  representatives  were  almost  invariably 
iniormed  that  their  companies  suffered  heavy  losses  through  the  over¬ 
grading  of  their  country  agents.  These  line  officials  laid  particular 
stress  upon  the  grading  side  of  the  controversy,  and  when  pressed 
or  details  on  the  other  features — weighing  and  docking — ^maintained 

that  the  gains,  if  any,  on  these  features  were  entirely  offset  by  the 
loss  on  grades.* 

In  consequence  it  was  decided  in  determining  the  facts  to  rely 
entirely  upon  a  comparison  of  the  grades,  dockages,  and  weights  at 
uie  country  elevator  with  those  of  the  same  grain  as  found  by  the 
otate  inspection  department  upon  its  arrival  at  the  terminal  market. 

h/LEVATORS  STUDIED. — The  collcction  of  the  material  for  this  com¬ 
parison  was  unfortunately  limited  by  necessity  to  such  figures  as 
could  be  obtained  from  line  elevator  companies,  since  none  of  the 
cooperative  and  independent  elevator  companies  visited  had  records 
covering  the  grades,  dockages,  and  weights  of  grain  both  in  the 
country  and  at  the  terminal  market.  An  occasional  case  was  found 
^\here  such  elevators  could  give  results  on  the  grade,  dockage,  and 
weight  of  particular  cars,  but  data  of  a  comparable  nature  on  all 
gram  handled  was  unobtainable.  A  few  Minneapolis  line  com¬ 
panies,  however,  have  for  their  own  information  and  guidance  re¬ 
corded  for  their  various  country  houses  the  grades,  dockages,  and 
weights  given  grain  by  the  local  agents  when  purchased  and  the 
grades,  dockages,  and  weights  given  to  this  same  grain  by  the  inspec¬ 
tion  department  at  the  terminal  market. 

For  the  purpose  of  this  study  four  of  these  companies  were  se- 
lected,  1.  e.,  the  Cargill  Elevator  Co.,  the  Northwestern  Elevator  Co¬ 
me  Andrews  Grain  Co.,  and  the  Osborne-McMillan  Elevator  Co. 
The  selection  thus  made  was  influenced  solely  by  the  manner  in 
which  the  records  were  kept,  and  the  companies  in  question  were 
those  which,  after  a  brief  survey,  appeared  to  have  this  information 
in  the  most  accessible  form.  At  the  time  of  the  Commission’s  in¬ 
vestigation  these  four  companies  were  operating  approximately  275 
houses,  handling  on  the  average,  as  subsequently  appears,  many 
million  bushels  of  grain  a  year.  ^  It  seems  reasonable  to  conclude, 
thereiDre,  that  this  sample  is  sufficiently  large  to  be  fairly  representa¬ 
tive  of  line  elevator  results  on  grading,  weighing,  and  docking. 

Although  the  basis  for  the  study  does  not  include  elevators  other 
than  line,  for  the  reasons  indicated,  it  is  reasonably  deducible  that 
line  elevator  results  on  grades,  dockages,  and  weights  would  show 
^eater  profits  or  less  losses  than  a  similar  study  for  cooperative  and 
independent  elevator  companies  had  it  been  possible  to  obtain  the 
necessary  data  from  representative  groups  of  such  houses.  The  rea- 
sons  for  this  viewpoint  are  subsequently  stated,  but  mention  is  made 

matter  at  this  point  as  affecting  the  representative  character 
or  the  figures. 

Grain  SELECTED.— After  some  consideration  it  was  determined  to 
confine  the  study  of  grading,  weighing,  and  docking  to  wheat.  In 
the  first  place,  wheat  is  by  far  the  most  important  grain  in  the  four 
orthwestern  States,  both  in  volume  of  production  and  amount 
marketed.  As  a  result  of  the  latter  fact  it  is  also  the  grain  upon  the 
r  arious  grades  of  which  it  is  possible  to  obtain  the  most  complete 

♦  For  interviews  with  local  elevators,  Ch.  V,  sec.  3,  cf.  also  Ch.  XI,  sec.  6. 


198  COUNTRY  GRAIN  MARKETING*  ] 

record  of  terminal  market  prices  from  day  to  day.  In  the  case  of  , 
many  of  the  grades  of  other  kinds  of  grain  (especially  the  lower 
grades)  the  daily  price  record  at  the  terminal  market  is  unsatisiac- 
tory.  Even  in  the  case  of  wheat,  despite  the  large  volume  of  sales 
daily,  prices  on  some  of  the  lower  grades  are  somewhat  less  complete 
than  would  be  desirable. 

In  the  case  of  the  other  grains,  on  account  of  the  smaller  volume  | 
of  sales  of  different  grades  at  the  terminal  market  (especially  the  ^ 
lower  grades)  and  the  consequent  incompleteness  of  the  price  record,  ? 
it  is  doubtful  if  computations  of  profits  and  losses  on  these  trans-  ! 
actions  would  have  been  sufficiently  accurate  to  warrant  presentation.  | 

Secondly,  owing  in  part  to  the  durum  market  in  the  Northwest,  a  | 
greater  number  of  wheat  grades  could  be  subjected  to  examination  ; 
than  in  the  case  of  any  ot&r  grain.  Wheat,  therefore,  was  selec^d  ^ 
not  only  because  of  the  completeness  of  the  price  record,  but  also  be¬ 
cause  of  the  number  of  different  grades  involved.  ; 

Period  covered. — For  all  the  elevators  operated  by  the  tour  line  , 
companies  selected,  the  Commission  obtained  the  grades,  dockages,  j 
and  weights  as  reported  by  the  agents  of  these  companies  in  the  coun-  f 
try  when  the  grain  was  bought  and  the  grades,  dockages,  and  weights  £ 
applied  by  the  grain  inspection  department  to  this  same  grain  upon  its  I 
arrival  at  the  terminal  market.  While  these  figures  were  taken  from  I 
the  books  of  the  four  line  companies  for  all  five  crop  years  of  the  I 
pGriod  1912 — 13  to  1916 — IT^  it  wus  (IgcicIgcI  to  tRbiilRt©  the  results  lor  s 
only  three  years  on  account  of  the  large  amount  of  labor  and  expense  S 
involved  in  compiling  the  data  and  1913—14  to  1915—16  were  selected  j 
as  being  representative  years.  A  further  consideration  leading  to  1 
this  selection  was  the  fact  that  the  figures  for  1916-17  could  not  be  ■ 
satisfactorily  employed  on  account  of  the  complications  due  to  the  in- 
troductibn  of  Federal  grades.  j 

Section  10.  Statistical  method  employed  in  study  of  grades,  dockages,  and 

weights.  J 

In  the  country  the  grain  is  inspected  and  graded  by  the  elevator  B 
agent  (Ch.  V,  sec.  3).  Upon  its  arrival  at  the  Minneapolis  or  * 
Duluth  market,  and  before  its  sale,  it  Avas  at  this  time  inspected  and  H 
graded  by  the*  inspection  department  of  the  Minnesota  Kailroad  and  B 
Warehouse  Commission  and  was  sold  on  the  basis  of  this  inspection  B 

and  grading.  i  .  i  •  I 

If  grain  is  overgraded  in  the  country,  it  is  apparent  that  this  oyer-  B 

grading  will  appear  as  a  shortage  in  one  or  more  of  the  grades  given  B 
at  the  terminal  market  upon  inspection  by  the  State  authorities  as  B 
compared  with  the  country  grades  and  an  overage  in  one  or  more  B 
of  the  lower  grades.  Similarly,  it  is  evident  that  if  undergraded, 
this  result  will  be  reversed,  an  overage  appearing  in  one  or  morelj 
of  the  higher  grades  given  by  the  State  and  a  shortage  in  one  or  morej 
of  the  lower  grades,  as  compared  with  the  country  grades. 

In  a  similar  fashion,  incorrect  docking  or  weighing  will  be  trans-W 
posed  into  overages  and  shortages  in  grades  at  the  terminal  market  on  J 
State  inspection,  as  compared  with  the  quantities  of  such  grades™ 
purchased  in  the  country.  Thus,  if  the  grain  is  overdocked  in  the« 
country  any  such  over  docking  will  show  up  as  an  overage  in  one  orB 
more  of  the  various  grades  of  wheat  on  State  inspection,  or  if  under-^W 
docked  in  the  country,  as  a  shortage.  Either  overages  or  shortages,*] 


PRICES,  MARGINS,  GRADES,  DOCKAGES,  WEIGHTS.  199 

as  the  case  may  be,  will  therefore  be  represented  in  the  profits  on  the 
total  net  wheat.  The  same  applies  to  short  weights  and  overweights. 
Any  underweighing  or  overweighing  at  the  country  points  will  be 
evidenced  by  an  overage  or  shortage  in  at  least  one  of  the  grades  at 
the  terminal  market  on  State  inspection. 

So  far  as  profits  and  losses  are  concerned,  the  elevators  profit  and 
the  farmers  lose  by  undergrading,  short  weighing,  and  overdocking 
in  the  country.  Elevators,  on  the  other  hand,  lose  and  the  farmers 
profit  from  the  reverse  of  these  conditions — i.  e.,  overgrading,  over¬ 
weighing,  and  under  docking.  It  is  important  to  bear  these  points  in 
mind  in  considering  the  statistical  results  subsequently  presented. 

In  all  cases  the  profits  or  losses  on  grades,  dockages,  or  weights, 
or  the  total  profit  or  loss  on  all  combined,  can  be  represented  by  the 
differences  between  the  prices  for  net  bushels  bought  in  the  country 
and  for  net  bushels  sold  at  the  terminal  market,  since  the  prices  paid 
both  in  the  country  and  the  terminal  are,  with  some  unimportant  ex¬ 
ceptions,  practically  always  for  net  wheat.^® 

In  computing  the  profits  and  losses  on  these  transactions,  there¬ 
fore,  average  terminal  market  prices  were  applied  to  the  grades  re¬ 
ported  as  purchased  in  the  country  and  also  to  the  grades  returned 
by  the  terminal  market  inspection  department  and  the  difference  be¬ 
tween  the  two  in  terms  of  loss  or  gain  computed.  Any  carry-over  of 
grain  was  treated  as  though  shipped  and  as  receiving  from  the  in¬ 
spection  department  the  same  grades  as  it  had  been  bought  at  in  the 
country.^® 

The  average  prices  applied  as  aforesaid  were  computed  by  taking 
a  weighted  average  of  all  sales  of  each  grade  of  wheat  on  Wednesday 
and  Friday  of  each  week  during  each  year,  as  shown  by  the  Min¬ 
neapolis  Daily  Market  Record,  the  preceding  day  being  used  when 
no  quotations  were  to  be  had  on  Wednesday  or  Friday.  From  these 
average  daily  prices  the  spread  between  No.  1  northern  wheat  and 
each  other  grade  was  worked  out  for  each  day  and  the  daily  figures 
for  each  kind  of  spread  (i.  e.,  between  two  grades  compared)  aver¬ 
aged.  The  daily  No.  1  northern  price  was  then  averaged  for  the  year 
and  the  average  figure  for  each  kind  of  spread  was  then  added  to  or 
deducted  from  this  No.  1  northern  price  to  obtain  the  prices  for  the 
other  grades.^^ 


In  some  cases  wheat  will  sell  in  the  terminal  at  a  premium  on  account  of  the 
value  of  the  screenings  contained  therein.  It  is  also  true  that  in  buying  in  the  country 
allowances  in  prices  are  sometimes  made  on  account  of  the  screenings.  (Ch.  V,  sec.  3.) 

The  amounts  of  the  carry  overs  at  the  various  houses  were  so  insignificant  as 
compared  with  the  total  handled  that  the  slight  error  involved  in  this  method  of  treat¬ 
ment  may  be  regarded  as  negligible.  Moreover,  it  was  the  practice  of  the  companies  in 
question  to  treat  the  carry  over  as  shipped  and  to  have  attempted  to  secure  any  greater 
accuracy  would  have  involved  a  great  amount  of  work  in  separating  and  tabulating  a 
multitude  of  small  inventory  items,  with  the  certainty  that  the  averages  would ‘be  little, 
if  at  all,  affected  thereby. 

A  few'  exceptions  to  this  rule  were  necessary.  In  1913-14,  for  No.  4  spring.  No.  4 
durum,  no  grade  durum,  and  western  wheat,  prices  were  very  infrequent.  In  order  to 
avoid  additional  computations  the  weighted  average  of  prices  at  which  sales  were  made 
for  these  four  grades  and  also  No.  2  northern  wheat  were  taken  from  computations 
made  for  another  study.  The  same  source  was  used,  the  only  difference  being  that  the 
averages  in  this  case  were  those  of  the  sales  of  each  day  when  comparison  of  these 
grades  and  No.  2  northern  was  possible  instead  of  two  days  a  week.  From  these  average 
prices  the  spread  of  each  grade  from  No.  2  northern  was  computed  and  these  spreads 
were  deducted  from  the  No.  2  northern  prices  as  outlined  for  the  present  study. 

In  1914—15  no  grade  durum  and  western  wheat  were  rarely  quoted.  Here  the  average 
prices  of  these  grades  were  computed  on  every  day  when  such  prices  were  found  and 
the  daily  spread  was  obtained  by  deducting  such  prices  from  average  daily  No.  1 
northern  prices  computed  for  the  same  days.  The  resulting  daily  spreads  were  then 
averaged  and  deducted  from  the  yearly  average  No.  1  northern  price  found  as  above 
described  by  averaging  Wednesday  and  Friday  prices  throughout  the  year, 


200 


COUNTRY  GRAIN  MARKETING. 


Overages  or  shortages  upon  each  grade  were  then  obtained  by  com¬ 
puting  the  differences  between  the  number  of  bushels  of  each  grade 
bought  in  the  country  and  the  number  of  bushels  of  each  grade  found 
on  terminal  inspection.  These  overages  and  shortages  were  then 
multiplied  by  the  average  price  of  each  grade,  the  result  being  the 
profit  or  loss  on  each  grade  and  the  net  balance  on  all  grades  com¬ 
bined  giving  the  total  profit  or  loss  on  grading,  weighing,  and 
docking. 

In  determining  the  profit  or  loss  on  each  one  of  these  items,  further 
computations  were  required.  The  overages  or  shortages  in  dockages 
or  weights  are  reflected  in  the  comparison  of  the  net  weight  of  the 
wheat  in  the  country  and  as  inspected  at  the  terminal  market.  There 
is  no  way  of  determining  in  what  particular  grades  these  overages 
or  shortages  were  distributed.  It  is  fair  to  assume  that  the  distri¬ 
bution  was  in  the  same  proportion  as  the  distribution  of  the  total  net 
wheat  among  the  different  grades,  terminal  inspection  figures  as  to 
distribution  of  total  net  wheat  being  employed  as  more  accurate  than 
the  country  figures.  But  no  importance  need  be  attached  to  this  dis¬ 
tribution  as  such.  It  may  be  regarded  as  merely  a  means  of  com¬ 
puting  in  terms  of  dollars  and  cents  the  importance  of  the  gain  or 
loss  by  reason  of  differences  between  country  grades  as  a  whole  and 
weights  and  dockages,  respectively,  and  the  corresponding  terminal 
figures. 

It  is  possible  to  determine  the  separate  gain  or  loss  attributable  to 
dockage  and  to  weights,  respectively,  provided  prices  may  be  affixed 
to  the  quantities  involved.  In  order  to  determine  loss  or  gain  on 
dockages  and  weights,  the  overage  or  shortage  in  each  case  was  multi¬ 
plied  by  an  average  price  obtained  by  weighting  the  price  of  feach 
grade  according  to  the  proportion  which  each  such  grade  constituted 
of  the  total  terminal  inspections  in  net  wheat.  The  loss  or  gain  in 
quantity  of  dockage  is  directly  determined  as  the  difference  between 
the  country  and  the  terminal  figure.  The  loss  or  gain  in  weights  is 
similarly  the  difference  between  the  two  gross  total  weights,  includ¬ 
ing  dockage.  These  figures  multiplied  into  the  average  price  de¬ 
scribed  show  the  profits  and  losses*  on  dockages  and  weights,  respec¬ 
tively. 

The  profit  or  loss  on  grades  was  then  determined  as  the  difference 
between  the  profits  and  losses  on  grading,  weighing,  and  docking 
combined  and  the  profits  and  losses  on  weighing  and  docking  as  inde¬ 
pendently  determined.  The  profit  or  loss  in  cents  per  bushel  was 
derived  by  dividing  total  profit  or  loss  by  total  net  wheat  as  shown  by 
the  terminal  inspections. 

Section  11.  Analysis  of  results,  grades,  dockages,  and  weights. 

All  companies  combined. — Table  70  presents  the  consolidated  re¬ 
sults  of  the  country  grading,  weighing,  and  docking  study  made  by 
the  Commission  according  to  the  foregoing  method.  These  results 
are  not  to  be  confused  with  the  results  of  terminal  elevator  mixing 
operations  which  are  discussed  in  a  subsequent  volume  dealing  with 
terminal  market  cash  operations.  This  study  covers  only  the  differ¬ 
ences  in  grading,  docking,  and  weighing  between  the  country  eleva¬ 
tors  and  the  State  inspection  service  at  the  terminal  market,  and 
does  not  extend  to  the  terminal  elevators. 


PRICES,  MARGINS 


,  GRADES,  DOCKAGES, 


WEIGHTS. 


201 


1  Pnee  for  dockage  and  total  wheat  obtained  by  Undlng  proportion  of  tenninai  grades  to  total  net  and  multiplying  price  of  respective  grades  by  this  proportion. 


202 


COUNTRY  GRAIN  MARKETING. 


I 


From  this  study  it  appears  that  on  something  less  than  25,000,000 
bushels  of  wheat  purchased  during  three  years  these  four  compa¬ 
nies  sustained  a  net  loss  of  over  $83,000  on  weig  ing,  a 

docking  combined,*  an  average  rate  of  over  $27,000  a 
a  third  of  a  cent  per  bushel.  On  dockage  a  profit  of  about  $87,000, 
amounting  to  something  over  a  third  of  a  cent  per  bushel,  was  rea  - 
ized,  and  on  weighing  about  $60,000,  or  around  a  fourth  of  a  cent 
per  bushel.  The  total  profits  on  weighing  and  docking  together, 
therefore,  amounted  to  nearly  $150,000  or  a  approximately 

three-fifths  of  a  cent  per  bushel.  As  shown  by  the  table,  however, 
the  grand  total  loss  on  grading,  weighing,  and  docking  combined 
amounted  to  $83,337.22,  or  a  loss  of  0.35  of  a  cent  per  bushel  It 
follows,  therefore,  that  the  total  loss  on  grading  must  have  been 
the  sum  of  this  total  loss  on  all  three  factors  and  the  profits  on 
dockage  and  weights,  a  total  of  $231,151.35,  or  a  loss  of  0.97  of  a 

cent  per  bushel  on  grades.  ^  A  o 

One  qualification  of  the  foregoing  results  must  be  made.  As 

elsewhere  indicated  (Ch.  V,  sec.  3),  elevators  not  infrequently  fail 
to  make  any  allowances  for  dockage  either  in  the  form  of  prices 
or  by  the  return  of  the  screenings  to  the  farmer.  It  has  also  been 
pointed  out  that  the  tendency  is  for  the  commercial  lines  to  clean 
at  the  terminal  market,  with  the  result  that  this  type  reports  a 
very  low  percentage  of  houses  equipped  with  cleaning  facilities  as 
cornpared  with  the  various  types  of  individual  elevators  (Ch  VII, 
sec.  9).  Because  of  this  lack  of  equipment  it  is  impossible  for 
many  of  the  commercial  line  elevators  to  return  the  screenings  to 
the  farmer,  and  any  allowance  for  dockage  taken,  therefore,  must 
be  made  in  the  form  of  price.  The  general  indications  are  that  the 
line  elevators  do  not  always  make  such  allowances  except  when  com¬ 
pelled  to  do  so  by  their  competition.  It  is  at  least  possible,  in  con¬ 
sequence,  that  the  profits  of  the  line  companies  shown  on  dockage 
were  slightly  increased  by  the  sale  of  certain  screenings  for  which 
no  allowance  was  made  to  the  farmers.  Competition,  however,  in 
the  bulk  of  cases  forces  allowances  for  such  screenings,  and  the^ 
is  no  good  reason  for  believing  that  the  profits  from  this  source 
would  increase  the  total  profit  on  dockages  in  any  very  considerable. 

Individual  companies. — Table  71  presents  by  years  for  each  of 
the  four  companies  studied  the  per  bushel  profits  and  losses  on  j 
grading,  weighing,  and  docking.  These  individual  results  are  PJ’^i 
sented  for  companies  A,  B,  C,  and  D,  and  are  not  identified  with  3 
the  names  of  the  organizations  from  which  they  were  obtained. 


but 


*  This  does  not  mean,  of  course,  that  the  entire  business  was  conducted  at  a  loss, 
t  relates  only  to  the  three  items  in  question.  .V; 


PRICES,  MARGINS,  GRADES,  DOCKAGES,  WEIGHTS. 


203 


Table  71. — Promts  and  losses  per  bushel  of  four  specified  line  elevator  companies 
on  country  grading,  iceighing,  and  docking,  crop  years  19 13-1 to  1015-16, 


1913-14. 

Profit  on  dockages . 

Total  profit  on  weights . 

Total  profit  on  grades . 

Total  profit  on  all . 


1914-15. 

Profit  on  dockages . 

Total  profit  on  weights . 

Total  profit  on  grades . 

Total  profit  on  all . 


1915-16. 

Profit  on  dockages . 

Total  profit  on  weights . 

Total  profit  on  grades . 

Total  profit  on  all . 


A. 

B. 

Cents. 

Cents. 

+0.118 

+0.313 

+  .183 

+  .408 

-  .496 

-  .723 

-  .195 

-  .002 

+  .380 

+  .152 

+  .684 

+  .823 

-1.377 

-  .992 

-  .313 

-  .017 

+  .566 

+  .560 

+  .159 

.+  .244 

-1.766 

-1.348 

-1.041 

-  .544 

C. 

D. 

Cents. 

Cents. 

+0.083 

+0.029 

-  .012 

+  .946 

-  .602 

-  .422 

-  .531 

+  .553 

+  .174 

+  .606 

+1.119 

+  .252 

-1.108 

-  .635 

+  .185 

+  .223 

+  .551 

+  .866 

-  .726 

+  .300 

-  .746 

-1.533 

-  .921 

-  .367 

ALL  COMPANIES. 


• 

1913-14 

1914-15 

1915-16 

1913-16 

Profit  on  dockages . 

+0.110 
+  .308 

-  .532 

-  .114 

+0.351 
+  .715 
-1.077 
-  .011 

+0.641 
-  .102 
-1.345 
-  .806 

+0.365 
+  .255 

-  .970 

-  .350 

Total  profit  on  weights . 

Total  profit  on  grades. . . . 

Total  profit  on  all . .  . 

With  the  exception  of  company  D  in  1913-14  and  companies  C  and 
D  in  1914—15,  no  profits  on  grading,  weighing,  and  docking  combined 
are  shown  by  the  results  of  the  computations  for  any  of  the  com¬ 
panies  in  any  year  of  the  period.  Each  of  the  four  companies  made 
a  profit  on  dockage  in  every  one  of  the  three  years  and  a  loss  on 
grades.  Companies  A,  B,  and  T>  also  made  a  profit  on  weighing  in 
each  year  of  the  period.  Company  C,  however,  sustained  losses  on 
weights  both  in  1913-14  and  1915-16.  All  companies  combined  made 
a  profit  on  dockage  in  each  year  of  the  period  and  a  loss  on  grades. 
In  the  first  two  years  of  the  period  the  combined  companies  made  a 
profit  also  on  weights,  but  in  1915-16  a  loss  was  sustained.  This  loss, 
however,  was  not  sufficient  to  offset  the  profits  on  this  item  in  the  pre¬ 
ceding  two  years,  so  that  the  four  companies  combined  made  a  profit 
on  this  item  for  the  three  years.  The  largest  loss  in  any  one  of  the 
three  years  on  all  three  factors  was  slightly  over  1  cent  a  bushel  sus¬ 
tained  by  company  A  in  1915-16.  The  largest  profit  on  all  three 
operations,  something  over  half  a  cent,  was  obtained  by  company  D 
in  1913-14. 

Section  12.  Explanation  of  the  profits  and  losses  involved. 

Errors  and  inaccuracies. — The  relative  consistency  of  the  profits 
of  the  line  elevator  companies  in  weighing  and  docking  and  of  losses 
on  grades  probably  calls  for  explanation.  Broadly  speaking,  it  is  in 
the  matter  of  grades  that  the  country  agent  is  most  liable  to  make 
mistakes.  As  indicated  elsewhere,  the  grading  of  grain  requires  that 
a  wide  variety  of  matters  be  taken  into  consideration  and  individual 
judgment  plays  a  very  important  part.  In  the  case  of  weighing  and 
docking  far  greater  accuracy  is  possible  than  in  grading,  for  the 


204 


COUNTRY  GRAIN  MARKETING. 


reason  that  dockages  and  weights  can  be  determined  very  largely 
by  mechanical  processes.^®  (Ch.  V,  sec.  3.)  There  is  little  or  no 
opportunity  or  need  for  exercising  individual  judgment  and  there 
should,  in  consequence,  be  less  error  than  in  determining  grades. 
This,  however,  does  not  constitute  an  explanation  of  the  consistent 
losses  on  grading.  It  is,  however,  an  important  result  of  the  fore¬ 
going  situation  that  it  is  impossible  for  the  line  houses  either  to 
check  up  grading  as  closely  as  dockages  and  weights  or  to  demand 
the  same  accuracy  in  the  first  matter  as  in  the  second  and  third. 

At  least  two  other  elements  are  also  of  importance  in  causing  the 
large  and  consistent  losses  on  grades  and  the  profits  on  dockages 
and  weights.  The  first  and  probably  most  important  is  competition ; 
the  second  is  the  general  psychology  of  the  line  agent. 

Effect"  of  competition.^'^ — Every  farmer  desires  to  grow  grain  of 
the  highest  grade,  and  whether  he  does  so  or  not  he  is  likely  to  believe 
that  his  grain  is  of  high  grade.  To  this  end  he  will  argue  at  great 
length  with  the  elevator  operator,  proposing  to  take  his  grain  to 
a  competitor  unless  a  high  grade  is  given.  In  the  process  of  bartering 
the  agent,  to  prevent  the  grain  going  elsewhere,  may  therefore  con¬ 
cede  a  grade  higher  than  the  grain  warrants,  but  drive  a  hard  bar¬ 
gain  on  the  dockage  to  be  taken,  the  net  result  being  that  while  the 
elevator  sustains  a  loss  on  grades  it  makes  up  at  least  a  portion  of  the 
loss  by  docking  the  grain  more  than  is  warranted  by  the  amount  of 
foreign  material  contained  therein.  The  indications  are  that  the 
farmer  lays  much  more  stress  in  his  bargaining  upon  the  grade  than 
upon  the  dockage  and  is  less  inclined  to  barter  over  the  latter  than 
the  former,  which,  in  consequence,  often  makes  the  above  course  of 
action  the  line  of  least  resistance  for  the  elevator  agent  to  follow. 

Broadly  speaking,  it  may  be  stated  that  the  information  obtained 
by  the  Commission  indicates  that  in  a  large  proportion  of  cases 
profits  on  dockage  result  from  attempts  of  the  agent  to  offset  over¬ 
grading.  Country  agents  sometimes  are  urged  by  their  employers 
to  do  this,  and  at  one  time  it  was  not  uncommon  for  certain  line  ^ 
elevator  companies  to  instruct  their  agents  to  take  at  least  a  pound 
or  more  dockage.^® 

No  recent  evidence  that  such  instructions  are  now  generally  given 
has  been  obtained,  although  isolated  instances  have  been  found  in 
connection  with  this  inquiry.  A  few  country  agents  other  than  of 
line  companies  frankly  admitted  that  whenever  a  customer  was  given 
the  benefit  of  a  grade  an  additional  amount  of  dockage  was  taken  to 
offset  the  concession,  and  the  correspondence  of  the  line  companies 
plainly  indicates  that  the  line  agents  also  frequently  pursue  the  same 
policy,  although  the  line  companies  as  a  rule  prefer  to  make  as  little 
concession  as  possible  in  grades  and  to  raise  the  price  instead. 
(Ch.  XI,  secs.  15-16.) 

Psychology  of  the  line  agent. — At  least  two  men  prominently 
identified  with  Minneapolis  line  interests  have  argued  that  over¬ 
grading  is  in  no  inconsiderable  degree  due  to  a  more  or  less  deep¬ 
ly  weights  can  also,  of  course,  be  determined  better  than  dockage,  as  the  latter  is  less 
a  mechanical  operation  than  the  former  and  also  because  in  determining  dockage  there 
is  frequently  inseparable  foreign  matter  in  the  grain  which  must  be  estimated. 

19  For  further  competitive  aspects  of  this  subject,  see  Ch.  XI,  secs.  6,  15,  and  16. 

20  The  rules  of  one  line-elevator  company  in  the  Northwest  for  the  “  Instruction  and 
guidance  of  its  agents,”  issued  Aug.  1,  1907,  contain  the  following ;  “  You  are  not  to 
take  less  than  1  pound  dockage,”  and  ”  In  addition  to  dockage  taken  yon  should  get  10 
pounds  additional  for  each  40  bushels  on  the  load  to  cover  shrinkage.” 


PRICES,  MARGINS,  GRADES,  DOCKAGES,  WEIGHTS.  205 

seated  or  ingrained  prejudice  in  the  country  elevator  agent  in 
favor  of  the  farmer.  Many  of  the  elevator  agents  either  are  or  have 
been  farmers  or  else  have  relatives  who  are.  They  live  in  rural  com¬ 
munities  and  their  lives  have  been  spent  largely  in  contact  with 
farmers.  It  is  contended  by  the  line  interests  that,  as  a  result,  their 
point  of  view  is  that  of  the  farmer  rather  than  that  of  their  employers. 
These  men  go  so  far  as  to  assert  that  this  attitude  often  affect^  their 
traveling  auditors  as  well  as  their  agents,  and  is  an  important  element 
in  causing  overgrading.  Presumably,  the  attitude  of  the  agent  is 
coupled  with  the  facts  that  he  knows  that  he  can  not  be  taken  to 
task  as  severely  for  overgrading  as  for  overweighing  and  under¬ 
docking,  on  account  of  the  individual  judgment  involved,  and  also 
that  he  can  often  make  up  for  grade  losses  by  heavy  dockage. 

Explanation  of  iveighing  profit. — From  the  evidence  obtained 
it  would  appear  that  the  country  elevator  operators  as  a  whole  view 
with  disfavor  the  fraudulent  weighing  of  grain,  and  that  the  line 
elevator  operators  do  not  countenance  underweighing.^i 

Most  of  the  lines  are  emphatic  in  their  denunciations  of  under¬ 
weighing  and  have  also  in  some  cases  informed  their  agents  that  the 
practice  will  result  in  dismissal.  In  no  case  in  the  correspondence  or 
elsewhere  was  any  statement  found,  either  expressly  or  impliedly, 
countenancing  this  practice.  It  is  true  that  the  figures  presented  in 
the  foregoing  tables  would  seem  to  disprove  these  statements.  The 
explanation  of  this  discrepancy,  however,  lies  in  the  fact  that  line 
elevator  agents  are  under  bonds  which  cover,  among  other  things, 
shortages  in  weights.  The  opportunity  for  loss  in  connection  with  the 
operation  of  an  elevator  as  a  result  of  dishonesty  is  greatest  in  the 
weighing  of  grain,  and  in  this  matter  the  line  companies  are,  as  a 
result,  apt  to  be  very  strict.  The  agents  under  pressure  of  constant 
cautioning  and  adinonition  from  their  employers  and  the  constant 
fear  of  being  short  in  weights  usuall^^  weigh  carefully,  but  probably 
tend,  through  overcautiousness,  to  err  in  their  own  favor. 

Section  13.  Profits  and  losses — Houses  other  than  line. 

While  the  statistical  study  of  grading,  weighing,  and  docking 
presents  the  results  of  line  company  operation. only,  it  is  reasonably 
safe  to  conclude  that  the  losses  by  houses  of  other  types  are  as  great 
as  those  incurred  by  the  lines,  and  certainly  that  they  are  not  less. 

The  indications  from  the  correspondence  of  the  line  elevator  com¬ 
panies  and  other  data  collected  are  that  there  may  be  less  overgrading 
and  underdocking  on  the  part  of  the  line  companies  than  there  is  by 
the  other  types,  owing  to  the  close  supervision  of  the  agents  by  the 
head  offices.  The  lines  are  continually  instructing  their  agents  to 
grade  correctly  and  to  take  full  dockage  while  the  bonding  of  the 
agent  usually  insures  that  there  will  be  no  loss  on  weights.  Even 
competition  does  not  apparently  greatly  affect  the  line  company  pol¬ 
icy  of  insisting  that  the  agent  shall  not  overgrade  and  underdock. 
The  correspondence  of  the  line  companies  indicates  that  they  seldom 
make  any  concessions  in  these  respects  no  matter  to  what  extent 
their  competitors  may  be  engaging  in  these  practices.  The  lines  gen¬ 
erally  regard  underdocking  and  overgrading  as  equivalent  to  paying 

21  The  following  is  an  extract  from  the  rules  of  the  same  line  company  referred  to  In 
the  last  preceding  footnote :  “  We  do  not  expect  you  to  take  anything  that  does  not 
belong  to  you,  but  we  do  expect  you  to  see  that  your  weights  are  correct  so  that  you 
will  come  out  all  right.” 


206 


COUNTRY  GRAIN  MARKETING. 


higher  prices^  and  in  meeting  competition  of  this  character  they 
usually  refuse  to  permit  concessions  in  grades  or  dockages,  but  au¬ 
thorize  their  agents  to  pay  higher  prices  instead.  (Ch.  XI,  sec.  15.) 

Section  14.  Conclusions. 

On  the  basis  of  the  foregoing  discussion,  the  Commission  concludes 
that  line  companies  in  one  section  sustained  a  loss  on  country  grading, 
weighmg,  and  docking,  and  that  this  loss  was  due  chiefly  to  overgrad¬ 
ing  and  was  partially  reduced  by  underweighing  and  overdocking. 
The  principal  reasons  accounting  for  these  conditions  are  to  be  found 
in  the  competitive  situation,  the  psychology  of  the  country  elevator 
agents,  and  the  practice  of  bonding  agents.  While  no  statistical 
proof  thereof  is  available,  it  is  reasonably  deducible  that  other  types 
of  elevators  have  had  a  similar  experience.  It  is  most  desirable  that 
grain  should  be  accurately  graded,  docked,  and  weighed  in  the  coun¬ 
try,  and,  despite  the  difficulties  involved,  efforts  ought  to  be  directed 

to  this  end. 


\ 


Chapter  IX. 

HEDGING  OPERATIONS  OF  COUNTRY  HOUSES. 
Section  1.  Theory  of  country-elevator  hedging.^ 

f  k!  <=ommonly  applied  by  the  grain  trade  to 

the  method  employed  by  many  dealers  in  cash  grain  of  protecting 
themselves  against  losses  due  to  inarket  fluctuations  by  executing: 
wit  cash  purchases  and  sales  practically  simultaneous  future  trans- 
aetions  upon  the  opposite  side  of  the  market.  This  is  done  upon 
the  assumption  that  the  prices  of  cash  and  future  grain  will  move 
up  and  down  together  and  that  as  the  trades  are  on  opposite  sides 
of  the  market  the  decline  or  advance  of  either  will  be  compensated 
by  a  corresponding  fluctuation  in  the  other.  While  this  theoretical 
harmony  in  the  movement  of  cash  and  future  prices  is  not  always 
to  be  found  and  the  coincidence  of  the  two  movements  is  often  more 
or  less  seriously  disturbed,  it  is  none  the  less  well  established  that, 
broadly  speaking,  the  cash  and  future  prices  actually  do  move  up 
and  down  together  with  considerable  regularity  if  not  in  the  same 
egree.  Consequently  this  fact  is  often  taken  advantage  of  by  coun- 
merchandisers  as  well  as  other  cash  grain  dealers,  both  of 
which  classes  frequently  execute  practically  simultaneous  cash  and 
future  trades  on  the  opposite  sides  of  the  market,  expecting,  since 
cash  and  future  prices  move  together,  that  gains  or  losses  iA  cash 
or  tutures,  bought  or  sold,  will  be  compensated  or  offset  by  corre¬ 
sponding  losses  or  gains  in  futures  or  cash  sold  or  bought. 

Country  elevators  which  hedge  their  grain  do  so  primarily  for  the 
purpose  of  protecting  their  buying  margin— i.  e.,  the  difference  be¬ 
tween  the  prices  paid  the  farmer  and  those  prevailing  in  the  terminal 
and  other  markets.  (Ch.  VIII,  sec.  5.)  If  these  elevators  could  sell 
tne  actual  grain  immediately  after  purchase,  hedging  would  be  un¬ 
necessary,  since  in  such  event  the  risk  of  market  fluctuations  between 
the  time  of  purchase  and  the  time  of  sale  would  be  comparatively 
slight,  ^wingj^  to  the  long  distances  to  markets,  the  differences  in 
the  methods  of  sale,  and  other  factors,  however,  days,  weeks,  and 
sometimes  inonths  may  intervene  between  purchase  and  sale,  during 
which  period  the,  grain  purchased  is  subject  to  all  the  risks  of  world¬ 
wide  market  fluctuations  and  possible  profits  and  losses  owing  to 
advances  and  declines  of  prices.  Recourse,  therefore,  is  sometimes 
had  by  the  country  elevator  to  the  selling  and  buying  of  futures  in 
order  to  insure  that  the  buying  margin  upon  which  the  elevator  oper¬ 
ator  bought  the  farmer’s  grain  is  not  reduced  or  wiped  out.^ 

^  It  is  necyssary,  in  order  to  describe  country-elevator  hedeine  transactions  to  disrns« 
to  some  extent  future-trading  operations.  This  has  been  dole  oSlv  to  luch  delreo 
however,  as  it  was  thought  would  give  a  clear  comprehension  of  Lis  sSn  For 
shS^ldLeL^JI^IteT  future-trading  operations  Vols.  V-VII  of  this  ‘report 

4.  slsyator  does  not  hedge,  the  law  of  averages  onerates  to  a  (’prtain 

SlanL^LcroLer.^  ^  tending  to 

207 


208 


COUNTRY  GRAIN  MARKETING. 


Section  2.  Theoretical  hedging*  operations  and  results. 

Basis  OF  illustrations  employed. — The  following  theoretical; 
illustrations  of  the  employment ,  and  results  of  hedging  by  country 
elevators  will  sufficiently  explain  the  practice.  The  Farmers  Elevator 
Co.  at  Barrett j  Minn.,  a  subscriber  to  the  Grain  Bulletin  price  in¬ 
formation  service,  is  assumed  to  be  -  the  elevator  engaging  in  the 
various  trades,  and  the  year  1913  has  been  selected  as  the  time  of  the 
transactions,  owing  to  the  fact  that  the  course  of  prices  during  that 
year  was  such  that  the  various^  illustrations  could  be  easily  worked 
out.  The  prices  employed  are  within  the  ranges  of  the  actual  cash  and 
future  prices  prevailing  in  Minneapolis  on  the  specific  dates,  and  for 
the  purposes  of  the  example  it  is  assumed  that  the  Grain  Bulletin 
card  is  followed  exactly.^ 

The  freight  rate  from  Barrett  to  Minneapolis  is  8.8  cents  per  hun¬ 
dredweight  or  5.28  cents  per  bushel  on  wheat.  On- October  2,  1913, 
the  Grain  Bulletin  price  card  received  by  the  Farmers  Elevator  Co! 
made  the  minimum  buying  price  of  No.  1  northern  wheat  at  Barrett 
75  cents  per  bushel.  The ,  Minneapolis  market  price  on  which  this 
price  was  based  was  about  85  cents  per  bushel.^  The  difference  be¬ 
tween  the  price  shown  by  the  card  and  the  terminal  price,  10  cents, 
was  the  gross  buying  margin.®  As  the  freight  rate  is  5.28  cents  per 
bushel  and  the  Grain  Bulletin  price  card  usually  eliminates  the  frac¬ 
tions,  it  may  be  assumed  that  the  10-cent  margin  was  composed  of  5 
cents  for  freight  and  5  cents  to  cover  the  costs  of  operation  and  the 
elevator’s  profit.  Assuming  that  3i  cents  per  bushel  covered  the  costs 
of  operation  and  1^  cents  per  bushel  is  the  balance  of  profit,  the  gross 
margin  was  divided  as  follows : 


Freight  per  bushel _ 

Cost  of  operation  per  bushel 
Net  profit  per  bushel _ 


$0.  05 
.035 
.015 


Total  margin _ _ _  .  _  iq 

Loss  ON  CASH  AND  PROFIT  ON  FUTURES. — By  11  a.  m.  on  October  2,  i 
1913,  let  it  be  assumed  that  the  Farmers’  Elevator  Co.  has  purchased 
from  various  farmers  a  total  of  1,000  bushels  of  No.  1  northern 
wheat,  paying  for  it  the  price  shown  on  the  card  for  grain  of  that 
grade,  namely,  75  cents  per  bushel,  making  the  total  cost  of  this 
grain  $750.  In  order  to  hedge  this  transaction  the  elevator  oper¬ 
ator  would  wire  to  his  commission  firm  in  Minneapolis  about  as 
follows:  “Sell  1,000  December  wheat  against  cash  purchases.”® 

Upon  receipt  of  the  above  telegram  the  commission  firm  executes 
the  order  in  the  future  pit,  either  directly  or  through  a  pit  trader. 
On  October  2,  1913,  the  December  wheat  future  opened  at  $0.84f 
and  during  the  day’s  trading  the  high  point  was  $0.85J,  the  low 
$0,841-1,  and  the  closing  prices  were  $0.85^-^  to  $0.85^.  For  the 
purposes  of  this  illustration  assume  that  the  future  sale  of  1  000 
bushels  was  made  at  $0.85  per  bushel,  or  at  a  total  cost  of  $850. 
After  effecting  the  sale  the  commission  firm  sends  a  confirmation  of 
this  trade  to  the  country  elevator. 


!w^-  regarding  the  Grain  Bulletin  card  see  the  preceding  chapter. 

average  price  of  No.  1  northern  in  Minneapolis  on  Oct.  1  1913  was  84  83 

purcMle!^^''^^’'^'’  delivery  month  to  the  month  of  the  cash 


HEDGING  OPERATIONS  OF  COUNTRY  HOUSES.  209 

About  a  Aveek  later,  on  October  10,  1913,  the  elevator  operator 
loads  a  car  with  1,000  bushels  of  No.  1  northern  wheat  and  consigns 
it  to  his  commission  firm  at  Minneapolis.  At  the  same  time  the 
firm  IS  instructed  to  buy  in  1,000  bushels  of  the  December  wheat 
future  upon  sale  of  the  carload  of  wheat,  in  order  to  close  out  the 
1,000  bushels  of  December  which  was  sold  on  October  2. 

On  October  IT  the  car  reaches  Minneapolis.  It  is  inspected  and 
graded  and  a  sanaple  of  the  wheat  is  sent  to  the  commission  firm’s 
table  on  the  trading  floor  of  the  Chamber  of  Commerce.  On  that 
day  No.  1  northern  wheat  sold  for  $0.81  to  $0.83f,  this  last  pricq 
being  for  only  one  car  which  contained  good  dockage."^  The  highest 
general  price  was  $0.83|^.  Let  it  be  assumed  that  the  commission 
firm’s  cash  grain  salesman  receives  an  offer  of  $0.82  per  bushel  for 
the  car  and  accepts  it,  and  that  the  firm  receives  therefor  $820. 

When  the  car  of  cash  grain  has  been  sold,  the  commission  firm’s 
l^it  trader  buys  in  the  pit  1,000  bushels  of  December  wheat  to  close 
out  or  cancel  the  elevator’s  future  account  of  1,000  bushels  sold  on 
October  2.  On  the  day  in  question— October  IT,  1913— December 
wheat  opened  at  $0.80J,  the  high  was  $0.80f-81,  low  $0.T9J-80,  and 
the  close  $0.80f  to  $0.80f-|-.  The  pit  trader  executes  the  trade  at 
$0.80  per  bushel  and  purchases  1,000  bushels  of  December  at  a  price 
of  $800.  ^ 

An  account  sale  of  the  cash  transaction  is  then  prepared  by  the 
commission  house  and  also  an  account  of  purchase  and  sale  of  the 
future,  and  both  are  mailed  to  the  elevator. 

The  results  of  the  cash  transaction  to  the  elevator  are  as  follows, 
disregarding  all  charges  for  commissions,  weighing,  inspection,  etc. : 


Sold  1,000  bushels  No.  1  northern,  at  $0.82 _ $820.  00 

Cost  of  1,000  bushels  No.  1  northern,  at  $0.75 _  750.  00 

Gross  profit _ _  70.  00 

Less  freight,  $0.0528  per  bushel _  52.  80 

Less  operating  expenses,  $0,035  per  bushel— _  35.  00 

Total  expenses _  87  80- 

Net  loss -  17;  80 


On  the  basis  of  prevailing  cash  market  prices,  therefore,  at  the 
time  of  the  purchase  and  sale  of  this  particular  thousand  bushels  of 
wheat,  and  assuming  a  10-cent  buying  margin,  this  elevator  ivould 
have  dost  $1T.80  had  only  the  foregoing  cash  buying  and  selling 
transactions  been  effected. 

Dut  at  the  same  time  that  the  elevator  bought  the  wheat  frojn  the 
farmer  it  also,  as  stated,  sold  1,000  bushels  of  the  December  future, 
and  when  it  sold  the  actual  grain  at  Minneapolis 'it  bought  back 
1,000  bushels  of  the  same  future,  thus  canceling  its  previous  sale. 
The  results  of  this  operation  were  as  follows,  disregarding  com¬ 
missions  : 


Sold  1,000  bushels  December  at  $0.85 _ $850 

Bought  1,000  bushels  December  at  $0.80 _ _ _  800 

Net  profit _  50 


7  The  weighted  average  price  of  No.  1  northern  on  Oct.  17,  1913,  was  82  cents. 
9964°— 20 - 14 


COUNTRY  GRAIN  MARKETING. 


210 

While,  therefore,  the  elevator  lost  $17.80  on  the  cash  operation,  it 
made  $50  on  the  future,  and  thus  made  a  profit  on  the  whole  transac¬ 
tion  of  $32.20.  Actually,  of  course,  the  profit  was  somewhat  less, 
since  commissions,  fees,  etc.,  would  amount  to  at  least  a  few  dollars. 

Speculative  possibilities  in  connection  with  hedging.  Wni  e 
the  above  illustration  is  fairly  typical,  some  elevator  operators  do 
not  sell  the  future  until  the  car  of  actual  gram  has  been  loaded  and 
is  ready  to  be  hauled  to  the  terminal  market.  The  future  is  then 
closed  out  (purchased)  upon  sale  of  the  actual  gram.  Again,  there 
are  elevator  companies  which  do  not  close  out  the  future  at  the  time 
the  cash  is  sold,  thus  incurring  a  speculative  chance  of  loss  or  gain. 
For  example,  if  in  the  above  illustration  the  elevator  operator  had 
not  notified  the  commission  firm  to  close  his  future  upon  the  sale  of 
the  cash  grain,  but  had  left  it  open  in  anticipation  of  a  decline  m 
the  future  price,  he  would,  in  essence,  be  speculating,  since  he  would 
be  taking  the  chance  of  an  increase  or  a  decrease  in  his  profits,  it 
the  future  prices  had  declined,  his  profit  of  $32.20  on  the 
transaction  would  have  been  increased,  as  he  had  originally  sold  the 
future,  and  the  declining  prices  would  enable  him  to  buy  m  and 
cancel  this  sale  at  a  lower  price  than  the  80  cents  per  bushel  which 
he  paid  in  the  illustration  given.  Had  the  price  of  December  wheat 
dropped  to  75  cents  per  bushel,  and  had  the  operator  bought  in  his 
future  at  that  price,  his  net  profit  on  the  whole  operation  would  have 
been  $82.80  instead  of  $32.20. 

Sold  1,000  December  wheat  at  $0.85  per  bushel - $850.  W 

Bought  1,000  December  wheat  at  $0.75  per  bushel -  750.  00 

Net  profit  on  future  transaction -  100.  00 

Less  loss  on  cash  transaction -  17.  80 

Total  profit - 

On  the  other  hand,  if  we  assume  that  the  elevator  operator  had  not 
closed  out  his  future  upon  sale  of  his  cash  grain  and  the  prices  of 
futures  had  not  declined,  but  had  advanced  to,  say,  $0.87  per  bushel 
before  he  closed  out  his  trade,  the  result  would  have  been : 

Sold  1,000  December  wheat  at  $0.85 - 

Bought  1,000  December  wheat  at  $0.87 -  870.  00 

Net  loss  on  future  transaction -  20.  W 

Loss  on  cash  transaction -  !'<'•  80 

Total  loss _ 

From  the  above  it  follows  that  hedging  in  the  most  exact  sense  of 
the  term  and  to  secure  the  fullest  possible  protection  rec[uires  that 
the  execution  of  the  cash  and  future  transactions  on  opposite  sides  of 
the  market  should  be  as  nearly  simultaneous  as  possible  and  that  the 
further  apart  they  are  in  point  of  time  the  more  the  opeiation  par¬ 
takes  of  speculation  and  the  less  the  reason  for  regarding  it  as 

hedging.  .  i  i 

Limitations  of  profits. — The  foregoing  illustrations  show  how 

as  a  result  of  a  future  operation  a  country  grain  merchant  may  re¬ 
duce  the  possible  loss  involved  in  the  buying  and  selling  of  cash 
grain  when  the  cash  market  declines  through  the  corresponding  de¬ 
cline  of  the  futures  which  the  elevator  sold  as  soon  as  it  had  bought 


HEDGING  OPERATIONS  OF  COUNTRY  HOUSES. 


211 


the  grain.  While  hedging,^  therefore,  in  theory  and  practice  tends 
to  limit  the  losses  of  the  cash  operator  in  the  event  of  a  decline  in 
cash  prices,  it  should  be  clearly  understood  that  it  usually  decreases 
the  profits  in  the  event  of  an  increase  in  cash  prices. 

For  example,  suppose  the  Barrett  elevator  in  the  foregoing  illus¬ 
tration,  after  buying  the  thousand  bushels  of  wheat  on  October  2  and 
selling  the  December  future  against  it,  had  not  shipped  the  grain,  but 
had  held  it  until  December  and  then  decided  to  carry  it  over  until 
the  spring  of  1914  on  the  chance  of  a  possible  premium  of  the  cash 
price  over  the  future. 

Since  the  operator  originally  hedged  in  the  December  future,  he 
must,  in  order  to  protect  himself,  switch  his  hedge  to  another  future. 
This  he  does  by  buying  in  the  December  future  for  1,000  bushels 
which  he  originally  sold  and  selling  1,000  bushels  of  the  May  future. 
Assume  that  this  transfer  was  made  on  December  20,  on  which  day 
the  December  future  sold  at  $0.83i  to  $0.84  and  the  May  future  at 
$0,874  to  $0.87f .  Assume,  further,  that  the  country  operator  bought 
in  his  December  future  at  $0.84  and  sold  1,000  bushels  of  May  at 
$0,874  and  that  on  April  11,  1914,  he  loads  out  the  wheat,  which  is 
shipped  to^  Minneapolis  and  is  sold  there  on  April  24. 

On  April  24  cash  wheat  ranged  from  $0.91J  to  $0,944  and  the  May 
future  from  $0.89f  to  $0.90f.  Assume  further,  for  illustrative  pur¬ 
poses,  that  the  cash  wheat  in  question  was  sold  at  $0.93  ^  and  that 
the  future  was  bought  in  at  $0.90^.  The  results  of  the  foregoing 
transactions  would  then  have  been  as  follows : 


Purchase  of  1,000  bushels  of  cash  wheat  on  Oct.  2,  1914 _ $750.  00 

Sale  of  1,000  bushels  of  cash  wheat  on  Apr.  11,  1914 _ _  930.  00 


Profit  on  cash  operations 


180.  00  ' 


Sold  1,000  bushels  of  December  wheat  on  Oct.  2  at  $0.85 _  850.  00 

Bought  1,000  bushels  of  December  wheat  on  Dec.  20  at  $0.84 _  840.  00 

Profit  on  December  future _  10.  00 

Sold  1,000  bushels  of  May  wheat  on  Dec.  20,  1914 _  872.  50 

Bought  1,000  bushels  of  May  wheat  on  Apr.  24,  1914 _  902.  50 

Loss  on  May  future _  30.  OO 

Less  profit  of  $10  on  December  future _  10.  oO 

Net  loss  on  futures _  20.  00 

Total  profit  on  cash  operations _  180.  00 

Less  loss  on  futures _  2o'  00 

Net  profit -  160.00 


In  other  words,  in  the  foregoing  illustration,  if  the  elevator  op¬ 
erator  had  not  hedged  his  grain,  but  had  merely  carried  it  over  until 
spring  and  had  sold  at  the  prices  indicated,  he  would  have  realized 
a  profit  of  $180  in  this  particular  instance.  Not  caring  to  assume 
the  possible  losses  involved  in  carrying  this  grain,  however,  because 
he  could  not  foretell  the  price  at  which  he  would  be  able  to  sell,  he 
hedged  in  order  to  limit  this  possible  loss,  and  by  so  doing  in  the 
particular  instance  reduced  his  profits  from  $180',  which-he  would 

®  Except  the  elevator  speculates,  as  shown  in  the  foregoing  illustration,  in  which 
stated,  the  operation  is  not  hedging  in  the  exact  sense  of  the  word. 

3  V  eighted  average  of  No.  1  northern,  cash,  93.37. 


COUNTRY  GRAIN  MARKETING. 


212 

have  obtained  in  the  absence  of  hedging,  to  $160.  But  by  thus  liniit- 
ing  his  profit  he  had  also  limited  the  possibility  that  he  would  sutler 

loss.  ,  n  -x 

In  other  words,  the  hedging  operator  theoretically,  as  it  were,  con¬ 
sents  to  a  limitation  of  his  profits  in  return  for  a  limitation  ot  his 
losses.  Being  upon  opposite  sides  of  the  market,  in  the  cash  and  in 
the  futures,  loss  as  a  buyer  of  cash  wheat,  if  cash  declines,  will 
theoretically  be  compensated  by  his  profit  as  a  seller  of  futures  on 
the  corresponding  decline  of  the  future.  Conversely,  if  the  cash 
advances,  the  hedger’s  gain  as  a  buyer  of  cash  will  be  reduced  by 
his  loss  as  a  seller  of  futures  from  the  corresponding  advance  in  the 
future  market. 

Section  3.  Some  technical  details  of  country-elevator  hedging. 

On  most  of  the  exchanges  trading  in  futures  is  in  1,000-bushel  lots 
as  a  minimum.  In  consequence,  orders  for  the  purchase  and  sale  of 
grain  futures  by  country  elevators  for  hedging  purposes  are  usually 
instructions  to  buy  or  sell  1,000  bushels,  or  multiples  thereof. 
generally,  perhaps,  the  elevators  in  the  Northwest  wait  until  they 
have  accumulated  1,000  bushels  by  purchases  from  the  farmers  or 
until  the  close  of  the  day  before  sending  in  the  hedging  order.  In 
some  cases,  however,  they  place  hedging  orders^  before  they  have 
accumulated  as  much  as  this  minimum  amount.  Such  action  is  most  ^ 
likely  to  be  taken  when  the  receipts  at  the  country  elevator  are  heavy 
and  there  is  good  reason  for  anticipating  that  the  total  receipts  either 
during  the  day  or  by  the  close  of  the  day  will  amount  to  the  miniinum 
quantity  required  by  exchange  regulations  for  a  future  transaction. 

For  example,  a  few  elevators  in  the  Northwest  and  also  in  Illinois 
and  Iowa  reported  the  placing  of  a  hedge  when  it  seemed  to  be  certain 
that  sufficient  grain  to  cover  it  would  be  received.  ^ 

As  the  most  of  the  grain  markets  close  very  early  in  the  aiter- 
noon,  however,  the  bulk  of  the  hedging  orders  of  the  country  ele¬ 
vators  are  executed  by  their  terminal  market  representatives  on  the 
morning  following  the  day  when  instructions  are  given.  Telegraphic 
or  telephonic  instructions  given  by  the  country  elevators  before  noon, 
however,  may  be  received  sufficiently  early  to  permit  the  execution  of 

the  hedge  on  the  same  day.  .  .  ,  i,- 

When  the  country  elevator  operator  consigns  a  car  ot  gram  to  ins 
commission  house  he  also  gives  instructions  to  close  out  the  hedge 
upon  the  sale  of  the  grain,  provided,  of  course,  that  he  is  using  the 
future  market  strictly  for  hedging  purposes.  (Sec.  2.)  In  some 
instances  the  order  to  close  is  attached  to  the  bill  of  lading.  In  other 
cases  the  elevator  operator  telegraphs  the  order  to  close  the  hedge 

to  the  commission  firm.  ^  1m| 

As  a  rule  the  instructions  specify  the  quantity  ot  futures  to  be|^| 
bought  in,  but  if  the  elevator  has  sold  several  thousand  bushels  of  I  J 
futures  the  commission  house  may  be  told  merely  to  buy  in  theljl 
future.  Some  elevators  give  standing  orders  to  the  commission 
houses  to  close  out  their  hedges  as  fast  as  their  grain  arrives  at  the 
terminal  markets.  One  operator  reported  that  during  the  rush* 
season  he  often  did  not  close  out  a  hedge  upon  the  sale  of  a  car  of 
grain,  but  allowed  this  hedge  to  stand  to  cover  the  heavy  receipts  of  m 
grain.  When  receipts  slackened  he  hedged  the  grain  as  it  was  re- 
ceived  and  the  futures  were  closed  as  fast  as  the  grain  was  sold.  ■ 


HEDGING  OPERATIONS  OF  COUNTRY  HOUSES. 


213 


In  the  case  of  the  lar^e  line  companies  in  the  Northwest  daily 
reports  are  submitted  by  each  country  agent  to  the  head  offices  at 
Minneapolis  and  Duluth.  These  reports  (Appendix  7)  show  the 
kinds  and  grades  and  quantities  of  all  grain  purchased  during  the 
day,  and  futures  are  sold  to  hedge  the  quantities  of  such  purchases.^® 
These  agents  also  often  have  standing  instructions  to  notify  the  head 
office  immediately  by  wire  whenever  purchases  during  the  day  exceed 
a  certain  quantity,  generally  500  to  750  bushels.  These  telegraphic 
reports  of  purchases  are  used  as  a  basis  for  additional  hedging  by 
the  line  companies  during  the  day  over  and  above  the  hedges  placed 
by  them  to  cover  country  purchases  made  on  the  preceding  day,  as 
shown  by  the  agents’  daily  reports,  in  order  that  as  little  grain  as 
possible  may  be  left  unhedged. 

Section  4.  Extent  and  prevalence  of  hedging. 

Approximately  50  per  cent  of  all  the  country  elevators  and  ware¬ 
houses  in  the  United  States  reporting  to  the  Commission  customarily 
hedge  their  grain  purchases  and  approximately  50  per  cent  do  not. 
This  appears  from  the  following  table  which  presents  in  summary 
form  the  reported  answers  of  all  elevators  and  warehouses  reply¬ 
ing  to  the  Commission’s  inquiry  on  this  subject.  (Appendix  2,  in¬ 
quiry  18.) 


Table  72. — Number  and  percentages  of  reporting  elevators  and  warehouses  cus-  * 
tomarily  hedging  and  not  hedging  grain  purchases. 


Total 

num¬ 

ber 

report¬ 

ing. 

Reporting 

“YesTf 

Reporting  to 
some  extent. 

Reporting  only 
by  flour  sales. 

Reporting 

“No.” 

Num¬ 

ber. 

Per 

cent. 

Num¬ 

ber. 

Per 

cent. 

Num¬ 

ber. 

Per 

cent. 

Num¬ 

ber. 

Per 

cent. 

Elevators . 

8,217 

354 

3,437 

7 

41.83 

1.98 

810 

10 

9.86 

2.82 

9 

0.11 

3,961 

337 

48.20 

95.20 

Warehouses . 

Total . 

8,571 

3,444 

Ao.  18 

820 

( 

y 

(9.57' 

;  9 

.11 

4,298 

.m.  15 

That  hedging  is  not  more  often  employed  by  country  houses  will 
perhaps  seem  peculiar  to  many,  especially  grain  dealers  and  others  in 
the  northwest  territory^  One  of  the  most  common  and  most  em¬ 
phasized  arguments  in  favor  of  future  trading  is  that  it  is  necessary 
to  enable  country  elevators  to  protect  themselves  against  financial  loss 
by  insuring  their  buying  margins  through  hedging  operations.  /  In 
the  northwest  territory  country  elevator  hedging  is  probably  believed 
by  many  to  exist  much  more  generally  than  is  actually  the  case,  owing 
either  to  a  lack  of  perspective  or' absence  of  statistics.  The  commer¬ 
cial  line  elevators  in  this  territory  hedge  almost  religiously  all  kinds 
of  grains  in  the  corresponding  futures,  and  before  the  establishment 
of  the  barley  and  rye  futures,  sometimesjb^ged  the  former  in  oats 
or  corn,  and  the  latter  in  wheat.“^,,-0wing  in  part  at  least  to  the 

*  - - 7*^^— - ^ - — - 

At  least  one  Minneapolis  line  company  informed  the  Commission  that  it  does  not 
wait  for  the  agents’  daily  reports,  which  are  not  usually  secured  until  the  following 
morning,  but  hedges  each  day  upon  estimates  of  country  receipts  during  the  day,  such 
estimates  being  made  up  from»  the  character  and  size  of  the  crop,  weather  conditions, 
quantities  bought  in  previous  years  on  the  same  day,  etc. 

“  The  theory  on  which  this  was  done,  apparently,  was  that  there  should  be  some 
correlation  between  wheat  and  rye  prices  owing  to  the  fact  that  rye  is  extensively  milled 
into  rye  flour  for  human  consumption.  A  large  quantity  of  barley,  on  the  other  hand, 
is  used  for  feeding  purposes,  as  are  both  corn  and  oats.  Wherefore,  there  should  be  some 
correlation  between  the  prices  of  barley  and  those  of  these  two  grains. 


214 


COUNTRY  GRAIN  MARKETING. 


peculiar  system  of  financing  country  elevators  which  prevails  in  the 
Northwest,  a  very  large  proportion  of  hedging  in  this  area  is  also 
found  among  other  types  of  elevators  than  the  commercial  lines. 
Largely  perhaps  as  a  result  of  these  facts  there  is  an  impression  in 
the  Northwest,  both  of  the  necessity  and  prevalence  of  country 
elevator  hedging  which  does  not  entirely  coincide  with  the  actually 
existing  situation,  considering  the  country  as  a  whole. 

Section  5.  Geographical  variations  in  hedging. 

Extent  of  variations.— Table  73  presents  in  detail  the  proportion 
of  elevators  and  warehouses  customarily  hedging  and  not  hedging  in 
the  various  States  and  grand  divisions.'  As  between  the  various  States 
for  which  the  figures  were  separately  tabulated,  the  proportions  of 
hedging  elevators  show  exceedingly  wide  variations.  Thus,  the  per¬ 
centages  of  elevators  reporting  hedging  range -from  as  low  as  3.04 
per  cent  in  Wisconsin  to  as  high  as  94.33  in  North  Dakota.  Similarly, 
only  3.68  per  cent  of  Michigan  elevators  report  hedging  as  compared 
with  89.54  per  cent  of  those  in  Montana. 

Table  73. _ ISlumher  end  percentage  of  elevators  customarily  hedging  and  not 

hedging  in  specified  States  and  grand  divisions. 


Reporting. 


State  or  division. 

Total 

ele¬ 

vators 

Yes. 

To  some  extent. 

No. 

Only  by  sale  of 
flour. 

and 

ware¬ 

houses 

report¬ 

ing. 

Num¬ 

ber. 

Per 
cent  of 
total. 

Num¬ 

ber. 

'  Per 
cent  of 
total. 

Num¬ 

ber. 

Per 
cent  of 
total. 

Num¬ 

ber. 

Per 
cent  of 
total. 

ELEVATORS. 

1,342 

1,193 

915 

871 

707 

555 

467 

373 

349 

317 

217 

177 

198 

133 

147 

144 

112 

1,223 

785 

178 

537 

128 

31 

168 

330 

9 

24 

4 

8 

1 

6 

2 

1 

2 

91.13 
65.80 
19. 45 
61.65 
18. 10 
5.59 
35.97 
88.47 
2. 58 
7. 57 
1.84 
4.52 
.51 
4. 51 

1.36 

.69 

1.79 

43 

111 

222 

88 

106 

84 

56 

4 

47 

16 

4 
14 

5 

5 

1 

4 

3. 20 

9. 30 
24. 26 
10. 10 

14.99 
15. 14 

11.99 
1.07 

13. 47 
5. 05 
1.84 
7. 91 
2.53 
3.76 

.68 
2. 78 

76 

296 

514 

246 

473 

438 

241 

39 

293 

275 

208 

155 

192 

122 

144 

139 

110 

5.66 
24. 81 
56. 17 
28. 24 
66.90 
78. 92 
51.61 
10.46 

83.95 
86. 75 
95.85 
87. 57 
96.97 
91.73 

97.96 
96. 53 
98. 21 

4S  01  vU  J-'dK.Uta' 

Minnesota . 

Illinois . 

1 

1 

0. 08 
.11 

Kansas . 

Nebraska . 

2 

2 

.36 

.43 

Ohio . 

Michigan . 

2 

1 

.63 

.46 

Mountain  and  Pacific  Divi- 

Middle  Atlantic  Division. . . . 
Southern  Division . 

Total . 

8,217 

3,437 

41.83 

810 

9. 86 

3,961 

48. 20 

9 

.11 

WAREHOUSES. 

Mountain  and  Pacific  Divi- 

190 

4 

2.11 

1 

.53 

185 

97.37 

112 

3 

2. 68 

7 

6.25 

102 

91.07 

30 

1 

3.33 

29 

96.67 

22 

1 

4.55 

21 

95.45 

XVXlOOlw  tldll vli/  X.'l  V  *  •  •  • 

Total . 

354 

7 

1.98 

10 

2.82 

337 

95. 20 

Grand  total . 

8,571 

3,444 

40.18 

820 

9.57 

4,298 

50.15 

9 

.11 

i^That  is  those  reporting  “  yes  ”  and  “  to  some  extent.”  See  also  footnote  1,  Table  74. 


HEDGING  OPERATIONS  OF  COUNTRY  HOUSES.  215 

At  least  three  primary  reasons  may  be  assigned  in  explanation  of 
the  foregoing  variations  between  States ;  first,  the  relative  extent  of 
tlie  consignment  and  direct  methods  of  selling  grain;  second,  the 
relative  extent  of  commission-house  financing;  and  third, the  business 
methods  of  the  large  line  elevator  companies. 

Effect  of  consignment  business. — The  following  table  presents 
the  proportions  of  elevators  reporting  hedging  in  comparison  with 
the  proportions  of  consignment  and  direct  business  in  the  14  principal 
grain-producing  States. 


Table  74. — Proportions  of  elevators  in  specified  States  reporting  hedgmg  im 
comparison  with  the  reported  proportions  of  grain  sold  on  consignment^^ 
and  direct  dnring  crop  years  1912-13  to  1916-17. 


State. 


North  Dakota 

Montana . 

Minnesota .... 
South  Dakota 

Nebraska . 

Illinois.. 

Iowa . 

Kansas . 

Indiana . 

Ohio . 

Missouri. . . . 
Oklahoma. . 
Michigan . . . 
Wisconsin.. 

All  elevators 


Percentage 
of  elevators 
reporting 
hedging  to 
a  greater 
or  less 
extent.i 

Percentage 
of  consign¬ 
ment  sales 
reported, 
crop  years 
1912-13  to 
1916-17.2 

Percentage 
of  direct 
sales 
reported, 
crop  years 
1912-13  to 
1916-17.2 

94.33 

89.87 

10.13 

89.54 

80.87 

19. 13 

75. 10 

91.99 

8.01 

71.75 

92.59 

7.41 

47. 96 

62.94 

37.06 

43. 71 

60.33 

39.67 

33.09 

71.86 

28. 14 

20.73 

70.53 

29.47 

16.05 

48.59 

51.41 

12.62 

32.36 

67.64 

12.43 

82.63 

17.37 

8.27 

14.63 

85.37 

3.68 

21.84 

78. 16 

3.04 

91.30 

8.70 

51.69 

72.33 

^  27.67 

1  The  question  asked  was,  “Is  it  a  custom  to  hedge  your  grain  purchases?”  The  answers  fell  into  four 
divisions,  “  Yes,”  “  To  some  extent,”  “No,”  and  “  Only  by  flour  sales,”  as  appears  from  Table  73.  In  this 
discussion,  answers  to  the  first  two  classes  have  been  combined  and  those  to  the  last  two.  The  first  two 
classes  employ  hedging  in  varying  degrees,  and  hedging  by  flour  sales  is  a  type  of  hedging  of  radically  dif¬ 
ferent  character  from  hedging  in  grain  (Vol.  VII). 

2  Ch.  VI,  sec.  15,  Table  46. 


An  examination  of  the  foregoing  table  reveals  the  fact  that  with 
some  exceptions,  notably  Missouri  and  Wisconsin,  the  proportion  of 
hedging  tends  to  vary  directly  with  the  proportion  of  consignment 
business  reported,  and  therefore  inversely  with  the  percentage  of 
direct  selling.  (Ch.  VI,  sec.  15.) 

Where  grain  is  sold  “  on-track  ”  in  the  country  or  on  a  “  to-arrive  ” 
basis,  there  is  not  the  necessity  for  hedging  that  exists  where  grain  is 
sold  on  the  consignment  basis,  the  reason  being  that  in  the  former 
case  there  is  not,  as  a  rule,  so  great  a  period  of  time  elapsing  between 
the  date  of  purchase  and  the  date  of  sale.  A  country  elevator  may 
sell  grain  “on-track  ”  or  “  to-arrive  ”  on  the  same  day  that  it  is  pur¬ 
chased,  and  does  so  in  many  cases.*  In  any  event,  the  time  elapsing 
between  the  time  of  purchase  and  the  time  of  sale  is  likely  to  be  much 
less  in  the  case  of  direct  sales  than  in  the  case  of  consignment  selling, 
with  the  result  that  less  risk  of  price  changes  is  involved.  In  conse¬ 
quence  it  is  to  be  expected  that  there  will  be  a  considerably  greater 
use  of  hedging  where  consignment  selling  is  largely  employed  than 
where  direct  sales  are  more  frequently  the  rule. 


♦  In  such  case  the  sale  is  in  effect  a  hedge,  and  is  sometimes  so  termed. 


4 


216 


COUNTRY  GRAIN  MARKETING. 


The  great  bulk  of  the  Northwest  grain  moves  to  Minneapolis  and 
Duluth,  which,  as  elsewhere  stated,  are  probably  the  most  important 
consignment  markets  in  the  country  (Ch.  VI,  secs.  15—16,  and  Table 
49).  While  something  over  70  per  cent  of  the  grain  disposed  of  by 
country  elevators  is  sold  on  the  consignment  basis,  the  proportion  is 
very  much  higher  in  all  four  of  the  Northwestern  States,  which,  as 
stated,  are  tributary  to  these  important  consignment  markets.  In 
consequence  the  proportion  of  elevators  reporting  hedging  tends  to 
be  relatively  high  in  this  area.  In  the  areas  farther  to  the  south  and 
the  territory  east  of  the  Mississippi,  except  Wisconsin  and  Missouri, 
much  smaller  proportions  of  the  various  grains  are  reported  sold  on 
the  consignment  basis  than  in  the  Northwest  and  much  larger  pro¬ 
portions  directly.  Many  of  the  markets  in  these  latter  States  are 
large  “  to-arrive  ”  markets  and  do  comparatively  little  consignment 
business.  In  many  of  these  States,  moreover,  there  is  a  great  deal  of 
local  grain  merchandising,  whereas  in  the  Northwest  there  is  little 

or  none  of  it.  (Ch.  VI,  secs.  7-16.) 

Effect  of  commission-house  financing  on  hedging. — As  previ¬ 
ously  indicated,  the  elevators  in  the  northwest  territory  other  than 
the  line  houses  are  financed  in  large  measure  through  various  com¬ 
mission  houses  located  in  the  terminals  of  Minneapolis  and  Duluth. 
(♦Siee  also  Ch.  X.) 

The  following  table  presents  the  proportion  of  elevators  reporting 
hedging  in  the  14  large  grain-producing  States  in  comparison  with 
the  extent  of  financing  by  commission  houses-: 

Table  75. — Proportion  of  elovntors  in  specified  States  reporting  hedging  in  com¬ 
parison  with  the  prevalence  of  commisswn-house  financing. 


State. 

Percentage 
of  elevators 
reporting 
hedging  to 
a  greater 
or  less  ex- 
tent.i 

Proportion 
of  times 
commission 
houses  are 
reported  as 
somce  of 
loans  to  all 
somces 
reported.2 

94.33 

33.76 

89.54 

24. 12 

75.10 

18.84 

•71.75 

21.16 

47.96 

.26 

43.71 

4.23 

33.09 

2.67 

20. 73 

.44 

16.05 

3.68 

12.62 

12. 43 

3.82 

8. 27 

.94 

3. 04 

8.39 

51.69 

10.86 

1  The  question  asked  was  “Is  it  a  custom  to  hedge  your  grain  purchases?  ”  The  answers  feU  into  fom 
divisions,  “Yes,”  “To  some  extent,”  “No,”  and  “Only  by  flour  sales,”  as  appears  froin  Table  73.  In 
this  discussion  answers  to  the  first  two  classes  have  been  combnmd  and  those  to  the  last  two.  The  first 
two  classes  employ  hedging  in  varying  degrees,  and  hedging  by  flour  sales  is  a  type  of  hedging  of  a  radi- 
cally  different  character  from  hedging  in  grain  (Vol.  VII). 

2  Appendix  Table  20, 


) 

\ 


A 


I 


i 


217 


HEDGING  OPERATIONS  OF  COUNTRY  HOUSES. 

As  appears  from  this  table,  the  four  Northwestern  States  reporting 
the  highest  proportions  of  hedging  are  also  the  ones  which  report  the 
greatest  prevalence  of  commission-house  financing.  They  are  in  fact 
the  only  ones  in  which  the  proportion  of  this  type  of  financing  is 
above  the  average  for  the  whole  14  States  and,  with  the  exception  of 
Wisconsin,  likewise  the  only  ones  in  which  commission  houses  are 
a  very  appreciable  factor  in  financing.  As  a  result  of  the  develop¬ 
ment  of  this  practice  the  average  northwestern  commission  house 
will  lend  many  thousands  of  dollars  during  the  course  of  the  year  to 
various  elevators  scattered  throughout  these  four  States.  (Ch.  X, 
sec.  4.)  In  order,  therefore,  to  protect  themselves  these  houses  fre¬ 
quently  require  that  the  elevators  in  consideration  of  the  advances 
made  shall  consistently  maintain  a  policy  of  hedging  promptly  all 
grain  purchases.  If  the  elevator  does  not  hedge,  its  operations  are 
necessarily  subject  to  all  the  fluctuations  of  grain  prices  in  the  great 
terminal  and  world  markets.  While  it  is  possible  that  large  profits 
may  be  made  as  a  result  of  these  fluctuations,  it  is  likewise  possible 
that  heavy  losses  will  occur,  and  in  the  latter  event  the  commission 
house  is  likely  to  find  it  somewhat  difficult  to  obtain  the  repayment 
of  the  money  which  it  has  loaned.  There  is  scarcely  a  commission 
house  in  Minneapolis  that  can  not  instance  severe  losses  which  it  has 
at  one  time  or  another  suffered  by  reason  of  having  advanced  money 
to  some  elevator  which  did  not  hedge,  but  took  the  risk  of  selling  its 
grain  without  this  form  of  insurance  and  lost  heavily.  The  infor¬ 
mation  obtained  clearly  indicates  that  the  commission  houses  in  the 
Northwest  are  tending  more  and  more  to  insist  on  hedging.  In  many 
cases,  moreover,  these  commission  houses  are  keeping  the  books  for 
the  country  elevators  which  they  finance,  and  this  tendency  also  is 
reported  to  be  on  the  increase.  When  this  is  the  case,  the  commis¬ 
sion  house  is  in  a  better  position  to  require  hedging,  since  the  ele¬ 
vators  in  such  cases  send  in  daily  reports  to  the  commission  houses  in 
,  much  the  same  way  as  line  agents  send  daily  reports  to  the  home 
office.  (Ch.  VI,  sec.  2.)  As  a  result,  it  knows  precisely  the  quantities  ' 
of  grain  and  grain  futures  bought  and  sold  and  can  check  up  the 
hedging  of  the  elevators.  The  reluctance  of  commission  houses  to 
finance  country  elevators  unless  they  hedge  probably  results  in  a  con- 
-^iderable  proportion  of  elevators  located  in  the  Northwest  hedging 
because  of  commission-house  requirements  in  this  matter.  In  other 
sections  commission-house  financing  is  not  nearly  as  prevalent,  and 
east  of  the  Mississippi  it  can  scarcely  be  said  to  exist.  In- consequence, 
this  is  not  an  appreciable  factor  in  inducing  hedging,  except  in  the 
former  area. 

Effect  of  the  presence  of  commercial  line  elevator  companies 
ON  HEDGING. — The  f ollowiiig  table  presents  the  proportion  of  elevators 
hedging  in  14  States  in  comparison  with  the  proportions  of  com¬ 
mercial  line  elevators  in  thosf^  States : 


218 


COUNTRY  GRAIN  MARKETING. 


Table  76. — Proportion  of  elevators  reporting  hedging  in  specified  States  in  com¬ 
parison  with  the  proportion  of  commercial  line  elevators. 


State. 

Proportion 
of  elevators 
reporting 
hedging  to 
a  greater 
or  less 
extent.i 

Proportion 
of  com¬ 
mercial 
line 

elevators. 

94.33 

54.17 

89.54 

49.90 

75.10 

46.42 

71.75 

43.37 

47.96 

48.58 

43. 71 

29.99 

33.09 

28.96 

20.73 

9.38 

16.05 

31.59 

3.68 

27.31 

12.62 

21.75 

12.43 

10.96 

8.27 

20.57 

3.04 

13.60 

51.69 

'36.01 

1  The  question  asked  was,  “Is  it  a  custom  to  hedge  your  gram  purchases?  The  answers  fell  into  four 
divisions,  “Yes,”  “To  some  extent,”  “No,”  and  ‘^Only  by  flour  sales,”  as  appears  from  Table  73.  In 
this  discussion  answers  to  the  first  two  classes  have  been  combined  and  those  to  the  last  two.  i  he  first 
two  classes  employ  hedging  in  varying  degrees  and  hedging  by  flour  sales  is  a  type  of  hedging  of  radically 
different  character  from  hedging  in  grain  (V ol.  VII) . 


According  to  this  table  there  is  some  tendency  for  the  proportion 
of  commercial  line  elevators  to  vary  directly  with  the  proportion  of 
elevators  reporting  hedging.  Thus  the  seven  States  reporting  the 
largest  proportions  of  hedging  elevators  are  also  among  the  eight  re¬ 
porting  the  largest  proportions  of  commercial  line  elevators. 

As  has  already  been  explained,  there  are  many  commercial  line 
elevator  companies  operating  a  large  number  of  houses---50,  60,  100, 
or  even  more.  Wliether  the  line  is  as  large  as  this  or  not,  it  is  usually 
true  that  this  type  of  company  handles  in  total  a  considerably  larger 
quantity  of  grain  from  day  to  day  than  does  the  individual  elevator, 
and  in  the  case  of  the  larger  ones  the  quantity  of  grain  subject  to  the 
'  risk  of  fluctuation  in  market  prices  is  very  great.  The  managers  of 
line  companies,  especially  the  larger  ones,  recognize  that  the  larger 
the  total  volume  of  grain  purchased  and  held  the  greater  the  amount 
of  risk  involved  from  the  fluctuations  of  world  grain  prices  and 
the  more  serious  the  possibility  of  heavy  .losses.  If  they  are  willing 
to  forego  the  opportunity  for  profits  arising  from  the  possibility 
of  price  advances,  they  can  by  the  use  of  the  hedging  market  protect 
themselves  against  serious  losses.  Other  things .  being  equal,  the 
greater  the  amount  of  risk  involved  the  greater  the  tendency  of 
tjie  average  business  man  to  protect  himself  against  that  risk.  As 
a  result  the  large  commercial  lines  tend  to  pursue  a  fairly  con¬ 
sistent  hedging  policy,  while  even  the  smaller  ones  probably  tend  to 
hedge  much  more  frequently  than  do  the  individual  elevators,  on 
the  whole.  In  other  territories  where  the  commercial  lines  are  fewer 
in  number  than  in  the  Northwest,  the  amount  at  risk  is  not  usually  as 
great  because  the  lines  are  smaller.^®  As  a  rule,  therefore,  these  types 
of  elevators  are  much  more  inclined,  having  relatively  smaller 
amounts  at  risk,  to  take  the  chances  of  the  market  than  are  the  com¬ 
mercial  line  companies. 


Except  perhaps  some  of  the  mill  lines. 


HEDGING  OPERATIONS  OP  COUNTRY  HOUSES. 


219 


Section  6.  Type  variations  in  hedging. 

Reshuts  of  tabulation. — Appendix  Table  19  presents  the  detail  of 
hedging  by  different  types  of  country  elevators  and  warehouses  in 
the  united  States.  The  following  table  presents  in  summary  form 
the  proportions  of  each  type  of  house  hedging  and  not  hedging  in  the 
United  States : 


Table  77. — Proportion  of  different  types  of  Elevators  and  warehouses  hedging 

and  not  hedging  their  purchases  of  grain. 


Type  of  house. 

Number 

reporting. 

Percentage 
hedging.  1 

Percentage 

not 

hedging.  1 

Commercial  line . 

3,140 

88 

1,479 

671 

2,709 

451 

29 

4 

73.25 
56. 81 
49.22 
38. 01 
30.79 
21.51 

26.75 
43. 18 
50.78 
62.00 
69.21 
78.49 
100.00 
100.00 

Cooperative  line . 

•  Individual  cooperative . 

Millline . t . 

Independent . 

Indi'^dual  mill . 

Maltster  line . 

Maltster  individual . 

'1 . 

All  elevators  and  warehouses . 

8, 571 
4,643 
3,928 

49.75 

35.73 

66.32 

50.26 

64.27 
33.69 

All  individual  elevators  and  warehouses . 

All  line  elevators  and  warehouses . 

1  The  question  asked  was,  ‘Us  it  a  custom  to  hedge  your  grain  purchases?  ”  The  answers  fell  into  four 
divisions, _ “Yes,”  “To  some  extent,”  “No,”  and  “Only  by  flour  sales,”  as  appears  from  Table 
73.  In  this  discussion  answers  in  the  first  two  classes  have  been  combined  and  those  in  the  last  two.  The 
first  two  classes  indicate  hedging  in  varying  degrees  and  hedging  by  flour  sales  is  of  a  radically  different 
character  from  hedging  in  grain  (Vol.  VII). 

• 

Disregarding  cooperative  line  and  both  maltster  types  on  account 
of  the  insignificant  number  reporting,  the  commercial  line  house  is 
easily  the  type  most  frequently  employing  hedging  and  the  indi¬ 
vidual  mill  the  type  least  often  making  use  of  this  device.  Both  mill 
types  and  also  the  independent  are  considerably  below  the  average 
in  the  percentage  of  hedging  reported  and  the  individual  cooperative 
is  also  slightly  below  the  average.  Most  of  these  variations  are  read¬ 
ily  explainable  on  the  basis  of  the  relative  importance  of  different 
types  of  elevators  in  different  sections  as  affected  by  the  conditions 
set  forth  in  the  preceding  section. 

As  warehouses  were  not  tabulated  by  States,  owing  to  the  small 
number  reporting,  the  succeeding  discussion  of  type  variations  is 
based  upon  the  returns  from  8,217  elevators,^^  the  354  warehouses 
also  reporting  on  hedging  being  too  small  a  proportion  appreciably 
to  affect  the  generalizations  made. 

Commercial  line  variations. — One  reason  for  the  high  proportion 
of  hedging  by  commercial  line  companies — l;he  business  methods  of 
this  type — has  already  been  fully  'explained  in  the  last  preceding 
section  in  connection  with  the  high  percentage  of  hedging  elevators 
reporting  in  the  four  northwestern  States. 

Individual  and  cooperative  variations. — The  following  table  pre¬ 
sents  the  proportions  of  cooperative  and  independent  elevators  in 
14  States  in  comparison  with  the  reported  proportions  of  hedging 
elevators. 


These  figures  are  shown  in  detail  in  Table  73. 


220 


COUNTRY  GRAIN  MARKETING. 


Table  78. — Proportion  of  elevators  reporting  hedging  in  specified  States  in 
comparison  with  the  proportion  of  independent  and  individual  cooperative 
elevators^ 


» 

state. 

Hedging 
to  a 

greater  or 
less 

extent.i 

Percentage 
of  indi¬ 
vidual  co¬ 
operative 
elevators. 

Percentage 
of  inde¬ 
pendent 
elevators. 

94.33 

23.71 

14.67 

89.54 

23.90 

13.63 

75.10 

21.34 

19.08 

71.75 

23.08 

25.26 

47.96 

26.30 

20. 77 

43.71 

14.47 

48.34 

33.09 

25.84 

42. 45 

20.73 

21.30 

36^93 

16.05 

5.46 

44.18 

12.62 

7.63 

49.72 

12.43 

6.14 

46.05 

8.27 

4.57 

29.71 

'M’lo'hicran  . 

3.68 

2.81 

51. 41 

3.04 

5.70 

49. 12 

All  elevators . 

51.69 

18.42 

31.62 

1  The  question  asked  was,  “Is  it  a  custom  to  hedge  your  grain  purchases?  The  answers  fell  mto  four 
divisions:  “Yes,”  “To  some  extent,”  “No,”  and  “Only  by  flour  sales,”  as  appears  from  Table  73.  In 
this  discussion  answers  in  the  first  two  classes  have  been  combined  and  those  in  the  last  tw^  The  first 
two  classes  indicate  hedging  in  varying  degrees  and  hedging  by  flour  sales  is  of  a  radically  dinerent  char¬ 
acter  from  hedging  in  grain. 

A  brief  examination  of  this  table  reveals  the  fact  that  the  pro 
portion  of  hedging  as  between  the  various  States  tends  to  vary  di¬ 
rectly  with  the  proportion  of  cooperative  elevators  reported,  and 
inversely  with  the  proportion  of  independent  elevators.  J  In  other 
words,  hedging  is  most  frequently  employed  in  the  four  north¬ 
western  States  where  the  proportion  of  cooperative  elevators  is 
relatively  high  and  the  proportion  of  independent  elevators  rela¬ 
tively  low.  Conversely,  it  tends  to  be  least  frequently  employed 
in  those  States  where  the  proportion  of  cooperatives  is  low  and 
that  of  the  independents  high.  In  the  former  area,  owing  largely 
to  the  prevalence  of  consignment  selling  and  commission-house 
financing,  hedging  is  customarily  used.  (Sec.  5.)  In  the  rest  of  the 
area  neither  of  these  practices  is  so  largely  employed,  for  the  reasons 
previously  stated.  The  relative  concentration  of  cooperatives  in 
the  former  area  and  of  the  independents  in  the  latter  is  therefore 
the  most  plausible  explanation  of  the  relatively  high  proportion  of 
cooperatives  reporting  hedging  as  compared  with  the  independents. 

Mill  elevators. — The  percentage  of  mill  elevators,  both  line  and 
individual,  reporting  hedging  is  considerably  below  the  average, 
though  the  proportion  of  mill  lines  reporting  this  practice  is  nearly 
twice  as  great  as  that  of  the  individual  elevators*.  The  low  per¬ 
centages  of  hedging  thus  reported  are  probably  due  primarily  to 
the  fact  that  mill  elevators,  as  a  whole,  tend  to  hedge  largely  by 
flour  sales  rather  than  by  the  purchase  of  grain  futures.  In  such 
cases  many  elevators  hedging  by  flour  sales  probably  interpreted  the 
question  as  referring  to  hedging  by  transactions  in  grain  futures  and 
reported  “No.”  If  a  mill  buys  wheat  for  milling  purposes,  it'can 
obviously  protect  its  milling  profit  against  fluctuations  either  in  the 
price  of  wheat  or  flour  by  making  a  contract  for  the  sale  of  flour 


HEDGING  OPERATIONS  OF  COUNTRY  HOUSES. 


221 


based  upon  the  price  paid  for  Avheat.  Wheat  purchases,  therefore, 
may  be  hedged  by  flour  sales  for  future  delivery,  or,  conversely,  flour 
sales  for  future  delivery  may  be  protected  by  the  purchase  of  wheat. 
As  previously  explained,  mill  elevators  of  both  types  purchase  grain 
primarily  for  milling  purposes  and  are  only  incidentally,  as  a  rule, 
engaged  in  merchandising.  In  so  far,  therefore,  as  the  elevator 
buys  only  for  milling,  it  is  unlikely  that  it  will  hedge  by  selling 
grain  futures,*  and  the  proportion  of  these  elevators  reporting  hedg¬ 
ing,  therefore,  is  probably  composed  chiefly  of  those  engaging  in 
some  degree  in  merchandising.  The  much  higher  proportion  of 
mill  line  elevators  reporting  hedging  than  of  individual  mill  ele¬ 
vators  is  probably  due  to  the  greater  tendency  of  mill  lines  to 
merchandise  as  compared  with  individual  mill  elevators. 

Section  7.  Hedging  in  the  various  grand  divisions. 

Elevators  and  warehouses  in  the  Middle  Atlantic  and  Southern 
grand  divisions  report  very  little  hedging,  presumably  owing  to 
the  fact  that  the  bulk  of  the  business  in  these  areas  is  direct  and  the 
shipments  go  chiefly  to  mills  and  small  local  points.  In  the  Mountain 
and  Pacific  sections  the  amount  of  hedging  by  both  elevators  and 
warehouses  is  also  small.  Pacific  coast  grain  has  seldom  come  east 
to  any  extent,  at  least  until  recently,  but  instead  has  gone  largely  for 
export.  On  the  coast  there  is  a  lack  of  large  concentrated  spot 
markets  at  the  terminal  cities,  and  in  consequence  exchanges  are  not 
utilized  to  any  great  extent  for  the  buying  and  selling  of  grain. 
Aloreover,  since  the  warehouses  are  not  merchandisers  to  any  con¬ 
siderable  extent,  but  are  largely  storage  propositions,  the  terminal 
market  buyers  deal  chiefly  with  the  farmers  instead  of  the  ware¬ 
houses. 

The  foregoing  situation  is  probably  primarily  responsible  for  the 
fact  that  cash  grain  prices  on  the  coast  move  to  a  considerable  degree 
independently  of  prices  in  the  great  grain  markets  of  the  Central 
West.  On  the  coast,  moreover,  there  is  no  future  market  except  a 
limited  call  business  at  San  Francisco  (Vol.  V),  and  in  consequence 
such  hedging  as  is  done  is  chiefly  in  the  eastern  markets.  As  has 
already  been  stated  the  employment  of  the  futures  market  as  a  means 
of  protection  against  losses  on  cash  operations  is  based  upon  the  fact 
that  cash  and  future  prices  move  together.  Although  this  coincidence 
of  movement  will  be  found  in  Chicago,  Minneapolis,  and  other  large 
terminal  markets,  it  is  not  necessarily  true  of  the  futures  in  these 
markets  and  the  prices  of  Pacific  coast  cash  grain  since,  as  stated,  the 
coast  cash  prices  move  more  or  less  independently  of  those  in  the 
terminal  markets  in  the  Central  West.  As  a  result  these  future 
markets  can  nolr  be  expected  to  afford  adequate  protection  to  coast 
grain  dealers  attempting  to  use  them  for  hedging.  This  explanation 
is  confirmed  by  the  experience  of  coast  grain  dealers,  many  of  whom 
have  reported  that  they  could  secure  little  or  no  protection  from 
the  use  of  such  future  markets  as  Chicago,  Minneapolis,  etc.,  and 
that  they  had  in  some  cases  incurred  heavy  losses  as  a  result  of 
their  attempts  to  do  so.  In  consequence  the  proportion  of  elevators 
and  warehouses  hedging  on  the  Pacific  coast  is  relatively  incon¬ 
siderable. 


♦  This  is  by  no  means  so  true  of  the  large  commercial  mill  with  high  storage  capacity. 


222 


COUNTRY  GRAIN  MARKETING. 


Section  8.  Factors  affecting  the  extent  of  hedging. 

General  statement. — Agents  of  the  Federal  Trade  Commission 
and  of  the  Bureau  of  Markets  interviewed  the  proprietors,  operators, 
or  officers  of  nearly  300  country  elevators  of  the  cooperative,  inde¬ 
pendent,  and  individual  mill  types  in  the  Dakotas,  Minnesota,  Mon¬ 
tana,  Illinois,  and  Iowa  concerning  hedging.  Interviews  were  also 
had  with  the  officers  of  numerous  mill  and  commercial  line  elevator 
companies  with  headquarters  in  Minneapolis,  Chicago,  Kansas  City, 
and  other  terminal  markets  which  covered  the  same  subject.  These 
interviews  are  interesting  and  suggestive,  as  they  present  the  indi¬ 
vidual  viewpoint  of  various  persons  connected  with  country  market¬ 
ing  operations,  and  also  because  they  indicate  the  considerable  va¬ 
riety  of  causes  which  in  greater  or  less  degree  affect  the  extent  of 
hedging. 

The  various  factors  affecting  the  extent  of  hedging  as  reported  in 
these  interviews  are  as  follows:  Hedging  policy,  commercial  method j 
of  selling  grain,  market  conditions,  kind  of  grain,  storage  and  con¬ 
tracting,  and  transportation  conditions. 

That  the  amount  of  hedging  may  fluctuate  to  a  considerable  de¬ 
gree  owing  to  factors  such  as  these  and  others  of  a  similar  character 
is  indicated  by  the  summary  of  the  hedging  operations  of  a  Chicago 
line  concern  from  July  1,  1912,  to  June  30,  1917.  During  this  five- 
year  period  the  hedging  transactions  in  futures  of  this  concern 
varied  all  the  way  from  one-fifteenth  to  one-half  of  its  total  cash 
purchases.  For  several  months — to  be  exact,  from  November  1, 
1913,  to  May  1,  1914 — this  concern  did  not  hedge  at  all  on  account 
of  the  small  amount  of  grain  which  it  was  handling,  while  from  May 
1, 1916,  to  May  1, 1917,  the  books  of  this  company  indicated  a  volume 
of  future  transactions  much  in  excess  of  actual  grain  purchases  dur¬ 
ing  the  same  period.  This  excess  was  explained  by  the  fact  that  a 
part  of  these  hedges  were  placed  to  cover  grain  on  hand  which  had 
been  bought  during  the  previous  six  months. 

Hedging  policy’. — The  operators  of  numerous  cooperative,  inde¬ 
pendent,  and  individual  mill  elevators  in  the  Northwest  advocated 
hedging  as  being  a  necessity  in  order  to  permit  the  conduct  of  the 
grain  business  in  a  safe  and  conservative  fashion  and  as  a  means  of 
safeguarding  it  against  undue  risks.  In  fact,  a  considerable  propor¬ 
tion,  if  not  the  bulk,  of  the  operators  of  these  types  of  elevators  inter¬ 
viewed  in  this  territory  regarded  a.  failure  to  hedge  grain  as  involv¬ 
ing  the  elevator  in  speculation. 

A  few  elevators  in  the  Northwest,  of  the- cooperative  type  espe¬ 
cially,  stated  that  hedging  was  contrary  to  their  business  policy. 
One  organization,  for  example,  contended  that  hedging  was  specula¬ 
tion,  and  that  in  view  of  this  fact  the  manager  was  instructed  not  to 
hedge  any  grain.  The  board  of  directors  of  two  other  country  ele¬ 
vators  which  were  visited  gave  instructions  to  the  manager  not  to 
hedge  the  purchases  made,  because  they  were  opposed  to  the  practice 
of  hedging.  While  the  Commission  will  not  vouch  for  the  authen¬ 
ticity  of  the  statement,  it  is  understood  that  the  by-laws  of  a  few  co¬ 
operative  elevator  companies  forbid  trading  in  futures  for  any  pur¬ 
pose  whatsoever.  The  head  of  a  Chicago  commercial-line  organization 
is  authority  for  the  statement  that  many  of  the  cooperative  com- 


HEDGING  OPEKATIONS  OF  COUNTRY  HOUSES.  223 

panics  in  the  territory  tributary  to  Chicago  do  not  hedge  and  that 
some  even  advertise  on  their  stationery  and  elsewhere,  We  do  not 
trade  in  futures.” 

In  some  cases  there  can  be  littie  doubt,  from  the  information  se¬ 
cured  by  the  Commission,  that  some  of  the  country  elevator  mana¬ 
gers  do  not  understand  the  hedging  operation  and  are  opposed  to 
it  largely  for  this  reason.  In  other  instances  country  managers  who 
understand  the  operation  do  not  hedge,  because  they  fear  that  they 
will  be  unable  to  explain  the  operation  satisfactorily  to  a  farmer 
board  of  directors.  There  is  also  evidence  from  the  Northwest  ter¬ 
ritory  indicating,  in  some  cases,  the  misuse  of  the  hedging  policy 
adopted  by  certain  elevators.  Under  the  guise  of  hedging  grain  * 
which  they  have  purchased,  managers  have  occasionally  speculated 
upon  their  own  account,  using  the  elevator’s  resources  for  that  pur¬ 
pose.  Incidents  of  this  character,  of  course,  tend  to  react  unfavor¬ 
ably  upon  the  minds  of  the  directors  and  are  not  unlikely  to  lead  to  ^ 
an  unfavorable  attitude  toward  hedging. 

The  commercial  line  companies,  especially  those  with  headquar¬ 
ters  at  Minneapolis,  as  already  stated,  generally  insist  on  the  abso¬ 
lute  necessity  of  hedging  in  order  to  insure  themselves  against  de¬ 
clines  in  prices  and  consequential  losses  therefrom.  These  com¬ 
panies  emphatically  believe,  if  one  is  to  judge  from  their  statements, 
that  hedging  results  in  the  elimination  of  great  risks  and  by  reason 
of  this  fact  renders  it  possible  to  purchase  grain  on  a  much  smaller 
margin  than  would  otherwise  be  the  case.  The  St.  Anthony  & 
Dakota  Elevator  Co.,  one  of  the  largest  Minneapolis  line  companies, 
reports  that  it  is  their  custom  to  hedge  country  purchases  immedi¬ 
ately  if  there  is  a  future  market  for  the  grain.^® 

The  Monarch  and  Northwestern  elevator  companies  similarly  re¬ 
port  that  all  grain  purchased  is  hedged  as  quickly  as  possible.  Other 
Minneapolis  lines  claim  to  pursue  a  similar  policy.  Close  question- 
ing,  however,  developed  the  fact  that  although  the  Minneapolis  line 
companies  usually  state  that  they  hedge  every  bushel  purchased,  this 
is  probably  true,  with  some  exceptions,  rather  as  a  statement  of 
policy  than  as  a  matter  of  absolute  accuracy.  Thus,  circumstances, 
says  one  company,  are  often  such  that  it  is  not  advisable  to  hedge. 

In  one  year,  when  the  wheat  crop  was  poor,  being  chiefly  No.  3  and 
No.  4  grades,  one  of  the  largest  lines  did  not  always  hedge  these  low 
grades. 

Farther  to  the  south,  in  Chicago  territory,  one  large  converter 
operating  country  houses,  claimed  that  it  was  necessary  to  hedge  its 
oats  purchases  on  account  of  the  large  amount  of  this  grain  which 
it  customarily  carries  in  store  in  its  country  elevators. 

A  milling  company  of  St.  Louis,  however,  which  operates  a  few’ 
country  elevators,  does  not  hedge  its  grain  by  the  selling  of  grain 
futures.  Instead,  its  policy,  like  that  of  many  other  mills  operating 
country  elevators,  is  to  sell  flour  and  purchase  wheat  simultaneously, 
the  company  thus  insuring  its  milling  profit  on  its  flour  sales.  The 
officer  interviewed  expressed  the  opinion  that  while  a  nonhedging 
policy  (as  regards  grain  not  hedged  by  flour  sales)  results  in  losses 
at  certain  times  and  gains  at  others,  the  risk  from  a  failure  to  hedge 


“This  interview  was  taken  before  there  were  any  reported  future  prices  for  rye  and 
barley  at  Minneapolis.  ^  j  ^ 


224 


COUNTRY  GRAIN  MARKETING. 


is  no  greater  than  that  which  is  present  in  hedging,  provided  a  com¬ 
pany  is  financially  strong  enough  to  suffer  a  big  loss  when  it  occurs. 
According  to  his  theory  the  losses  and  gains  over  a  period  ot  years 
tend  to  offset  each  other,  as  in  the  case  of  losses  and  gams  from 
hedging^ transactions  5  and  there  is  this  difference  between  the  result 
of  the  two  policies,  that  the  first  involves  no  commission  expense 
for  conducting  hedging  transactions  while  the  latter  does. 

While  this  theory  is  interesting,  a  further  qualification  to  his 
views  must  be  pointed  out.  Except  under  yqyj  abnormal  conditions 
the  total  amount  of  losses  or  profits  in  a  particular  year  should  be 
less  if  hedging  is  used  than  if  not,  although  over  a  series  ot  years 
the  amount  of  total  profits  and  losses  with  and  without  the  use  ot 

hedging  might  not  be  greatly  different.  ^ 

Some  line  companies  expressed  objections  to  any  governmental 
restriction  upon  future  trading  on  the  ground  that  it  would  have  an 
unfavorable  effect  upon  the  possibility  of  hedging.  One  company 
claimed  that  the  restriction  of  future  trading  operations  would  tend 
to  prevent  the  distribution  of  the  forces  of  supply  and  demand  over 
a  long  period  of  time  and  hence  would  tend  to  prevent  the  equaliza¬ 
tion  of  prices  between  different  periods.  Discussion  of  this  subject  is 

reserved  for  another  volume.  . 

Commercial  method  of  selling  grain. — As  has  already  been  indi¬ 
cated,  the  extent  of  hedging  is  greatly  influenced  by  the  commercial 
method  used  by  the  country  elevator  in  disposing  of  its  grain.  A 
to-arrive  sale  made  immediately  after  the  purchase  of  grain  is  in 
itself  an  insurance  against  price  fluctuations.  Some  of  the  elevators 
in  the  northwest  territory  which  customarily  hedge  also  report  that 
they  occasionally  sell  on  a  to-arrive  basis  in  lieu  of  sales  of  futures 

to  protect  themselves.  .,,^11/. 

Line  companies  also  not  infrequently  use  the  to-arrive  method  ot 
selling  instead  of  hedging  by  future  sales.  This  method  can  perhaps 
be  used  to  the  best  advantage  early  in  the  crop  movement,  when  a 
strong  demand  for  the  grain  exists.  A  small  Chicago  line  sells  only 
a  small  proportion  of  its  grain  “to-arrive,”  and  therefore  hedges 
nearly  all  its  purchases.  The  attitude  of  the  operator  toward  hedg¬ 
ing  is  much  the  same  as  that  of  the  line  companies  farther  north  in 
the  Minneapolis  territory.  He  regards  the  practice  as^  indispensable 
for  insuring  his  organization  against  grain-handling  risks.  Another 
Chicago  line  over  a  period  of  five  years  consigned  about  the  same 
amount  of  grain  as  it  sold  on  the  to-arrive  basis.  As  between  dif¬ 
ferent  periods  during  these  five  years  there  is  a  considerable^  varia¬ 
tion  in  the  use  of  the  two  methods.  This  was  explained  as  being  the 
result  of  the  rapidity  and  amount  of  price  changes,  quality  of,  the 
crop,  and  other  factors.  As  a  general  rule  this  company  hedges  its 

consigned  grain.  ^  n  -j.  - 

A  line  organization  with  headquarters  in  Kansas  City  sells  its  g 

<>-rain  both  on  the  “to-arrive”  and  consignment  basis.  It  hedges  allj 
Srain  that  is  not  sold  “to-arrive.”  The  company  considers  that  iril 
the  case  of  corn  it  is  better  protected  against  loss  by  “  to-arrive 
sales  than  by  hedging,  this  view  being  based  upon  the  fact  that  the  1 
company  is  ordinarily  more  familiar  with  the  quality  of  this  grain™ 
which  is  bought  in  its  territory  than  it  is  in  the  case  of  wheat.  .1 


HEDGING  OPEKATIONS  OF  COUNTRY  HOUSES. 


225 


Another  small  line  company  of  Kansas  City  does  not,  as  a  rule, 
hedge,  for  the  reason  that  it  usually  sells  on  the  “to-arrive”  basis, 
which,  as  already  indicated,  is  in  a  measure  a  protection  against 
price  fluctuations.  This  organization,  however,  occasionally  makes 
use  of  the  future  market  for  hedging  purposes  when  unable  to 
secure  cars.  When  cars  can  not  be  obtained,  futures  are  sold,  and 
later,  when  cars  are  available,  the  hedge  is  closed  out  and  the  grain 
sold,  as  a  rule,  “  to-arrive.”  This  company  also  reported  that  hedg¬ 
ing  itself  involved  a  risk  in  that  the  margin  between  cash  and  future 
prices  may  vary  considerably.  At  one  time  the  cash  may  be  lower 
than  the  future,  and  at  another  time  higher.  This  may  result  in  a 
loss  or  gain  from  the  hedging  transaction,  depending  upon  the  posi¬ 
tion  of  cash  and  future  prices  at  the  time  the  hedge  is  placed  in 
1  relation  to  such  prices  at  the  time  the  hedge  is  closed  out.  The  cor- 
1  rectness  of  this  observation  must,  of  course,  be  admitted.  As  previ¬ 
ously  pointed  out,  the  cash  price  and  the  future  price  tend  to  move 
up  and  down  together,  but  the  margins  between  the  two  frequently 
vary  considerably.  So  long  as  future  and  cash  prices  do  not  move 
!  together  exactly,  the  use  of  the  futures  for  hedging  purposes  does 
I  not,  and  can  not,  afford  a  perfect  insurance  against  loss ;  instead,  it 
can  only  limit  the  losses  and  profits  within  certain  boundaries,  and  in 
extraordinary  situations,  where  cash  and  future  prices  become  seri¬ 
ously  dislocated,  a  hedge  may  afford  little  or  no  protection. 

Market  conditions. — Some  of  the  elevators  in  the  northwestern 
States  informed  the  Commission’s  agents  that  their  policy  as  to 
hedging  depends  to  a  great  extent  upon  the  conditions  of  the  market. 
Thus  some  12  of  the  elevators  which  were  visited  by  the  Commis¬ 
sion’s  agents  reported  that  they  hedged  grain  only  when  the  market 
was  falling  or  was,  in  their  opinion,  ‘‘  due  for  a  drop,”  and  that  they 
did  not  hedge  when  the  market  was  rising.  Some  of  these  same  12 
'  elevator  companies  also  stated  that  when  the  market  was  high  they 
shipped  their  grain  as  fast  as  possible,  presumably  for  the  purpose 
of  getting  it  to  the  terminals  to  obtain  the  benefit  of  the  high  prices 
prevailing.  Certain  northwestern  elevators  reported  that  their  hedg¬ 
ing  policy  was  more  variable  during  the  summer  and  fall  of  1914 
than  at  any  other  time,  owing  to  the  uncertain  market  conditions 
which  obtained  following  the  outbreak  of  the  European  war.  The 
wide  fluctuations  in  the  prices  of  grain,  both  cash  and  future,  tended 
to  prevent  hedging  from  constituting  a  satisfactory  form  of  insur¬ 
ance  for  grain  purchases.  This,  together  with  the  general  rise  in 
prices,  discouraged  the  practice.  One  northwestern  elevator  reported 
that  upon  the  outbreak  of  the  war  it  immediately  stopped  hedging, 
as  it  thought  that  prices  would  go  up.  Another  elevator  which  re¬ 
ported  that  it  was  its  custom  systematically  to  hedge  its  grain  ad¬ 
mitted  that  in  1916-17  its  wheat  was  not  hedged  because  of  the  rising 
prices. 

The  operator  of  an  elevator  at  Buttsville,  N.  Dak.,  informed  the 
representatives  of  the  Commission  that  he  did  not  hedge  his  grain 
if  he  thought  that  a  profit  would  follow  from  a  failure  to  hedge. 

This  tendency  to  speculate  in  connection  with  the  hedging  opera¬ 
tions  is  also  manifest  in  the  report  of  one  country  manager  Avho  ex¬ 
plained  that  the  hedges  which  he  placed  were  closed  out  according 
io  his  judgment  as  to  market  conditions.  • 

9964°— 20 - 15 


226 


COUNTRY  GRAIN  MARKETING. 


As  has  been  pointed  out,  country  elevator  hedging  in  the  exact 
sense  of  the  term,  i.  e.,  as  an  insurance  against  loss,  involves  a  pur¬ 
chase  of  grain  and  the  sale  of  a  future  as  simultaneously  as  possible 
under  existing  conditions  and  circumstances;  and  in  the  “close-out” 
an  equally  simultaneous  execution  of  the  reverse  of  these  transac¬ 
tions.  The  moment  that  the  operator,  after  having  sold  his  actual 
grain,  fails  to  buy  back  his  hedge  in  the  future  market  he  is  backing 
his  individual  judgment  against  the  fluctuations  of  market  prices  and 
is  speculating  and  no  longer  hedging. 

It  is  also  interesting  to  note  that  the  manager  of  at  least  one  co¬ 
operative  elevator  in  the  northwest  territory  expressed  the  opinion 
that  better  results  were  obtained  in  normal  times  by  not  hedging. 

Kind  or  grain. — There  is  a  considerable  variation  in  the  extent  of 
hedging  as  between  the  various  kinds  of  grain.  Up  until  recently, 
for  example,  the  hedging  of  rye  and  barley  was  necessarily  limited 
owing  to  a  practically  complete  lack  of  hedging  facilities.  In  occa¬ 
sional  instances  these  grains  used  to  be  hedged  in  other  grains;  for 
example,  barley  by  sales  and  purchases  of  oats  or  corn  futures  and 
rye  by  sales  and  purchases  of  wheat  futures.  (Ch.  IX,  sec.  4.) 

As  has  already  been  stated,  the  Minneapolis  line  companies  tend, 
as  a  matter  of  policy,  to  hedge  consistently  all  grains  purchased.  One 
Chicago  line  hedges  a  larger  percentage  of  wheat  than  it  does  of  corn 
and  other  grains.  The  explanation  by  the  company  of  this  fact  is 
that  wheat  per  bushel  represents  a  considerably  higher  cost  than  the 
other  grains,  and  therefore  a  greater  risk  of  loss.  Moreover,  this 
concern  claimed  that  wheat  is  handled  on  a  narrower  margin  of  profit 
and  fluctuates  more  in  price  than  the  other  grains  within  short 
periods  of  time.  This  company  during  the  five-year  period  from 
July  1,  1912,  to  June  30,  1917,  shows  hedging  sales  of  wheat  futures 
amounting  to  about  44  per  cent  of  its  total  purchases  of  wheat,  but 
the  similar  ratio  for  corn  and  oats  was  less  tlian  25  per  cent. 

One  Kansas  City  line  informed  the  Commission  that  corn  is  not 
hedged  so  generally  as  wheat  because  it  is  handled  in  smaller  quanti¬ 
ties,  which  makes  hedging  scarcely  worth  while.  Wheat  usually 
moves  in  larger  quantities  than  corn  and  within  a  shorter  period  of 
time. 

Storage  and  contracting. — As  the  capacity  of  the  average  coun¬ 
try  elevator  is  not  always  great  enough  to  permit  the  operator  to  hold 
the  grain  which  is  stored  and  at  the  same  time  receive  new  grain 
offered  for  sale,  it  is  frequently  necessary  to  ship  out  stored  grain  as 
well  as  that  owned  by  the  elevator  company  in  order  to  make  room 
for  incoming  grain.  Some  of  the  elevators  in  the  northwest  territory 
reported  that  it  was  their  practice  to  hedge  shipments  of  stored  grain. 

The  farmer  who  stores  grain  expects  to  sell  it  at  a  price  higher  than 
the  one  prevailing  when  he  brings  the  grain  to  the  elevator  unless  it 
is  to  be  used  for  seeding  purposes  at  the  next  season.  It  is  essential 
that  the  elevator  shipping  stored  grain  protect  itself,  since  the  grain 
so  shipped  may  be  sold  at  a  lower  price  than  that  prevailing  at  the 
time  the  farmer  presents  his  storage  tickets  for  payment.  Unless  a 
future  has  been  bought  therefore,  the  elevator  must  suffer  the  loss  of 
the  difference  between  the  price  at  which  the  grain  was  sold  and  the 
country  market  price  prevailing  when  the  farmer  elects  to  cash  his 
storage  tickets.  As  the  cash  and  future  markets  presumably  move 


HEDGING  OPERATIONS  OF  COUNTRY  HOUSES. 


227 


or  fluctuate  together,  the  country  elevator  operator,  when  selling  a 
car  of  storage  grain,  buys  a  like  quantity  of  future  grain  and  when, 
at  a  later  date,  the  farmer  presents  his  storage  ticket  to  the  elevator 
operator  to  be  cashed,  the  latter  pays  the  farmer  the  higher  price  and 
closes  out  his  future,  which  presumably  is  also  at  a  higher  price.* 

In  shipping  stored  grain  the  line  elevator  company  is  in  a  some¬ 
what  better  position  than  is  the  individual  elevator,  for  the  reason  that 
it  usually  has  plenty  of  its  own  grain  in  some  one  or  other  of  its  eleva¬ 
tors  which  protects  it  on  shipments  of  the  storage  grain  of  farmers. 
In  consequence  a  line  company  does  not  usually  hedge  individual 
shipments  of  grain  stored  for  farmers  if  the  amount  of  its  own  stored 
grain  is  asj  ^eat  as  or  gi’eater  than  that  of  the  shipments  of  the 
farmers’  grain. 

The  claim  of  the  desirability  of  the  individual  elevator  hedging 
shipments  of  stored  grain  is  apparently  sustained  by  the  experience 
of  one  cooperative  in  North  Dakota.  This  concern  claims  to  have 
lost  $7,000  during  the  crop  year  of  1916-17  because  of  the  alleged 
failure  of  the  commission  company  to  which  it  had  consigned  ship¬ 
ments  of  stored  grain  to  hedge  it. 

Two  northwestern  elevators  which  were  visited  by  the  agents  of 
the  Commission  reported  that  they  hedged  shipments  of  stored  grain, 
though  they  did  not  follow  this  practice  with  reference  to  their  own 
purchases,  while  another  which  reported  no  hedging  did,  however, 
after  making  the  cut-off,  hedge  any  shortage  of  storage  grain  which 
was  discovered. 

In  two  instances  encountered  by  the  agents  of  the  Commission,  the 
elevators  stated  that  they  hedged  in  anticipation  of  receipts  where 
contract  grain  was  involved.  If  grain  is  contracted  for  at  a  given 
price,  it  is  obvious  that  such  a  future  transaction  may  be  a  protection 
of  this  contract  price. 

Transportation  facilities. — In  the  northwest  territory  two  ele¬ 
vators  reported  that  car  shortages  greatly  influenced  their  hedging 
policy.  F or  example,  one  of  these  concerns  located  near  Minneapolis 
can  ship  grain  into  this  city  within  a  short  period  of  time.  If  the 
shipment  reaches  the  market  the  day  after  loading,  it  is  evident  that 
little  risk  of  loss  from  price  fluctuations  is  involved  except  during 
abnormal  price  conditions. 

As  has  been  indicated  above,  car  shortages  are  also  likely  to  result 
in  an  increase  in  the  amount  of  hedging  even  by  those  elevators  which 
consistently  sell  either  “  on-track  ”  in  the  country  or  on  a  “  to-arrive  ” 
basis,  the  reason  being  that  many  of  these  elevators  in  the  case  of 
such  shortages  recognize  the  fact  that  some  time  is  likely  to  elapse 
between  the  time  of  purchase  and  the  time  of  sale  and  that  it  is 
desirable  to  protect  themselves  against  the  possible  fluctuations  occur¬ 
ring  in  this  period. 

Section  9.  Markets  employed  by  country  elevators  for  hedging. 

Results  of  tabulation. — Of  those  elevators  and  warehouses  which 
answered  the  Commission’s  inquiry  on  the  subject  of  hedging,  2,457 
reported  the  exchanges  on  which  they  hedged.  (Appendix  2,  inquiry 
18.)  The  following  table  presents  the  number  of  times  each  of  these 
exchanges  is  reported  in  the  schedules  as  being  employed  both  ex¬ 
clusively  and  exclusively  and  partially  for  hedging. 

*  The  effect  from  the  elevator's  standpoint  would  have  .been  the  same  if  prices  had  gone 
the  other  way. 


228 


COUNTRY  GRAIN  MARKETING. 


Table  79. — Number  and  proportion  of  times  specified  exchanges  are  reported  by 
country  elevators  as  bding  used  for  hedging.'^ 


Exchanges  used  exclusively. 

Times  reported  in 
schedules  report¬ 
ing  only  one  ex- . 
change. 

Exchanges  used  exclusively 
and  partially. 

Times  reported  in 
schedules  report¬ 
ing  one  or  more 
exchanges. 

Number. 

Per  cent. 

N  umber. 

Per  cent. 

5 

0.35 

Toledo . 

20 

0. 51 

6 

.43 

Omaha . 

30 

.76 

8 

16 

.57 

St.  I.ouis . 

33 

.84 

1. 13 

Milwaukee . 

34 

.86 

Dnlntb  . 

36 

2.  55 

Kansas  City . - . 

125 

3. 17 

99 

7. 02 

Duluth . 

811 

21. 34 

508 

36.  00 

Chicago . 

1, 154 

29. 28 

Minneapolis . 

733 

51. 95 

Minneapolis . 

1,704 

43.  24 

Total  times  reported .... 

1,411 

100. 00 

Total  times  reported . . . . 

3,941 

100.00 

1  This  table  is  based  on  the  returns  made  by  2,457  elevators  and  warehouses,  1,41 1  of  which  reported 
hedging  on  only  one  exchange,  the  balance,  1,046,  reporting  hedging  on  two  or  more  exchanges 


Of  the  markets  reported  in  the  foregoing  table  as  being  used  for 
hedging  purposes  by  country  elevators,  Minneapolis  is  the  one  most 
frequently  recurring  in  the  schedules.  On  the  basis  of  this  fact,  it 
is  probably  safe  to  conclude  that  Minneapolis  is  easily  the  most  im¬ 
portant  hedging  market  for  country  elevators  and  warehouses.^® 


18  This  conclusion  is  not  arrived  at  solely  on  the  basis  of  the  figures  as  they  were 
returned.  It  must  be  pointed  out  that  over  one-half  of  the  elevators  and  warehouses 
reporting  the  exchanges  on  which  they  hedged  are  located  in  the  four  Northwestern 
States  of  Minnesota,  North  and  South  Dakota,  and  Montana,  which  States  are  normally 
regarded  as  being  tributary  to  Minneapolis  and  Duluth.  A  not  unnatural  inference  or 
deduction  from  this  fact  would  be  that  the  statistical  indication  of  the  above  table  is 
incorrect,  owing  to  the  unduly  large  proportion  of  elevators  reporting  which  are  located 
in  territory  tributary  to  Minneapolis,  thus  inflating  the  Minneapolis  fi^re.  ^  ^ 

On  the  other  hand,  it  is  undeniable  that  a  vastly  greater  proportion  of  elevators  in 
these  four  Northwestern  States  customarily  hedge  their  grain  purchases  than  is  the  case 
in  any  other  section  of  the  United  States.  (Cf.  Table  73.)  Necessarily,  therefore,  an 
accurate  picture  of  hedging  in  the  United  States  would  include  a  relatively  Much  larger 
proportion  of  elevators  from  these  States  than  from  other  localities  or  secDons  where 
hedging  is  either  relatively  insignificant  or  can  scarcely  be  said  to  exist.  The  follow¬ 
ing  tabular  statement  compares,''  separately,  the  proportion  of  elevators  hedging  in  the 
four  Northwestern  States  and  in  the  rest  of  the  United  States  with  the  proportion  of 
elevators  reporting  the  markets  in  which  they  hedge  for  the  same  four  Northwestern 
States  and  for  the  remainder  of  the  country  : 


Locality. 

Niunber  of 
elevators 
and  ware¬ 
houses 
answering 
inquiry  on 
hedging. 

Number  of 
elevators 
and  ware¬ 
houses 
reporting 
hedging.® 

Per  cent  of 
elevators 
and  ware¬ 
houses 
hedging  to 
those 
reporting. 

Number  of 
elevators 
and  ware¬ 
houses 
reporting 
exchanges 
on  which 
they  hedge. 

Per  cent 
of  total. 

4  North  wpstom  States  . 

3,779 

4,792 

3,121 
1, 143 

82.59 
23. 85 

1,756 

701 

71. 47 
28. 53 

Pa.lnriep.  of  Tlnited  States  .: . . . 

Total  . 

8, 571 

4,264 

49. 75 

2,457 

100.00 

1 

5  Figures  obtained  by  combining  those  answering  “Yes”  and  “To  some  extent”  to  the  Commission’s 
inquiry.  (Table  73.) 


While  about  71 J  per  cent  of  the  elevators  reporting  the  future  markets  employed  for 
hedging  are  located  in  the  four  Northwestern  States  and  only  about  28i  per  cent  in 
the  remainder  of  the  country,  the  proportion  of  hedging  elevators  in  the  four  North¬ 
western  States  and  the  rest  of  the  United  States  is  in  the  ratio  of  82.61  to  24.02.  In 
other  words,  the  high  frequency  with  which  country  elevators  report  the  employment 
of  the  Minneapolis  future  market  for  hedging  purposes  is  not  due  so  much  to  the  large 
number  of  reporting  elevators  in  the  four  Northwestern  States  tributary  t9  Minne¬ 
apolis  as  to  the  high  proportion  of  the  elevators  in  this  area  which  customarily  hedge 
their  grain  purchases.  On  the  basis  of  these  facts,  therefore,  it  is  reasonable  to  con¬ 
clude  that  Minneapolis  is  probably  used  for  hedging  by  a  larger  proportion  of  country 
elevators  than  is  any  other  market. 


HEDGING  OPERATIONS  OF  COUNTRY  HOUSES. 


229 


Although  Chicago  is  not  employed  for  hedging  by  as  large  a  pro¬ 
portion  of  country  elevators  and  warehouses  as  is  Minneapolis,  it  is 
apparently  somewhat  more  important  than  the  latter  market,  or  any 
other  market,  in  the  breadth  of  distribution  of  the  elevators  hedging 
there.  As  appears  from  Table  80,  country  elevators  or  warehouses 
from  every  one  of  the  grand  divisions  and  from  every  one  of  the  14 
States  separately  tabulated,  except  Wisconsin,  report  the  use  of 
Chicago  for  hedging. 

Table  80. — Number  of  country  elevators  in  specified  States  and  grand  divisions 
hedging  in  specified  markets,  in  comparison  with  the  proportion  of  country 
grain  receipts  ^  in  those  markets.^ 


Percentage  of  receipts  and  number  of  elevators  hedging  at — 


Total 


State  or  division. 

ele¬ 

vators 

and 

ware¬ 

houses 

report¬ 

ing. 

Miimeapolis. 

Chicago. 

Duluth. 

Kansas  City. 

Re¬ 

ceipts. 

Num¬ 

ber 

hedg¬ 

ing. 

Re¬ 

ceipts. 

Num¬ 

ber 

hedg¬ 

ing. 

Re¬ 

ceipts. 

Num¬ 

ber 

hedg¬ 

ing. 

Re¬ 

ceipts. 

Num¬ 

ber 

hedg¬ 

ing. 

ELEVATORS. 

Perct. 

Per  ct. 

Per  ct. 

Per  ct. 

North  Dakota . 

773 

33.98 

761 

0.23 

289 

72. 20 

542 

0. 05 

Minnesota . 

475 

36.03 

458 

5.79 

146 

17. 79 

123 

.71 

Illinois . 

246 

.01 

51.98 

236 

South  Dakota . 

341 

23.11 

314 

3.30 

105 

3.38 

33 

3  78 

Iowa . 

146 

1.01 

11 

31.43 

144 

.02 

6  53 

Kansas . 

90 

.11 

.35 

6 

55  24 

89 

Nebraska . 

104 

.86 

12 

1.78 

90 

.02 

11 

26. 39 

21 

Montana . 

167 

4.24 

145 

.02 

51 

6.15 

130 

.16 

Indiana . 

35 

2. 44 

35 

1 

Ohio . 

36 

.01 

31 

Michigan . 

4 

.03 

4 

Missouri . 

11 

.71 

1 

3  26 

5 

Wisconsin . 

4 

.09 

1 

.50 

.01 

.10 

Oklahoma . 

6 

.05 

.07 

4 

1.81 

5 

Mountain  and  Pacific  divi- 

sion . 

1 

.17 

.18 

.08 

.84 

1 

Middle  Atlantic  division. . . . 

4 

4 

Southern  division . 

2 

2 

.05 

1 

Total . 

2,445 

99. 66 

1,702 

98.81 

1,148 

99.65 

839 

98.97 

123 

WAREHOUSES. 

• 

Moimtain  and  Pacific  divi- 

sion . 

2 

.21 

1 

.35 

1 

.07 

1 

.16 

Central  division . 

9 

.13 

1 

.84 

5 

.28 

1 

.48 

■  1 

Southern  division... . 

1 

.39 

1 

Middle  Atlantic  division. . . . 

Total . 

12 

.34 

2 

1.19 

6 

.35 

2 

1.03 

2 

Grand  total . 

2,457 

100.00 

1,704 

100.00 

1,154 

100.00 

841 

100.00 

125 

1  According  to  shipments  to  those  markets  as  reported  by  country  elevators  (Table  37). 

2  For  States  included  in  the  grand  divisions  see  Ch.  II,  sec,  5. 


t 


•t 


I 


0 


230 


COUNTKY  GRAIN  MARKETING. 


Table  80. — Number  of  country  elevators  in  specified  State'S,  etc. — Continued. 


/ 


Percentage  of  receipts  and  number  of  elevators  hedging  ait — 


Total 


state  or  division. 

ele¬ 

vators 

and 

ware¬ 

houses 

report¬ 

ing. 

Milwaukee. 

St.  Louis. 

Omaha. 

Toledo. 

Re¬ 

ceipts. 

Num¬ 

ber 

hedg¬ 

ing. 

Re¬ 

ceipts. 

Num¬ 

ber 

hedg¬ 

ing. 

Re¬ 

ceipts. 

Num¬ 

ber 

hedg¬ 

ing. 

Re¬ 

ceipts. 

Num¬ 

ber 

hedg¬ 

ing. 

ELEVATORS. 

Per  ct. 

Per  ct. 

Per  ct. 

Per  ct. 

North  Dakota . 

773 

0. 25 

2 

0. 04 

Minnesota . 

475 

23.53 

14 

1.07 

0.20 

Illinois . . . 

246 

1.39 

41.63 

21 

7.12 

South  Dakota . 

341 

23. 15 

14 

.25 

12. 16 

Iowa . 

146 

32. 35 

26.47 

1 

22. 38 

2 

Kansas . 

90 

.01 

.49 

.21 

Nebraska . 

104 

.74 

6.39 

63. 19 

28 

Montana . 

167 

.43 

.47 

Indiana . 

35 

.10 

1 

39.99 

Ohio . 

36 

40.98 

11 

Michigan . 

4 

9. 96 

2 

Missouri . 

11 

19. 73 

7 

.01 

Wisconsin . 

4 

17.74 

3 

.40 

.01 

Oklahoma . 

6 

.33 

.02 

Mountain  and  Pacific  divi- 

Sion . 

1 

.02 

.31 

.87 

Middle  Atlantic  division .... 

4 

Southern  division . 

2 

.02 

Total . 

2, 445 

99.20 

33 

97.67 

30 

99.50 

30 

98. 07 

20 

WAREHOUSES. 

Mountain  and  Pacific  divi- 

sion . 

2 

.02 

.20 

.  10 

Central  division . 

9 

.79 

1 

2. 12 

3 

.40 

1.93 

Southern  division . 

1 

.01 

Middle  Atlantic  division .... 

Total . 

12 

.80 

1 

2.33 

3 

.50 

1.93 

Grand  total . 

2,457 

100.00 

34 

100.00 

33 

100.00 

30 

100.00 

20 

Effect  of  shipments  upon  hedging  markets. — A  careful  exami-  .* 
nation  of  Table  80  indicates  that  the  breadth  of  distribution  of  the 
country  elevator  hedging  in  the  various  markets  is,  with  the  possible  'j ' 
exception  of  Chicago,  conditioned  largely  by  the  flow  of  grain  to  the  ; 
particular  market.  In  other  words,  there  appears  to  be  a  tendency  r'. 
for  the  use  of  a  market  for  hedging  by  the  elevators  to  vary  rather  ih 
directly  with  the  proportion  of  country  grain  receipts  in  that  market,  i 
Little  or  no  hedging  is  reported  by  the  elevators  and  warehouses  of  i 
any  'State  in  any  market  in  which  no  country  receijDts  from  that  State  ^ 
are  reported,  while  the  great  bulk  of  the  elevators  using  a  particular 
market  for  hedging,  except  in  the  case  of  Chicago,  tend  to  be  located  ^ 
in  the  relatively  few  States  comprising  the  restricted  geographical 
area  from  which  the  great  bulk  of  the  shipments  to  the  particular 
market  are  drawn.  For  example,  over  1,500  out  of  the  1,702  ele¬ 
vators  reporting  hedging  in  Minneapolis  are  located  in  the  States  of 
Minnesota  and  North  and  South  Dakota,’ from  which  three  States 
that  market,  according  to  reported  shipments  by  country  elevators, 
receives  over  90  per  cent  of  its  country  grain.  Over  600  out  of  839 
elevators  reporting  hedging  in  Duluth  are  in  North  Dakota  and  Min¬ 
nesota,  from  which  two  States  90  per  cent  of  the  shipments  to  Duluth 
are  made.  One  hundred  out  of  one  hundred  and  twenty-three  ele- 


HEDGING  OPERATIONS  OF  COUNTRY  HOUSES. 


231 


vators  reporting  hedging  in  Kansas  City  are  located  in  Kansas  and 
Nebraska,  from  which  two  States  over  80  per  cent  of  Kansas  City 
country  receipts  are  shipped.  A  somewhat  similar  situation  is  also 
found  in  the  case  of  the  most  of  the  other  markets. 

On  the  basis  of  these  comparisons  of  shipments  and  hedging,  there¬ 
fore,  it  is  concluded  that  the  selection  of  markets  for  hedging  pur¬ 
poses  by  country  elevators  is  determined  primarily  by  the  flow  of 
grain  from  the  elevators,  and  that  country  elevators  usually  hedge  in 
those  markets  to  which  their  shipments  are  made. 

Chicago  as  a  hedging  market  for  country  elevators. — As  already 
indicated,  Chicago  has  a  much  wider  distribution  of  country  elevator 
hedging  clientele  than  has  any  other  market.  Chicago  is  also  peculiar 
in  the  fact  that  it  is  extensively  used  for  hedging  by  elevators  in  vari¬ 
ous  States  from  which  comparatively  little  of  its  country  receipts  are 
reported  as  being  obtained.  Thus,  Chicago  receipts  from  North 
Dakota  are  less  than  one-fourth  of  1  per  cent  of  the  total  receipts 
at  that  market,  but  the  use  of  the  Chicago  futures  market  for  hedging 
is  reported  by  289  elevators  in  that  State,  or  more  than  one-fifth  of 
the  total  elevators  and  warehouses  of  the  United  States  which  report 
the  use  of  Chicago  for  hedging.  In  Minnesota,  South  Dakota,  and 
Nebraska,  also,  the  number  of  elevators  reporting  the  use  of  Chicago 
for  hedging  is  apparently  somewhat  disproportionate  to  the  reported 
Chicago  receipts  from  these  States.  Chicago  receives  at  least  some 
grain  from  every  State  separately  tabulated  and- from  two  of  the 
grand  divisions,  and  there  is,  therefore,  to  that  extent  a  relationship 
between  the  receipts  at  this  market  and  its  use  for  hedging.  The 
apparent  disproportion  between  hedging  and  receipts  in  certain 
cases  is  perhaps  indicative  of  the  fact  that  Chicago  hedging  by 
country  elevators  is  somewhat  less  influenced  by  shipments  than  is 
the  case  with  hedging  in  the  other  markets.  If  this  view  is  correct, 
the  predominance  of  the  Chicago  futures  market  is,  in  all  likeli¬ 
hood,  responsible  for  the  situation.  (Yol.  V.) 

On  account  of  the  importance  of  Chicago  as  a  futures  market,  it 
seems  entirely  probable  that  whenever  elevators  employ  more  than 
one  market  for  hedging  purposes,  except  perhaps  in  the  four  North¬ 
western  States,  Chicago  is  likely  to  be  one  of  those  employed.  This 
is  indicated  by  Table  79,  which  shows  that  although  only  508  elevators 
report  the  use  of  Chicago  exclusively  for  hedging,  1,154  elevators  re¬ 
port  it  as  being  used  either  exclusively  or  partially.^’^ 

The  use  of  the  Chicago  market  by  country  elevators  for  hedging 
has  also  probably  been  largely  increased  by  the  operations  of  the 
various  wire  houses.  Chicago  is  easily  the  principal  wire-house 


While  the  corresponding  increases  in  the  employment  of  Minneapolis  and  Duluth 
exclusively  and  exclusively  and  partially  are  from  733  to  1,704  in  the  case  of  the  former 
and  from  36  to  841  in  the  case  of  the  latter,  these  figures  may  be  said  to  be  indicative 
primarily  of  the  fact  that  the  Northwest  tends  to  use  either  Duluth  or  Minneapolis 
for  hedging,  depending  upon  circumstances.  In  much  of  the  northwest  territory,  ele¬ 
vators,  on  account  of  freight  rates,  are  able  to,  and  do,  ship  to  both  Minneapolis  and 
Duluth  and  hedge  in  either  or  both  markets.  As  appears  from  Table  80,  the  839  ele¬ 
vators  which  report  hedging  in  Duluth  are  all  located  in  the  four  Northwestern  States, 
except  11  in  Nebraska,  and  of  the  1,702  reporting  hedging  in  Minneapolis,  1,678  a.re 
located  in  the  same  States,  and  only  11  in  Iowa,  12  in  Nebraska,  and  1  in  Wisconsin. 
It  therefore  follows  that  the  greater  number ^of  elevators  which  use  Duluth  and  Minne¬ 
apolis,  both  exclusively  and  partially,  as  convgared  with  the  respective  numbers  which 
use  each  of  these  markets  exclusively,  is  causOT  by  this  alternative  employment  of  the 
one  or  the  other  in  the  Northwest,  according  to  the  course  of  shipments  to  both  markets 
and  various  other  factors. 


232  COUNTRY  GRAIN  MARKETING. 

center  in  the  United  States.  From  this  market  there  radiate  thou¬ 
sands  of  miles  of  private  wires  extending  to  various  towns  and  cities 
in  the  United  States,  including  the  14  principal  grain  States,  where, 
all  told,  there  are  scores  of  branch  offices  of  such  concerns.  (Vol.  V.) 

As  elsewhere  discussed,  the  primary  business  of  wire  houses  is  to 
obtain  and  execute  orders  for  futures.  Few  of  the  other  grain  mar¬ 
kets  of  the  United  States  are  wire-house  centers  of  any  importance, 
and  there  seems  little  reason  to  doubt  that  the  numerous  branch 
offices  of  Chicago  wire  houses  scattered  throughout  the  grain  terri¬ 
tory  are  partially  responsible  for  the  wide  distribution  of  the  country 
elevator  hedging  clientele  of  the  Chicago  market.  (Ch.  VIII.) 

1  -• 


i 


Chapter  X. 

FINANCING  COUNTRY  HOUSES. 

Section  1.  Sources  of  loans. 

About  5,000  elevators  and  warehouses  in  the  United  States  reported 
to  the  Commission  as  to  the  sources  of  their  borrowed  funds.  (Cf. 
Appendix  2,  inquiry  21.)  Owing  to  the  fact  that  line-elevator  sta¬ 
tions  usually  procure  their  funds  for  buying  grain  from  the  main 
office  of  the  company,  the  “head  office”  was  reported  as  the  source 
of  such  funds  by  most  line  elevators.  Iij&.iLYideat^J^  that 

the  funds  ad_vaiiQed.d3y- the  head  office  of  a  line  company  to  an  im. 
divlduar~statm  for  the  purchase  of  grain  are  not  in^any  true 
s^s^^bUthe  T^ord  l^ounSj  bu  ^dv^ces  .  of  J;ha.  capital  of 

the^^lmej^mfra  employed  in  the  transaction  of  its  gr^n  busi¬ 
ness.  From  the  standpoint  of  the  individual  station,  however,  the* 
aHvSce  from  the  head  office  is  somewhat  similar  in  character  to  the 
loans  procured  from  a  source  outside  of  the  local  station  itself  by 
other  types  than  the  lines  for  the  current  operation  of  the  house. 

These  matters  are  mentioned  at  this  point  in  order,  since  the  ap¬ 
pendices  and  tables  refer  to  sources  of  loans,  that  there  may  be  no 
misapprehension  as  to  the  exact  character  of  the  transaction  involved 
in  the  case  of  line  elevators  reporting  the  head  office  as  a  source  of 
loans. 

The  following  table  presents  the  percentages  of  elevators  and  ware¬ 
houses  in  the  United  States  reporting  various  sources  of  loans  in  the 
order  of  their  importance,  as  shown  by  the  proportion  of  times  in 
which  each  source  occurs  in  the  schedules  to  the  total  number  of 
sources  reported  in  all  schedules.  (Appendix  2,  inquiry  21.)  Ap¬ 
pendix  table  20  presents  the  figures  in  detail  by  States  and  grand 
divisions. 

Table  81. — Relative  importance  of  different  sources  of  country  eldvatot  and 
warehouse  horroivinfi  as  indicated  hy  llie  proportion  of  times  each  source  is 
reported  to  total  sources  reported. 


Source. 


Percentage 
of  t  mes 
each  source 
is  reported 
to  total 
times  all 
sources  are 
reported. 


Local  banks . 

Head  offices . 

Commission  houses . 

Farmers . 

City  banks . 

Local  residents  other  than  farmers . 

Mills . 

Terminal  dealers  other  than  commission  men 

Stockholders . 

Miscellaneous . 


41.58 

34.99 

10.44 

2.97 

2.21 

1.72 

1.36 

1.26 

.67 

2.80 


100.00 


2.S3 


234 


COUNTRY  GRAIN  MARKETING. 


From-this  table  it  is -apparent  that  there  are  only  three  f  of 
any  great  importance  in  financing  the  country  grain  business,  i.  e., 
local  banks,  head  offices  of  line  companies,  and  the  commission  houses.. 

Section  2.  Sources  of  loans  by  type  of  elevator. 

Line  elevators. — In  considering  the  variations  in  the  sources  from 
which  various  types  of  country  elevators  and  warehouses  procure 
their  funds,  the  cooperative  line  and  individual  and  line  maltster 
types  may  be  disregarded  owing  to  the  small  number  of  these  houses 
reporting  and  the  discussion  may  be  confined  to  the  other  five  types. 

Table  82,  which  shows  the  sources  of  loans  of  various  types  of 
elevators  and  warehouses  in  detail,  indicates  that  so  far  as  line  houses 
are  concerned  the  head  office  is  by  far  the  most  frequently  reported 
source  of  funds  for  financing. 


Table  82. — Relative  importanee  of  different  sourees  of  borrowings  by  different 

types  of  country  eldvators  and  warehouses. 


Source  of  loans. 

Grand 

total. 

Line. 

Individual. 

Total. 

Com¬ 

mer¬ 

cial. 

Co- 

oper¬ 

ative. 

Mill. 

Malt¬ 

ster. 

Total. 

Co- 

oper¬ 

ative. 

Inde¬ 

pend¬ 

ent. 

Mill. 

Malt¬ 

ster. 

Number  of  elevators 

reported . 

4,925 

2,353 

1,862 

58 

409 

24 

2,572 

899 

1,403 

267 

3 

Total  number  of 

sources  reported . 

5, 6.50 

2,454 

1,932 

63 

435 

24 

3, 196 

1,145 

1,692 

354 

5 

PERCENTAGE  OF  TOTAL 

NUMBER  OF  SOURCES 

REPORTED. 

EAnTiprs 

2. 97 

0.37 

0.31 

4. 77 

4. 97 

8.99 

2. 66 

3.11 

1  72 

.61 

.52 

1.15 

2. 56 

1.31 

2. 60 

6. 50 

Rtrtplrli  nl  H  pr.cj 

.67 

.33 

.21 

.92 

.94 

1.48 

.47 

1.41 

Local  banks . . . 

41.58 

10.80 

9. 68 

34. 92 

12.41 

8.33 

65. 21 

55. 81 

70.63 

70. 06 

40. 00 

10.44 

2.00 

2. 28 

1.59 

.92 

16.93 

26.64 

12.88 

5. 08 

Other  terminal  grain 

flpalers 

1.26 

.61 

.67 

.46 

1.75 

2.36 

1.54 

.85 

Oity  banks _  . . . . 

2. 21 

1.34 

1.14 

3. 17 

2.07 

2.88 

.61 

3.31 

7.63 

40.00 

TTpQfl  nffipA 

34.99 

80. 56 

82.40 

52.38 

75.86 

91.67 

Mills 

1.36 

2. 57 

2. 07 

5.29 

.44 

.09 

.41 

1.69 

Miscellaneous . 

2.80 

.81 

.72 

3. 17 

.92 

4.32 

2.71 

5. 50 

3.67 

20.66 

Total . 

100.00 

100. 00 

100. 00 

100.00 

100. 00 

100. 00 

100.00 

100.00 

100. 00 

100. 00 

100. 00 

Of  all  the  sources  from  which  funds  are  reported  as  procured  by 
line  elevator  stations,  the  head  office  constitutes  slightly  over  80  per 
cent,  local  banks  comprise  about  11  per  cent,  and  the  proportion  of 
any  other  one  source  reported  is  relatively  insignificant.  The-Jm- 
portance  of  the  head  office  as  a  source  of  funds  arises  from  the 
f  ai2t_thatin_  the  nature  of  things  the  head  offices  would  normally  in 
the  operation  of  the  business  finance  the  requirements  of  their  vari- 
ous  houses  and  not  place  such  a  matter  in  the  hands  of  the  hired 
managers  of  their  local  elevators.  If  the  company  possesses  the  finan¬ 
cial  resources  it  may  make  the  advances  from  its  own  funds.  In  other 
cases  the  head  offices  will  borrow  from  various  sources. 

Other  sources  of  loans  than  the  head  office  reported  are  probably 
due  in  large  part  to  the  fact  that  the  head  offices  of  smaller  country 
lines  are  frequently  located  in  connection  with  one  of  the  local  ele¬ 
vators.  In  consequence,  such  parties  in  making  the  returns  had 
Imowledge  of  the  sources  of  the  funds  procured  by  the  head  office 
and  reported  them. 


FINANCING  COUNTRY  HOUSES. 


235 


Individual  elevators. — So  far  as  the  various  types  of  individual 
elevators  are  concerned  no  funds  are  reported  as  borrowed  through 
the  head  office  for  obvious  reasons,  and  the  most  frequently  reported 
sources  for  the  individual  type  are  the  local  banks  and  commission 
houses.  Of  the  total  number  of  reported  sources  of  loans  of  co¬ 
operative  elevators,  local  banks  constitute  56  per  cent  and  commis¬ 
sion  houses  something  less  than  27  per  cent.  In  the  case  of  the  inde¬ 
pendents,  however,  local  banks  represent  70  per  cent  of  the  reported 
sources  and  commission  houses  only  12.88  per  cent.  Individual  mill 
elevators  report  local  banks  as  a  source  of  loans  in  about  the  same 
proportion  as  do  independent  elevators,  but  borrow  of  commission 
houses  in  a  considerably  less  proportion  than  the  latter  and  more 
from  both  city  banks  and  local  residents. 

Section  3.  Sources  of  loans  by  States. 

The  explanation  of  the  foregoing  variations  lies  chiefly  in  the  geo¬ 
graphical  distribution  of  these  types  of  elevators  with  reference  to 
the  characteristics  of  the  grain  business  in  different  sections.  Ap¬ 
pendix  Table  20,  which  presents  the  distribution  of  sources  of  loans 
by  States  and  grand  divisions,  reveals  the  fact  that,  broadly  speaking, 
the  proportion  of  commission-house  financing  is  most  important  by 
fa*r  in  Minnesota,  Montana,  and  the  Dakotas,  all  of  which  report 
relatively  high  proportions  of  cooperative  elevators  and  are  rela¬ 
tively  among  the  least  important  independent  elevator  States.  Local- 
bank  financing  is  most  important ,  and  commission-house  financing 
relatively  unimportant  in  those  States  reporting  high  percentages  of 
independent  or  individual  mill  elevators  or  both,  and  relatively 
smaller  proportions  of  cooperatives.  This  is  shown  in  the  following 
table : 


Taisle  83. — Proportion  of  elevators  of  specified  types  in  specified  States  in  com¬ 
parison  ivitli  the  extent  of  commission  house  and  local  hank  financing.^ 


state. 

Percentage 
of  local 
banks  to 
total 
sources, 
reported. 

Percentage 
of  inde¬ 
pendent 
elevators. 

Percentage 
of  individ¬ 
ual  mill 
elevators. 

Percentage 
of  commis¬ 
sion  houses 
to  total 
somces 
reported. 

Percentage 
of  individ¬ 
ual  cooper¬ 
atives. 

Ohio . 

70.85 

49. 72 

13.56 

7  63 

Missomi . . 

64.33 

46.05 

26.75 

3.82 

6. 14 

Indiana . . . 

64.09 

44.18 

14.96 

5  46 

Iowa . 

61.73 

42. 45 

1.75 

2.67 

25.84 

Kansas . 

60.09 

35.93 

8. 43 

.44 

21.30 

Illinois . 

58. 46 

48.34 

3.12 

4.23 

14.47 

Michigan . 

55. 03 

51.41 

12. 45 

2  81 

Wisconsin . 

51.75 

49. 12 

13. 16 

8.39 

5.70 

Oklahoma . 

42. 99 

29.71 

6.86 

.94 

4.57 

Nebraska . 

41.19 

20.77 

2.85 

.26 

26.30 

Minnesota . 

23.74 

'  19.08 

4.21 

18.84 

21.34 

South  Dakota . 

21.96 

25. 26 

2. 48 

21.16 

23,08 

North  Dakota . . . 

10.56 

14.67 

1.81 

33.76 

23.71 

Montana . 

10.00 

13.63 

4.61 

24. 12 

23.90 

Average,  all  elevators . 

41.71 

31.62 

5.54 

10.86 

18. 42 

1  As  indicated  by  the  ratio  of  the  number  of  times  commission  houses  and  local  banks  are  reported  to  the 
total  sources  reported. 


Section  4.  Commission-house  financing. 

Causes. — The  extensive  commission-house  financing  so  largely 
prevalent  in  Minnesota,  Montana,  and  the  Dakotas  has  undoubtedly 


236 


COUNTRY  GRAIN  MARKETING. 


resulted  from  and  been  affected  by  a  considerable  variety  of  factors.  9 
The  indications  are  that  originally,  owing  to  the  lack  of  development  ■ 
of  this  area,  it  was  difficult  and  in  many  cases  impossible  to  borrow  1 
money  locally  because  there  was  little  or  no  accumulation  of  local  9 
capital.  The  opinion  is  quite  generally  expressed  by  northwestern  M 
grain  men  that  even  to-day  the  local  banks  in  the  grain  territory  to  v 
the  south  and  east  are  better  equipped  to  finance  the  grain  business  1 
than  those  in  the  Northwest  on  account  of  larger  deposits  and  capital,  i 
It  is  stated  that  many  Northwest  banks  have  comparatively  small  | 
capital  and  that  their  deposits  are  not  large ;  also  that  they  are  f re-  1 
quently  under  such  limitations  in  regard  to  the  amounts  which  maj^  9 
be  loaned  to  a  single  organization  as  to  render  their  resources  inade-  1 
quate  to  the  financing  of  the  country  grain  business.  _  I 

Owing  to  the  relative  scarcity  of  local  capital,  moreover,  it  is  as-  J 
serted  that  the  local  banks  are  frequentlj^  able  to  obtain  higher  rates 
of  interest  than  the  grain  people  are  willing  to  pay  for  the  financing  ■ 

of  the  crop.  .  •  i  I 

Another  factor  mentioned  which  is  probably  of  importance  is  the  || 

time  the  grain  is  in  transit.  In  the  Northwest  the  distances  to  the  | 
terminals  from  much  of  this  territory  are  considerably  greater  than  i 
in  the  grain  areas  tributary  to  other  markets,  with  the  result  tbat  9 
grain  is  in  transit  longer  and  capital  is  correspondingly  tied  up  for  A 
a  longer  period.  It  is  stated  that  Montana  figures  upon  from  1  to  9 
per  cent  interest  charges  merely  for  the  time  during  which  the  grain  | 
is  in  transit  to  the  Minneapolis  and  Duluth  terminals.  ^  ■ 

However  important  historically  the  scarcity  of  local  capital  was,  and  ■ 
perhaps  is  even  to-day,  in  developing  commission-house  financing,  1 
there  is  every  indication  that  two  of  the  important  factors  in  ■ 
preserving  the  system  are  the  consignment  business  and  the  co^i-  ■ 
petition  of  the  commission  houses.  Probably  as  a  result  of  the  ■ 
scarcity  of  local  capital  the  country  grain  handlers  in  the  Northwest  |j 
originally  turned  to  the  terminal  markets  for  financial  assistance, 
and  thus  developed  these  terminal  connections.  Owing  largely  to  flj 
the  preference  of  the  Minneapolis  mills  for  country-run  grain,  how- 
ever,  there  developed  in  the  four  Northwestern  States  more  ex-  9 
tensively  than  elsewhere  the  practice  of  selling  on  consignment.  9 
(Ch.  VI,  sec.  16.)  Under  this  method  the  grain  was  consigned  to  the* 
commission  house  and  sold  by  sample  on  the  floor.  This  method  pos- 
sessed  an  advantage  to  two  distinct  groups :  To  the  mills  and  other  X 
consumers  in  that  they  could  thus  purchase  virgin  grain  after  an  * 
examination  of  its  peculiarities  and  characteristics  with  reference  to  * 
conversion ;  to  the  country  elevator  or  shipping  producer  in  that  it  * 
enabled  these  sellers  occasionally  to  realize  premiums  for  grain  of* 
especially  good  quality  or  certain  peculiar  characteristics  for  conver-  1 

sion  purposes.  * 

So  large  a  volume  of  consignment  sales,  however,  tended  to  make  9 
the  business  profitable.  The  result  was  the  multiplication  of  com- J 
mission  houses  and  the  development  of  the  commission  business  .on* 
an  extensive  scale  at  both  Minneapolis  and  Duluth.  The  country  ele^ 
vator  in  need  of  funds  naturally  turned  to  the  commission  house  han^ 
dling  its  shipments,  and  thus  terminal  market  connections  began  tojj 
be  built  up  by  the  country  elevators.  This  in  turn  led  to  competition . J 
among  the  commission  houses  in  financing  the  country  elevators,  such^j 


.  FINANCING  COUNTRY  HOUSES. 


237 


financing  being  offered  as  an  inducement  to  the  country  elevator  to 
ship  its  grain  to  the  financing  house.  The  interviews  clearly  indicate 
that  this  competition  is  very  sharp. 

Methods. — All  the  larger  commission  houses  usually  maintain  at 
least  two  or  three  solicitors  (often  more).^  One  of  the  chief  func¬ 
tions  of  these  solicitors  is  to  procure  new  business.  Many  commission 
houses  send  them  to  the  different  elevators  during  the  summer  months 
soliciting  grain  business  by  offers  to  finance.  When  possible  these 
solicitors  attend  the  annual  meetings  of  the  stockholders  of  the  ele¬ 
vators  and  also  directors’  meetings,  with  the  proposals  of  their  prin¬ 
cipals  as  to  the  amounts  of  the  loans  which  the  latter  are  willing  to 
make  and  the  terms  and  conditions  under  which  such  amounts  will  be 
advanced.  Some  elevators  request  financial  aid  from  commission 
houses,  but  usually  the  latter  offer  to  finance  the  former. 

After  agreeing  upon  details  a  contract  is  usually  drawn  up  and 
signed  by  the  officers  of  the  elevator  and  the  commission  firm.  Such  con¬ 
tracts  with  cooperative  concerns  are  signed  by  the  board  of  directors 
and  manager,  while  those  with  independent  elevators  usually  by  the 
owners.  In  some  cases  there  is  no  formal  written  contract  and  the 
advances  are  made  upon  the  basis  of  an  oral  agreement  or  under¬ 
standing  as  to  the  proportion  of  grain  which  the  elevator  will  ship 
to  the  financing  commission  house.  Where  there  is  no  contract  or 
agreement,  as  is  occasionally  the  case,  the  financing  house  usually 
obtains  the  bulk  of  the  elevator’s  business  because  the  operators  of 
such  ele\^ators  usually  feel  obligated  to  give  them  the  greater  part 
of  it. 

The  contracts  state  the  amount  of  money  that  will  be  advanced 
and  the  method  of  repayment.  Sometimes  the  commission  house 
advances  outright  a  specific  amount.  More  often,  probably,  the  ele¬ 
vator  is  given  an  open  account  under  which  it  can  draw  against  the 
commission  house  up  to  a  certain  amount,  as  business  requires. 

Some  of  the  contracts  prescribe  a  fixed  percentage  of  its  grain 
which  the  elevator  must  ship  to  the  commission  house  in  question. 
The  proportion  thus  demanded  in  return  for  financing  varies  as  be¬ 
tween  different  commission  houses  and  depends  considerably  upon  the 
severity  of  the  competition  of  the  commission  houses  in  different 
sections.  Usually  it  runs  from  60  per  cent  to  80  per  cent,  but  larger 
proportions  are  not  infrequently  agreed  upon.  Thus,  one  country 
elevator  operator  interviewed  contracted  to  ship  90  per  cent  of  his 
grain  to  the  commission  house  which  financed  him,  while  another  re¬ 
ported  that  a  mutual  understanding  existed  that  the  commission 
house  should  receive  all  his  shipments.  Some  of  the  contracts,  how¬ 
ever,  merely  demand  that  a  reasonable  percentage  of  the  shipments 
shall  go  to  the  commission  house,  and  various  other  variations  are 
found,  as,  for  example,. that  the  value  of  the  grain  which  the  elevator 
ships  to  the  commission  house  shall  be  as  great  as  the  amount  of 
money  advanced,  etc. 

1 A  few  firms  were  found  that  had  at  various  times  maintained  as  many  as  six 
solicitors,  and  one  firm  at  the  time  of  the  Commission’s  investigation  reported  that  it  had 
ten  men  building  up  the  business  in  the  country.  Usually  the  solicitors  are  comparatively 
highly  paid,  salaries  reported  being  practically  never  below  $200  a  month  and  custom¬ 
arily  ranging  as  high  as  $350  a  month  and  in  exceptional  cases  even  higher. 

For  further  details,  see  the  discussion  of  receiving  on  consignment  in  Vol.  HI, 


238 


COUNTRY  GRAIN  MARKETING. 


While  the  variations  in  the  character  of  the  agreements  employed 
are  considerable,  the  form  of  contract  shown  in  Appendix  8  illustrates 
the  general  nature  of  such  arrangements. 

Supervision  or  financed  elevators. — The  risk  involved  in  the 
financing  of  country  elevators  by  commission  houses  is  considerable 
and  the  severity  of  the  competition  between  such  houses  tends  to 
increase  this  risk  through  the  fact  that  it  leads  to  concessions  in 
regard  to  the  security  for  loans. 

The  affairs  of  elevators  financed  by  commission  houses  are  usually 
carefully  watched  by  the  financing  house.  Often  the  elevator,  es¬ 
pecially  if  financially  weak,  is  required  to  submit  detailed  daily  re¬ 
ports  of  its  operations  similar  to  those  made  by  line  stations  to  the 
head  office  (Ch.  VI,  sec.  2).  These  reports,  and  also  the  books  of  the 
elevators,  are  checked  up  more  or  less  frequently  by  the  traveling 
solicitors  of  the  commission  houses,  and  thus  it  is  ascertained  whether 
the  purchases  of  grain  shown  by  the  books  equal  those  reported. 
Country  elevator  agents  are  as  a  rule  adverse  to  making  out  daily 
reports  for  the  financing  house  and  competition  leads  to  the  elimina¬ 
tion  of  the  report  feature  in  certain  cases. 

A  number  of  commission  houses  also  insist  upon  the  elevator  pur¬ 
suing  a  rigid  policy  of  hedging  in  connection  with  its  grain  pur¬ 
chases;  As  previously  explained,  the  northwestern  terminal  market 
grain  dealers  are  very  much  inclined  to  regard  the  buying  and  selling 
of  grain  without  hedging  as  speculation.  In  consequence,  they  are 
usually  loath  to  finance  elevators  which  do  not  hedge  or  which  engage 
in  speculation.  If  an  elevator  is  found  to  be  speculating  or  endan¬ 
gering  in  any  way  the  capital  advanced  by  the  commission  house, 
the  latter  is  very  likely  to  withdraw  its  aid  and  demand  the  payment 
of  the  amounts  loaned.  The  extent  to  which  the  affairs  of  financed 
elevators  are  supervised  is  likely  to  be  governed  in  no  small  measure 
by  the  relative  financial  strength  of  'such  elevators.  Commission 
houses,  chiefly  by  reason  of  this  financing,  are  able  to  influence  the 
policies  of  the  elevator  not  only  as  to  hedging,  but  also  as  to  prices, 
competition,  etc.^ 

The  development  of  the  business  of  the  commission  house  in  the 
Northwest  has  thus  become,  in  a  large  measure,  dependent  upon 
financing. 

Section  5.  Contrasts  between  northwest  and  other  areas. 

With  some  exceptions  the  principal  grain  States  outside  of  the 
Northwest,  especially  those  east  of  the  Mississippi  River,  are  rela¬ 
tively  older  grain-producing  territory  than  the  Northwest,  have 
accumulated  a  larger  volume  of  local  capital  and  can,  in  conse¬ 
quence,  finance  through  the  local  banks  to  a  greater  extent.  In  addi¬ 
tion,  there  is  outside  the  Northwest,  either  a  very  much  greater 
volume  of  local  business  or  of  direct  selling  to  the  terminal  markets 
(Ch.  VI,  secs.  7  and  15),  and  consequently  a  much  less  development, 
on  the  whole,  of  the  consignment  business.  The  result  is  a  higher  pro¬ 
portion  of  financing  through  local  banks  and  a  much  lower  pro¬ 
portion  through  commission  houses  than  is  the  case  in  the  North¬ 
west  territory. 


For  further  details  on  commission-house  financing  consult  Vol.  Ill  of  this  report. 


FINANCING  COUNTRY  HOUSES. 


239 


» 


Section  6.  Country-elevator  interviews  on  sources  of  loans. 

The  interviews  had  by  the  agents  of  the  Commission  and  of  the 
Bureau  of  Markets  with  country  elevator  operators  confirm  the  data 
obtained  by  schedule.  Of  87  of  the  elevators  visited  in  Illinois  and 
Iowa,  73  reported  that  they  borrowed  from  local  banks,  11  from 
local  individuals,  and  only  3  from  commission  firms  or  houses.  Out 
of  122  elevators  in  the  Northwest  interviewed  on  this  same  subject, 
101^  borrowed  from  commission  houses,  52  from  local  banks,  and 
8  from  individuals.  * 

In  parts  of  South  Dakota  and  southern  Minnesota  the  elevators 
do  not  borrow  from  commission  houses  to  such  an  extent  as  in  other 
sections  of  the  Northwest.  The  freight  rates  in  this  area  permit  the 
grain  to  move  advantageously  to  two  or  more  markets — Minneapolis, 
Duluth,  Chicago,  Milwaukee,  and  Omaha.  Many  of  the  elevators 
employ  more  than  one  market,  and  this  situation  tends  to  preclude 
the  commission  house  from  receiving  as  much  of  the  grain  as  it 
would  consider  necessary  to  justify  the  financing.  This  same  terri¬ 
tory  is  also  the  oldest  portion  of  the  Northwest,  and  the  local  banks, 
liaving  larger  resources,  finance  the  elevators  to  a  larger  extent  than 
in  the  remainder  of  the  Northwest.  Few  Northwest  elevators  are 
financed  entirely  by  local  banks,  and  when  this  occurs  the  elevators 
usually  require  little  capital  owing  to  either  a  small  grain  business 
or  a  large  capital  of  their  own,  or  both. 

As  a  rule  the  northwestern  country  elevators  prefer  not  to  bor- 
roAv  from  the  local  banks.  The  requirements  ^s  to  security  are 
usually  severe  and  the  interest  rate  charged  is  often  very  high, 
especially  as  compared  with  the  rate  offered  by  the  commission 
houses. 

Time  and  demand  notes,  both  unsecured  and  secured  by  a  mort¬ 
gage  of  the  elevator,  are  given  in  return  for  loans.  Often  the  per¬ 
sonal  notes  of  directors,  and  even  stockholders,  are  required;  but, 
on  the  other  hand,  there  are  cases  where  the  commission  houses  do 
not  ask  for  any  security  whatever,  but  simply  instruct  the  financed 
elevator  to  draw  on  them  as  they  need  funds. 

In  general,  the  commission  houses  apparently  get  as  much  as  they 
can  in  the  way  of  security,  but  competition  for  the  business  of  the 
elevators  tends  to  make  their  requirements  as  to  such  security  less 
severe,  on  the  whole,  than  those  of  the  local  banks.  An  exception, 
perhaps,  is  to  be  found  in  cases  where  the  financial  condition  of 
the  elevator  is  not  good. 

A  number  of  country  elevator  operators  that  carry  side  lines 
borrow  from  both  commission  houses  and  local  banks.  The  funds 
secured  from  the  former  are  used  to  finance  grain  purchases,  and 
'those  obtained  from  the  latter  to  finance  the  side  lines.  One  con¬ 
cern  in  North  Dakota  which  borrows  from  both  sources  stated  that 
the  local  banks  would  finance  the  side  lines  of  an  elevator,  but 
not  its  grain  business.  On  the  other  hand,  the  commission  house 
is  willing  to  finance  the  grain  business  of  the  country  elevator  so 
as  to  handle  a  part  or  all  of  its  grain.  Sometimes,  however,  the 
elevator,  without  the  consent  of  the  commission  house,  uses  a  part 
of  the  funds  advanced  by  it  in  financing  side  lines,  and  also  for 
other  purposes. 


®  Including  6  reporting  as  borrowing  from  the  Equity  Cooperative  Exchange  of  St.  Paul. 


240 


COUNTKY  GRAIN  MARKETING. 


» 


Section  7.  Maximum  amounts  of  capital  borrowed. 

The  Commission  endeavored  by  its  country  elevator  and  ware¬ 
house  schedule  to  ascertain  something  about  the  seasonal  variations 
in  borrowed  capital,  together  with  the  maximum  and  minimum 
amounts  borrowed  (Appendix  2,  inquiry  21).  The  returns  were 
so  few  regarding  the  seasonal  variations,  however,  and  so  many 
elevators  returned  a  maximum  and  no  minimum  amount  borrowed, 
or  vice  versa,  that  the  returns  were  tabulated  only  for  the  maximum 
amounts  reported  as  borrowed.  Tlje  results  appear  in  Table  84. 

Table  84. — Number  and  proportion  of  elevators  in  specified  States  reporting 
borrowed  funds  and  average  maximum  amounts  borroived  in  the  crop  years 
191S-U  and  1916-17. 


Total 

No  funds  borrowed. 

Funds  borrowed. 

Average 

Year  and  State. 

elevators 

reporting. 

Number. 

Per  cent 
of  total. 

Number. 

Per  cent 
of  total. 

amount  per 
elevator. 

1913-14. 

. . . 

109 

3 

2.75 

106 

97.25 

$7,403 

7,597 

9,770 

9,920 

. . - . . 

111 

1 

.90 

no 

99.10 

Ohin  . 

49 

1 

2.04 

48 

97. 96 

69 

69 

100. 00 

Mnrttfinfl,  . 

2 

1 

50.00 

1 

50.00 

10,000 

10,568' 

106 

•* 

106 

100.00 

12 

12 

100.00 

11,053 

90 

90 

100.00 

12,450 

^p.Erp.^iVp.  ..  . . 

47 

1 

2. 13 

46 

97.87 

14, 445 
14,700 

58 

58 

100. 00 

54 

54 

100.00 

147m 

24 

24 

100. 00 

1.5,910 

56 

56 

100.00 

23,818 

Missouri . 

28 

28 

100.00 

26,813 

Total . 

815 

7 

.86 

808 

99.14 

12,301 

1916-17. 

191 

191 

100.00 

10,582 

. . . . 

206 

1 

.49 

205 

99.51 

11,402 

14,041 

134 

134 

100. 00 

Ohio  . 

93 

1 

1.08 

92 

98.92 

14,801 

17,029 

194 

194 

100.00 

47 

47 

100.00 

17,553 

71 

71 

100. 00 

17,577 

26 

26 

100.00 

17,773 

164 

164 

100.00 

18,330 

196 

196 

100.00 

19,060 

97 

97 

100.00 

20,034 

NeVirfiska  . . . . 

121 

1 

.83 

120 

99.17 

23,631 

65 

65 

100.00 

30, 632 

Montana . 

34 

1 

2.94 

33 

97.06 

40,828 

Total  . . 

1,639 

4 

!  .24 

1,635 

99.76 

17,309 

i 

From  this  table  it  appears  that  most  elevators  rely  largely  upon 
borrowed  capital  in  financing  their  business.  The  average  maximum 
amount  borrowed  per  elevator  in  1913—14  was  $12,301.  In  1916—17 
this  amount  had  increased  over  40  per  cent,  to  $17,309.  The  quite 
generally  larger  amounts  borrowed  in  1916-17  in  practically  every 
State,  as  compared  with  1913-14,  may  be  attributed,  of  course,  to  the 
great  increase  in  grain  prices  subsequent  to  the  outbreak  of  the 
European  war. 

Section  8.  Rates  of  interest. 

Rates  reported. — Maximum  and  minimum  interest  rates  for  two 
crop  years  were  reported  by  several  hundred  individual  elevators 
(cooperative,  independent,  niill,  and  malster) .  (Appendix  2,  inquiry 
21.)  Table  85  presents  the  results  by  States. 


FINANCING  COUNTRY  HOUSES.  241 


Table  85. — Average  maximum  and  minimum,  rates  of  interest  paid  by  country 
elevators  on  borrowed  funds  in  the  crop  years  1913-14  and  1910-17. 


State. 


Wisconsin _ 

Ohio . 

Indiana . 

Illinois . 

Michigan . 

North  Dakota 

Minnesota _ 

Montana . . 

Missouri . . 

Nebraska . 

Iowa . 

South  Dakota. 

Kansas . . 

Oklahoma. . . . 

Total. . . 


1916-17 

1913-14 

Maximum. 

Minimum. 

Maximum. 

Minimum. 

Number 

of 

elevators 

reporting. 

Rate  of 
interest 
reported. 

Number 

of 

elevators 

reporting. 

Rate  of 
interest 
reported. 

Number 

of 

elevators 

reporting. 

Rate  of 
interest 
reported. 

Number 

of 

elevators 

reporting. 

Rate  of 
interest 
reported. 

37 

6.45 

29 

6.40 

23 

6.46 

20 

6.45 

66 

6.58 

43 

6.52 

36 

6.53 

27 

6.46 

71 

6.61 

47 

6.59 

44 

6.52 

32 

6.41 

165 

6.62 

113 

6.53 

98 

6.57 

77 

6.50 

58 

6.91 

45 

6.90 

47 

6.93 

39 

6.81 

118 

7. 12 

73 

7.01 

41 

7.35 

27 

7.31 

172 

7.23 

120 

7.05 

102 

7.13 

78 

7.01 

22 

7.36 

13 

6.96 

54 

7.43 

42 

7.31 

26 

7.46 

19 

7.29 

84 

7.57 

56 

7.32 

39 

7.71 

28 

7.36 

134 

7.67 

105 

7.34 

80 

7.69 

64 

7.34 

102 

7. 73 

76 

7.71 

55 

7.83 

44 

7.77 

157 

8.02 

97 

7.87 

76 

8.01 

58 

7.79 

20 

9.30 

10 

9.30 

8 

9.75 

5 

9.30 

1,260 

7.28 

869 

7. 14 

675 

7.25 

518 

7.09 

_  f 

This  table  indicates  that  the  country  grain  business  was  financed 
during  both  of  the  years  in  question  upon  a  basis  slightly  in  excess 
of  7  per  cent,  though  in  several  States  it  was  considerably  below  this 
figure  and  in  others  considerably  higher.  It  will  be  noted  that  in  a 
general  way  the  interest  rates  conform  to  the  age  of  the  territory 
(Ch.  II,  sec.  8).  Thus  the  rates  are  lowest  in  the  five  States  east  of 
the  Mississippi — Wisconsin,  Illinois,  Indiana,  Michigan,  and  Ohio — 
and  are  considerably  higher  west  of  that  river.  The  highest  rates 
reported  are  in  Oklahoma,  one  of  the  latest  grain-producing  areas  to 
develop.  Montana  is  of  almost  equally  recent  development,  but 
shows  a  relatively  low  rate  as  compared  with  Oklahoma.  This  may 
be  probably  attributed  to  the  existence  of  commission-house  compe¬ 
tition  in  financing  in  the  Northwest. 

By  types  the  average  variations  in  interest  rates  are  even  less  than 
between  States,  as  appears  from  the  following  summary  statement :  ^ 


Maximum. 

Minimum. 

Type  of  individual  elevator. 

Number 

reporting. 

Average 

rate 

reported. 

Number 

reporting. 

• 

Average 

rate 

reported. 

1913-14. 

Cooperative . 

243 

7.42 

193 

7.25 

Independent . 

330 

7.20 

245 

7.02 

99 

7. 06 

78 

6. 94 

Total . 

672 

7. 26 

516 

•  7.09 

1916-17. 

Cooperative . 

492 

7.37 

343 

7. 22 

Independent . 

629 

7.  28 

429 

7.14 

MUl . 

138 

7. 04 

97 

6.83 

Total . 

1,2.59 

7.29 

869 

7.14 

*  Individual  maltsters  not  included  on  account  of  insignificant  number  of  reports. 

9004*’— 20 - 10 


242 


COUNTKY  GRAIN  MARKETING. 


Country  elevator  interviews  on  interest  rates.  The  operators 
of  independent  and  cooperative  elevators  of  the  Northwest  who  were 
visited  by  the  agents  of  the  Commission  reported  that  interest  rates 
varied  considerably  as  between  the  different  factors  which  finance 
country  elevators.  The  niost  common  rates  charged  at  that  time 
(1918)  by  individuals  were  reported  to  range  from  5  per  cent  to 
8  per  cent;  by  commission  houses  from  5^  per  cent  to  8  per  cent, 
with  6  per  cent  and  7  per  cent  as  the  most  prevalent  rates.  The 
interest  rate  which  commission  houses  charge  is  influenced  not  only 
by  the  general  demand  for  capital  and  the  supply  of  it  available,  but 
also  by  the  competition  between  them  in  financing  the  country  ele¬ 
vators  in  order  to  secure  their  grain  business.  A  country  elevator 
which  is  efficiently  managed  and  does  a  large  business  is  in  a  position 
to  obtain  a  lower  rate  of  interest  than  one  which  is  operated  in  a  less 
efiicient  fashion,  because  commission  firms  will  compete  ,to  a  greater 

degree  with  each  other  in  the  former  case.  . 

The  interest  rate  of  the  local  bank  in  the  Northwest  was  claimed 
to  be  higher  than  that  charged  by  any  other  factor,  in  many  instances 
as  high  as  10  per  cent  being  asked. 


J 


\ 


\ 


Chait’er  XI. 

COMPETITIVE  CONDITIONS  IN  COUNTRY  GRAIN 

BUYING.^ 


Section  1.  Scope  of  inquiry  regarding  country  competition. 

Sources  of  information. — ^The  major  portion  of  the  discussion  of 
competition  and  competitive  conditions  in  the  country  marketing  of 
giain  refers  to  conditions  existing  in  those  States  in  which  a  special 
study  of  country  marketing  was  made  by  the  agents  of  the  Commis¬ 
sion,  i.  e.,  Montana,  North  and  South  Dakota,  and  Minnesota. 

The  reasons  for  this  fact  are  found  in  the  following  circum¬ 
stances.  By  far  the  most  illuminating  data  covering  the  matter  of 
competition  and  competitive  methods  were  found  in  the  files  of  the 


^  Following 
duced  in  this 


is  a  list  of  line  elevator  companies  referred  to  in  the  correspondence  intro- 
chapter  : 


Name  of  company. 


Address. 


Greatest 
number  of 
country 
elevators 
operated, 
Sept.  1, 
1912-Sept. 
1, 1919. 


Smallest 
number  of 
country 
elevators 
operated, 
Sept.  1. 
1912- Sept. 
1, 1919. 


Amenia  Elevator  Co . 

Amenia.  N.  Dak. 

Andrews  Grain  Co . 

Atlantic  Elevator  Co . 

803  Chamber  of  Commerce,  Min¬ 
neapolis,  Minn. 

Minneapolis  Minn 

Bagley  Elevator  Co..  Geo.  C . 

Cargill  Elevator  Co . 

Cornwell.  A.  0 . 

Empire  Elevator  Co . 

Heising  Grain  Co . 

604  Chamber  of  Commerce,  Min¬ 
neapolis,  Minn. 

Minneapolis,  Minn 

International  Elevator  Co . 

Duluth.  Minn . 

McCaull-Webster  Elevator  Co _ 

Mimiekota  Elevator  Co . 

Monarch  Elevator  Co . 

Mooers,  E.  S.,  Elevator  Co . 

National  Elevator  Co . 

New  London  Milling  Co . 

Minneapolis,  Minn . 

652  Chamber  of  Commerce,  Min¬ 
neapolis,  Minn. 

316  Chamber  of  Commerce,  Min¬ 
neapolis,  Minn, 

1100  First  National-Soo  Line 
Building,  Minneapolis,  Minn. 

754  Chamber  of  Commerce,  Min¬ 
neapolis,  Minn. 

W  illmar.  Minn. .  . 

Northland  Elevator  Co . 

Northwestern  Elevator  Co.,  The. . 

Occident  Elevator  Co . 

• 

Osbome-McMillan  Elevator  Co. . . 

Pacific  Elevator  Co.,  The . 

Powers  Elevator  Co . 

St.  Anthony  &  Dakota  Elevator 
Co.,  The. 

Spaulding  Elevator  Co . 

604  Chamber  of  Commerce,  Min¬ 
neapolis,  Minn. 

Chamber  of  Commerce,  Minneap¬ 
olis,  Minn. 

434  Security  Building,  Minneap¬ 
olis,  Minn. 

604  Chamber  of  Commerce,  Min¬ 
neapolis,  Minn. 

Minneapolis  Minn . 

1004  Flour  Exchange,  Minneap¬ 
olis,  Minn. 

320  Chamber  of  Commerce,  Min¬ 
neapolis,  Minn. 

Warren.  Minn . 

Thorpe  Elevator  Co . 

Minneapnli.c,  Mirni 

Van  Dusen  &  Co.,  G.  W . 

Victoria  Elevator  Co . 

W oodworth  Elevator  Co . . .  . 

707  Chamber  of  Commerce,  Min¬ 
neapolis,  Minn. 

819  Chamber  of  Commerce,  Min¬ 
neapolis,  Minn. 

507  Chamber  of  Commerce,  Min¬ 
neapolis,  Minn. 

a) 

(a) 

65 

32 

116 

31 

31 

18 

100 

80 

i>12 

b  8 

39 

30 

a) 

(a) 

40 

20 

42 

32 

29 

20 

c  125 

clOO 

6 

(a) 

80 

70 

13 

8 

44 

39 

70 

55 

no 

75 

60 

48 

53 

34 

55 

45 

170 

132 

19 

13 

i) 

(d) 

75 

58 

33 

29 

35 

29 

Mill  line. 


No. 

No. 

No. 

No. 

No. 

No. 


No. 

No. 

No. 


No. 


No. 

Yes. 

No. 


No 

Yes. 


No. 


Yes. 

No. 


No. 


No. 

No. 

No. 

No. 


“  Out  of  business. 

6  Out  of  business  since  Aug.  1, 1917. 

C  Aug.  1, 1914-Sept.  1, 1919. 

^Corporation  dissolved  in  1917.  Elevators  consolidated  with  Cargill  Co. 

orthography,  gramniar,  etc.  in  the  correspondence  introduced  in  this  chapter  have 
checked  with  original.  Many  letters  were  in  manuscript  and  on  account 
large  aniount  of  correspondence  copied  it  was  not  attempted  to  check  all  letters  for  typographical 
errors.  Letterheads,  except  names  of  companies,  were  not  copied.  ^  ^  ^ 


243 


COUNTRY  GRAIN  MARKETING. 


244 


large  line  elevator  companies  having  their  headquarters  in  Minne-  *| 
apolis.  A  much  less  complete  and  significant  amount  of  material  | 
was  scoured  from  the  country  elevators  visited  by  the  Commission  s  || 
agents  in  these  States  and  from  those  States  in  which  the  agents  o  || 
the  Bureau  of  Markets  studied  country  marketing,  i.  e.,  Iowa  ^^^d 
Illinois.  In  this  latter  territory,  and  also  in  practically  all  those 
States  tributary  to  Chicago  and  other  markets,  the  line  companies 
are,  as  a  rule,  smaller  and  their  headquarters  much  more  widely  | 
scattered  than  is  the  case  in  the  territory  tributary  to  Minneapolis,  yl 
where  the  line  headquarters  are  concentrated  principally  at  one  termi-  ||| 
nal  market.  In  consequence  no  material  comparable  with  that 
secured  from  the  files  of  the  Minneapolis  line  companies  could  be  ^ 
obtained  in  other  sections  of  the  country  than  the  Northwest  (pro-  J 
vided  such  material  existed)  without  a  large  expenditure  of  time 
and  money  and  with  no  certainty  that  the  results  would  justify  such  || 

expenditure.  . 

No  attempt  has  been  made  in  this  discussion  to  recite  all  the  evi- 

dence  in  the  possession  of  the  Commission  with  reference  to  country 
marketing  practices.  The  method  which  has  been  followed  is  to  state 
briefly  the  competitive  conditions  indicated  by^  the  correspondence  | 
and  interviews,  employing  selections  from  this  correspondence  to  Jj 

illustrate  the  situations  described.  •  j:  §! 

Period  covered  by  the  correspondence. — In  the  presentation  oi 
letters  and  excerpts  from  the  correspondence  of  the  line  elevator  com- 
panics,  no  attempt  has  been  made  to  preserve  any  definite  chron- 
olo^^ical  or  other  order.  The  correspondence  covers  the  period  of  ; 
eight  years,  from  the  crop  year  1912-13  to  the  crop  year  1919-20,  | 
and  there  is  every  reason  to  believe  that  competitive  conditions  and  || 
the  methods  and  practices  illustrated  have  been  in  general  sub-  | 
stantially  the  same  throughout  the  entire  period.  The  letters  pre-  | 
sented,  therefore,  have  been  selected  primarily  with  reference  to  the  | 
question  of  how  satisfactorily  they  illustrate  particular  phases  of  5 
competition  and  agreements,  and  with  little  or  no  reference  to  the 
date  within  the  period  or  any  other  factor.  f 

It  has  been  attempted  wherever  possible,  however,  to  introduce  - 
correspondence  from  a  sufficient  number  of  years,  and  also  of  such  i 
recent  date,  as  to  indicate  that  the  conditions  described  have,  been  • 
more  or  less  characteristic  of  the  entire  period  covered. 


The  summary  of  the  mass  of  information  obtained  (jIil  Olffll- 
O^iBBmi  indicates  that  at  the  average  country  marketing  station,  espe¬ 
cially  in  the  northwestern  grain  States,  there  is  a  considerable  amount 
of  competition.  On  the  other  hand,  there  are  frequently  stations  or 
points  at  which  competition  is  either  insignificant  or  nonexistent  on 
account  of  local  or  other  agreements  among  ^purchasing  elevators  or 
other  factors. 

The  Commission  is  in  possession  of  hundreds  of  letters  from  the 
files  of  line  elevator  companies  operating  in  the  northwest  which 
clearly  evidence  either  agreements  as  to  country  prices,  grades,  dock¬ 
ages,  etc.,  or  else  such  harmonious  and  cooperative  action  with  ref¬ 
erence  to  these  matters  as  would  bring  about  practically  the  same 
elimination  of  competition  as  could  be  secured  by  more  specific  agr^- 
ments.  As  is  to  be  expected,  this  evidence  relates  principally  the  ^ 
acts  of  the  line  elevator  companies  From  this,  however,  it  should^ 


\ 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING. 


245 


not  be  Agrftftty  concluded  that  these  methods  are  in  any  way  peculiar 
to  line  elevator  companies,  although  there  is  little  reason  to  doubt 
that  the  lines  are  often,  not  mogt  frequently,  the  originators  and 
instigators  of  the  nm ri  TTn,!.;  n,  ^irrnngemenfri 

The  correspondence  clearly  shows,  however,  that  cooperative  or 
farmers,  and  independent  and  mill  elevators  are  also  frequently 
parties  to  such  arrangements  and  that  agreements  and  understand¬ 
ings  affecting  and  often  eliminating  competition  in  one  or  more 
respects,  are  by  no  means  peculiar  to  the  line  companies. 

F urthermore,  it  must  be  remembered  that  evidence  that  the  coopera¬ 
tives  or  farmers  and  independent  and  mill  elevators  are  also  partici¬ 
pants  in  agreements  and  understandings  is  found  in  the  correspond¬ 
ence  files  of  the  line  companies.  There  exists  no  source  of  information 
,  as  to  agreements  and  cooperation  among  other  types  of  elevators 
y  comparable  with  these  files  from  which  information  as  to  line  com- 
I^Xpany  competitive  practices  was  obtained.  If  all  files  of  all  types  of 
elevators  could  have  been  examined,  the  extensiveness  of  agreements 
and  cooperation  in  the  whole  field  might  have  been  found  to  be 
considerably  greater. 


Factors  in  competition. 

fejDVAToncii  While  eight  types  of  elevators  have  been  distinguished 
in  the  discussion  of  country  elevators,  only  five  types  require  consid¬ 
eration  from  a  competitive  standpoint — commercial  line,  individual 
mill,  mill  line,  cooperative,  and  independent.  Cooperatives,  both  line 
and  individual,  may  be  classed  together  and  maltster  elevators  are 
so  insignificant  in  number  that  they  can  scarcely  be  said  to  affect  the 
competitive  situation  in  the  country. 

Besides  the  foregoing  types  of  elevators,  which  are  by  far  the  most 
important  purchasing  factors  in  the  country  market,  certain  less 
important  buyers  are  also  found  operating  in  certain  of  the  country 
markets  in  varying  degrees.  The  principal!  ones  are  the  scoop 
shovelers,  track  buyers,  and  terminal  market  concerns,  such  as  com¬ 
mission  firms,  or  terminal  elevators.  Moreover,  in  considering  coun¬ 
try  competitive  conditions  it  is  to  be  borne  in  mind  that  a  considerable 
influence  upon  competition  is  exercised  by  farmers  who  load  their 
grain  either  on-track  ”  or  through  the  elevator  for  the  purpose  of 
shipping  and  selling  on  their  own  account.  Little  or  no  information 
was  obtained  regarding  the  competitive  operations  of  the  foregoing 
factors  in  the  country  grain  trade.  In  the  Northwest  a  relatively 
larger  proportion  of  the  country  grain  is  handled  by  the  elevators 
than  perhaps  in  any  other  section.  As  a  result,  the  correspondence 
of  the  line  companies  contains  comparatively  little  reference  to  these 
classes  of  operations. 

ScooPERs. — In  occasional  instances  a  scooper,  or  a  track  buyer, 
makes  his  appearance  and  the  result  is  apt  to  be  to  compel  the  elevator 
to  increase  the  price  paid.  sec.~2.)^ 

'  Royalton,  Minn.,  May  9,  1916. 


POWEES  Elevatoe  Co., 

Minneapolis,  Minn. 

Gentlemen  :  Don’t  be  surprised  if  you  see  that  I  am  paying  40  cents  to  41 
cents  for  oats  these  days,  because  R.  Barbagos,  the  son  of  J.  G.  Bargobos,  the 
one  that  was  in  company  with  his  father  in  the  grain  business  has  commenced  to 
buy  oats  on  track  again,  and  is  paying  40  cents. 

Yours  truly, 


M.  M,  Saijee. 


246 


COUNTRY  GRAIN  MARKETING. 


f  Farther  to  the  south  and  east  of  the  Mississippi  there  is  niore  direct 
/  country  buying  than  in  the  Northwest,  and  this  is  a  very  important 
I  factor  in  competition.  As  to  the  eifects  of  these  operations,  however, 
I  no  investigation  was  attempted,  it  not  being  considered  that  the  in- 
Yformation  obtainable  would  warrant  the  labor  and  expense  involved. 
VHKTthe  older  days  scoop  shovelers  were  bitterly  fought  both  by  the 
large  line  companies  and  also  by  other  “  regular  ”  elevator  dealers,  it 
being  felt  by  these  organizations  that  their  capital  investment  and  the 
taxes  which  they  paid  warranted  them  in  making  things  unpleasant 
for  the  scooper.^ 

Even  to-day  the  established  elevator  companies  are  inclined  to 
fight  the  scoop  shoveler.  Thus  there  are  indications  that  the  north¬ 
western  line  companies  have  been  more  or  less  active  in  supporting 
legislation  requiring  the  bonding  and  licensing  of  scoop  shovelers, 
and  such  operators  are  not  apparently  recognized  by  the  grain  trade 
as  “  regular  ”  dealers  in  any  case.^ 

✓  Direct  shipping. — An  occasional  reference  to  the  practice  of  direct 
/  shipping  is  also  found  in  the  correspondence.  This  operation  else- 
'  where  discussed  AMI,  8)  is  a  factor  which  tends  to  raise 

[  the  price  of  grain  in  the  country.  Every  bushel  of  grain  shipped 
\  directly  decreases  the  volume  merchandised  through  ^  elevator, 
\  and  in  consequence  the  elevators  frequently  will  pay  a^price  suffi- 
X^ciently  high  to  discourage  the  practice. 


Dec.  10,  1915. 


Spaulding  Elevator  Co,, 

Warren,  Mirni. 

Gentlemen  :  We  are  in  receipt  of  yours  of  the  9th  and  note  contents. 


* 


*  *  *  We  would  suggest  that  we  pay  2  cents  over  list  for  a  while  at  least 

and  possibly  that  will  not  only  draw  some  grain  to  that  station  that  might 
otherwise  be  marketed  on  some  other  line  of  railroad,  and  it  will  also  discourage 
track  loading  to  a  certain  extent.  *  *  * 

Awaiting  your  reply,  we  remain, 


Yours  truly. 


Osborne-McMillan  Elev.  Co. 


F.TS-N 


Mpls.  ^ept.  9,  '15. 


Mr.  C.  D.  JuNKiNs, 

Mgr.  St.  Anthony  d  Dakota  Elev.  Co.,  Minneapolis. 

Dear  Sir:  *  *  *  As  far  as  our  reports  show,  we  did  not  pay  over  list  on 

Sept.  3d,  for  any  wheat,  but  paid  24  over  list  on  a  carload  of  barley  which  was 
spS^ial-binned  in  our  elevator,  to  be  shipped.  In  fact,  the  farmer  did  ship  one 
carload  and  sold  one  carload  to  us.  Our  purchase  nietted  per  bushel, 

which  you  will  admit  was  better  than  allowing  the  farmer  to  ship. 


Yours  truly. 


Minnesota  Elevator  Co., 
By  W.  H.  Gooch. 


2  Op.  cit.,  Sen.  Doc.  278.  .  ,  ,  , 

» Cf.  titlei-pages  of  State  and  territorial  lists  of  elevators  and  grain  dealers,  pub¬ 
lished  by  the  Grain  Dealers  Journal  of  Chicago. 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING. 


247 


Oct.  7,  1914. 


C.  L.  Spauldinc, 

Warren,  Minn. 

Dear  Sir:  *  *  *  f  doubt  that  very  much,  if  any,  wheat  has  been  bot  at 

over  list  prices  this  year  at  Oslo.  One  or  two  lots  which  were  “  special-binned  ” 
would  have  been  shipt  if  our  agent  had  not  bot  them.  I  feel  that  he  displayed 
good  judgment  in  buying  the  grain  at  that  time,  rather  than  to  let  it  be  loaded 
on  track  with  the  margin  in  effect  at  that  time.  This  should  not  be  considered 
in  the  question  at  this  time.  We  could  no  doubt  recall  special  instances  wherein 
yoiii'  agents  displayed  their  best  judgment  in  similar  cases,  and  paid  over  the 
card. 

*  ,  :!!  *  *  * 


Yours  truly, 
F.  C.  U. 


Atlantic  Elevator  Co. 

Secy. 


Aside  from  a  few  references  to  direct  shipping  and  “on-track” 

I  operations,  such  as  the  foregoing,  the  correspondence  of  the  line 
^companies  examined  contains  practically  no  information  regarding 
the  operations  of  country  grain  buyers  other  than  elevators. 


Si3Tire  g&iicral  coiisidemtlglK  allfttlliiij  oompctitioir 

Competitive  and  noncompetitive  points. — Based  on  the  number 
of  elevator  buyers,  country  stations  may  be  divided  into  two  classes — 
noncompetitive  and  competitive.  The  former  are  those  equipped 
with  only  one  elevator  and  the  latter  those  at  which  there  are  two  or 
more  elevators  operated  by  different  concerns  or  individuals. 

While  there  are,  of  course,  in  the  grain  belt  a  very  considerable 
number  of  single  elevator  stations,  the  information  obtained  indicates 
that  they  rarely  occupy  a  monopolistic  position  either  in  reference  to 
the  prices  which  they  pay  or  otherwise.  Two  principal  reasons  may 
be  assigned  for  this.  The  first  of  them  is  the  competition  of  the 
elevators  at  near-by  towns.  The  second  is  the  element  of  potential 
competition,  both  at  competitive  and  noncompetitive  points,  pd  the 
ever-present  fear  of  the  construction  of  new  elevators,  especially  of 
the  patronage  dividend  type.'^ 

At  probaWy  a  majority  of  so-called  noncompetitive  stations  local 
policies  as  to  prices,  grades,  dockage,  storage  charges,  etc.,  are  in¬ 
fluenced  to  a  very  considerable  degree  by  the  conditions  with  refer¬ 
ence  to  those  matters  prevailing  at  other  near-by  local  stations,^ 
owing  to  the  fact  that  many  farmers  are  so  situated  that  they  can 
haul  their  grain  to  more  than  one  station  with  almost  equal  facility. 


Gentlemen  :  We  are  in  receipt  of  a  letter  from  our  agent  at  Rival,  N.  D., 
advising  that  a  farmer  who  lives  about  midway  between  Rival  and  Lignite, 
where  you  have  an  elevator,  stated  that  your  agent  at  Lignite  offered  him  2<^ 
over  list  for  his  grain  if  he  would  haul  it  to  him. 


‘The  two  following  quotations  from  one  of  the  many  letters  on  this  subject  taken 
from  the  files  of  the  line  companies  are  given  as  typical  of  this  situation,  in  the  case  of 

“  At  Clontarf  we  are  entirely  guided  by  the  market  at  Hancock,  as  we  are  all  alone 
at  that  point  (Clontarf),  and  have  to  pay  within  reason  of  the  Hancock  market  on 

everything  from  the  North  because  of  Hancock.” 

♦  *  *  *  ^  ^ 

“  At  Everest  we  are  paying  1  cent  over  list  inasmuch  as  we  are  alone  there  and  sur- 
rounding  towns  would  draw  our  businoss  away  if  wo  did  not,  tho  territory  being  veiy 

confined  and  small.”  ^  ^  t 

(From  letter  written  by  Northwestern  Elevator  Co.,  of  Minneapolis,  to  F.  R.  Durant, 

of  the  Grain  Bulletin,  Oct.  31,  1917.) 


248 


COUNTRY  GRAIN  MARKETING. 


We  think  that  you  are  starting  out  pretty  strong  if  this  report  is  correct. 
We  would  like  to  see  that  territory  held  to  list  price.  Please  let  us  know  as  to 
what  your  instructions  are  to  your  agent  at  Lignite  relative  to  paying  over 
list,  and  greatly  oblige. 

Yours  truly, 

F.JS :  OM 

Competition  between  towns. — Provided  one  elevator  station  is 
sufficiently  close  to  another  to  permit  any  substantial  number  of 
farmers  to  haul  to  either,  the  prices  or  policies  prevailing  at  the  one 
are  likely  to  be  affected  by  those  at  the  other,  more  or  less  irrespec¬ 
tive  of  the  number  of  houses  at  either  station. 

[Taken  from  the  1919  files  of  the  Occident  Elevator  Co.] 

Dana,  9-29. 

Dear  Sir:  My  instructions  up  to  the  present  date  are  to  come  to  list  price 
strictly.  Osborne-McMillan  and  the  Farmers  at  Braddock  are  10(^  over  list  on 
rye  and  5^  over  list  on  durum  and  all  of  the  houses  in  Hazelton  are  over  list 
10^^  on  rye.  Some  of  the  patrons  are  threatening  to  haul  their  rye  out  of  here 
and  take  it  to  Hazelton  where  they  can  get  $1.29  for  it.  I  am  following  my 
instructions  to  the  letter  so  let  me  hear  from  you. 

Yours,  truly,  ’ 

Agent. 


Spaulding  Elevator  Company. 


Warren,  Minn., 


Mr.  F.  J.  Smith,  Sec. 

Osl)orne-McMillan  Elev.  Co.,  Minneapolis,  Minn. 


Jan.  2,  1916. 


Dear  Sir:  I  have  been  trying  to  have  our  man  see  the  other  men  at  Silva 
and  see  if  they  cannot  get  down  on  the  prices  paid  at  that  point.  He  says  that 
the  Ugland  people  are  willing,  but  that  your  man  says  that  Mr.  Robert^  thinks 
the  grain  will  go  to  Rugby  if  we  tighten  up. 

Please  advise  us  what  you  think  is  best  to  do  in  the  matter. 

Yours  truly, 


Spaulding  Elevator  Co. 

CLS  EMP  (Signed)  C.  L.  Spaulding, 

Pres.  <&  Gen.  Mgr. 


Minneapolis,  Minn.,  Dec.  17,  1915. 

Geo.  C.  Bagley  Elevator  Co. 

Building. 

Attention — Mr.  Ralph  Bagley. 

Gentlemen  : — We  have  a  load  report  from  Wecota,  S.  D.  He  says  there  is 
nothing  much  doing,  only  all  the  farmers  are  talking  about  hauling  to  Millard. 
Evidently  your  man  is  booming  the  town  again. 

We  would  suggest  that  you  watch  him  closely. 

Yours  truly, 

WAP-S  '  The  Pacific  Elevator  Company. 

Potential  competition. — The  fear  of  potential  competition  becom¬ 
ing  actual  is  like  the  competition  of  nearby  towns  in  no  sense  pecu¬ 
liar  to  single  elevator  points,  but  affects  in  a  greater  or  less  degree 
the  buying  policies  and  operations  of  elevators  at  numerous  stations, 
both  competitive  and  noncompetitive. 

New  competition  from  any  source  means,  as  a  rule,  at  least  some 
decrease  in  receipts  and  a  consequent  decline  in  profits.  Especially 
is  this  true  in  the  event  that  a  farmers’  house  is  organized,  for  such 
a  house  by  virtue  of  a  large  number  of  farmer  stockholders  or  patron- 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING. 


249 


age  dividends,  or  both,  will  almost  inevitably  cut  heavily  into  the  re¬ 
ceipts  of  the  other  houses.  The  prospect  of  new  compkition,  there¬ 
fore,  tends  to  deter  the  existing  elevators  from  working  on  too  wide 
a  margin,  or,  in  other  words,  paying  too  low  prices  for  the  crop. 


li 


St.  Anthony  &  Dakota  Elev.  Co., 

Minneapolis. 


Duluth,  Minnesota,  5/13/16. 


Gentlemen  :  We  write  you  in  regard  to  the  situation  in  Western  Montana. 

We  believe  it  will  be  good  business  policy  from  this  time  until  the  end  of  the 
season,  to  work  on  a  pretty  close  margin.  There  is  considerable  talk  of  more 
elvators  all  thru  this  territory,  and  so  many  people  take  advantage  of  the 
situation  and  talk  about  the  working  margin. 

We  would  be  glad  to  hear  just  what  your  judgment  is  in  regard  to  the 
balance  of  the  season. 

Yours  truly. 


International  Elev.  Co., 
W.  J.  McCabe. 

Effects  of  competition  between  towns  on  local  agreements. — 
Even  though  all  the  elevators  at  a  particular  local  station  are 
getting  along  very  satisfactorily  under  local  agreements  or  under¬ 
standings,  paying  the  same  prices,  grading  and  docking  on  a  similar' 
basis,  etc.,  it  may  be  difficult  to  hold  the  elevators  in  line  and  keep 
the  arrangements  in  operation  in  the  face  of  competition  from  other 
stations. 


John  Weick,  Agent, 

Sanborn,  N.  D. 


Peer.  17,  1920. 


Dear  Sir:  We  note  what  you  have  to  say  about  the  effect  of  paying  strictly 
card  prices  is  having  on  the  trade  at  Sanborn,  but  do  not  imagine  with  the  run 
of  weather  we  have  been  having  recently,  that  a  great  deal  of  business  has 
been  lost  on  this  account. 

If  this  movement  to  other  stations  should  develop  into  anything  of  any 
importance,  perhaps  it  will  be  necessary  for  you  and  your  competitors  to  get 
together  and  agree  on  going  up  a  little— at  least  enough  to  hold  the  trade  that 
should  rightly  come  to  Sanborn,  and  hope  that  if  anything  of  this  kind  will  be 
necessary,  it  will  not  be  another  “  cut  throat  ”  proposition  but  that  all  of  the 
buyers  at  your  station  will  act  uniformly. 

Yours  truly, 

Andrews  Grain  Co. 

HGT : S  By 

CO  T  T  Bakke, 


[Andrews  Grain  Co.  Receivers  and  shippers  of  grain.] 


Elevators  General  Office,  Minneapolis,  Minn., 

Commission  Oriska  N.  D.  Station  11/1  1015. 

To  Andrews  Grain  Co. 

Minneapolis,  Minn. 

Gentlemen  :  I  received  your  letter  dated  10/30  and  noted  contense.  '  First 
plase  we  dident  start  with  other  people  and  pay  Minneapolis  prices  then  when 
we  did  get  started  we  tried  to  get  it  on  grade  and  next  thing  got  together  and 
bought  on  card  prices  and  all  the  naboring  towns  paid  more  then  Oriska  Now 
Monarch  agt  breaks  agreement  and  Mr.  O  Shea  said  I  could  follow  suit  today 
the  Farmers  are  haveing  a  meeting  to  compell  the  agent  to  buy  11  off  on  list 
from  highest  arive  price  Now  I  am  busy  leting  the  farmers  know  that  I  will 
meet  all  comers  if  within  reason  almost  half  off  the  farmers  are  hauling  to 
naboring  towns  that  should  haul  here  and  it  takes  time  to  get  them  back. 

♦  ***!):*♦ 

Yours  Truly,  ^ 

(Signed)  F.  J.  Pottner,  agt. 


250 


COUNTRY  GRAIN  MARKETING. 


Whenever  a  situation  develops,  or  threatens  to  develop,  at  one  sta¬ 
tion  which  in  turn  threatens  to  disrupt  the  smooth  working  of  the 
market  at  another  local  station,  efforts  may  be  made  by  the  operators 
at  the  latter  point  either  to  “  get  in  line  ”  or  “  hold  in  line  ”  the 
elevators  at  the  former.. 


The  Northwesteen  Elevator  Co., 
Minneapolis,  Minnesota,  Oct.  SI,  1917. 


National  Elevator  Co. 

Monarch  Elevator  Co. 

Gentlemen  :  Are  we  to  understand  you  have  come  to  list  at  Christine,  N.  D.  ? 
Christine  is  in  competition  with  our  Walcott  station,  and  we  would  be  glad  to 
come  to  list  immediately  at  Walcott  if  we  can  rely  upon  the  fact  that  Christine 
will  remain  at  list  also. 

Yours  truly, 

M.  G.  Magnuson, 

Gen.  Supt. 


[Taken  from  the  files  of  the  Empire  Elevator  Co.] 

August  31,  1914. 

Mr.  H.  Thompson, 

Oakes,  N.  D. 

Dear  Sir:  We  want  you  to  use  your  influence  to  keep  the  market  down  at 
Ellendale.  We  do  not  want  any  fighting  going  on  there,  or  the  first  thing  we 
know,  we  will  have  to  put  the  price  up  at  Winship. 

:::  *  :is  * 

Yours  truly, 

JRM-M 

While  the  neighboring  town  is,  in  many  cases,  an  important  factor 
in  protecting  the  farmer,  it  is  probably  true  that  elevators,  or  towns, 
that  are  more  or  less’ isolated  are  apt  to  pay  as  little  as  possible  for 
grain  and  there  is  some  evidence  in  the  possession  of  the  Commission 
which  tends  to  show  that  this  is  the  case.  As  an  illustration,  there 
may  be  cited  the  following  instance:  S.  I.  Miller,  a  traveling  super¬ 
intendent  of  the  Atlantic  Elevator  Co.,  visited  the  town  of  Kimball, 
Minn.,  on  August  5,  1916,  at  which  point  the  Atlantic  Elevator 
Co.  and  the  Northland  Elevator  Co.,  both  line  concerns,  are  the  only 
elevators  operating.  Following  his  visit,  Mr.  Miller  wrote  to  the 
Northland  Elevator  Co.,  on  August  6, 1916,  in  part,  as  follows: 

I  am  not  acquainted  with  conditions  there,  yesterday  having  been  my  first 
visit,  nor  have  I  met  Mr.  Wilson  who  looks  after  that  station  for  you,  but  wish 
you  would  advise  me  the  reason  that  station  is  so  much  over  list,  the  station 
appears  to  be  considerable  distance  from  competing  points  on  other  lines. 

Eailroads  and  town  competition. — Competition  between  towns 
lying  upon  different  railroad  lines,  or  between  elevators  in  the  same 
town  similarly  situated  upon  different  lines,  is  at  times  the  occasion 
for  the  railways  injecting  their  influence  into  the  competitive  situa¬ 
tion.  In  the  northwest  grain  States  competing  elevators,  either  in 
the  same  or  different  towns,  are  occasionally  located  upon  different 
railway  lines,  so  that  the  farmers  can  deliver  at  either  elevator  with 
almost  equal  facility.  As  it  is  to  the  interest  of  each  railroad  to 
draw  as  much  grain  as  possible  to  its  line  in  order  to  create  traffic, 
there  are  apt  to  be  attempts  made  upon  the  part  of  a  road  with  ele¬ 
vators  thus  located  to  secure  an  adjustment  of  competitive  condi¬ 
tions  whenever  the  elevator  located  upon  the  competing  line  is  taking 
the  bulk  of  the  grain  at  the  expense  of  the  elevator  upon  its  own 
line. 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING. 


251 


The  late  James  J.  Hill,  of  the  Great  Northern  Kailroad,  testified 
before  the  Interstate  Commerce  Commission  that  whenever  situations 
arose  similar  to  those  outlined  above  he  would  try  to  remedy  matters 
in  such  a  nianner  as  to  bring  the  grain  to  elevators  on  the  Great 
Northern  Railroad.® 

While  this  testimony  was  given  in  1906,  it  is  apparent  that  the 
railroads  still  attempt  upon  occasion  to  influence  the  local  competi¬ 
tive  situation  by  way  of  requests  to  elevators  to  raise  prices  at  points 
on  their  own  lines  in  order  to  meet  the  competition  of  elevators  situ¬ 
ated  upon  competing  roads. 


[Minneapolis,  St.  Paul  &  Sault  Sainte  Marie  Railway  Company.  Office  of  Freight  Agent.] 


In  your  reply  please  refer  to  CFR 
CFR 

Noethland  Elevator  Co. 


Sept.  11,  1916. 


Mr.  F.  J.  Smith, 

City. 


Dear  Sir  :  Referring  to  our  ’phone  conversation  date : 

Will  appreciate  your  taking  whatever  action  you  consistently  can  at  Omemee, 
North  Dakota,  so  our  mutual  interests  will  be  protected  there  against  the 
Farmers,  who  I  understand  are  paying  considerably  over  grade  and  over  list. 
Yours  truly, 


(Signed)  B.  G.  Clark, 

General  Freight  Agent  Soo  Line. 


File  R. 


Great  Northern  Railway  Co 

St.  Paul,  Minn.  Oct.  IS,  19 11^ 


^YcTORIA  Elevator  Company, 

Minneapolis,  Minn 


Gentlemen:  Again  referring  to  the  grain  situation  at  Reserve  as  compared 
with  prices  being  paid  on  the  Soo  Line  in  that  territory : 

On  the  9th  instant  we  had  our  Traveling  Freight  Agent  cover  the  Soo  Line 
to  the  west  of  Ambrose  and  on  that  date  we  find  that  the  prices  being  paid  at 
Westby,  competitive  with  Reserve,  were  as  follows :  No.  1  Northern  wheat 
Westby  92c;  Reserve  89c,  and  on  flax  Westby  $1.16  as  against  $1.11  at  Reserve. 

Can  you  not  arrange  to  raise  your  prices  at  Reserve  in  line  with  prices  being 


paid  on  the  Soo  Line  and  save  us  from  loss  of  business? 
Yours  truly, 


James  Robinson. 


Section  5.  Competition  in  prices. 

As  nearly  as  one  can  judge  the  most  active  competition  in  country 
grain  buying,  as  well  as  the  most  frequent  agreements,  understand¬ 
ings  and  mutual  arrangements,  occur  in  the  prices  offered  for  grain. 
Neither  competition  nor  agreements,  however,  are  confined  to  buying 
prices  and  practically  every  other  phase  of  country  grain  business, 
either  primary  or  incidental,  is  subject  to  competition  in  varying 
degrees. 

The  correspondence  of  the  line  companies  is  replete  with  letters 
referring  to  the  higher  prices  paid  by  competitors  either  locally  or 
at  near-by  stations.  Often  these  letters  recount  the  efforts  made  to 
persuade  such  competitors  to  reduce  their  prices,  or  again,  suggesting 
measures  to  procure  such  a  reduction. 


6  Op.  cit.,  S.  Doc.  278,  p.  861. 


252 


COUNTRY  GRAIN  MARKETING. 


The  following  letters  will  give  some  idea  of  this  type  of  compe¬ 
tition  as  it  exists  in  the  country : 

The  Northwestern  Elevator  Co., 

Sept.  13th,  1919. 

St.  Anthony  &  Dakota  Elevator  Company, 

City. 

Mr.  Jiinkins. 

Dear  Sirs  :  I  wrote  our  agent  at  Blanchard  asking  for  the  reason’  why  he 
was  paying  o^er  the  card  ®  for  wheat  and  flax.  He  writes  me  under  date  of 
Sopt  2ri(i " 

“  In  regard  to  the  above,  the  St.  Anthony  &  Dakota  Elevator  Man  is  paying 
from  5  to  100  over  list  ®  price  on  wheat,  50  over  on  flax  and  buying  rye  at  120 
under  Duluth  and  paying  for  pigeon  grass  dockage,  so  you  can  see  for  yourself 
that  I  have  got  to  pay  the  above  prices  in  order  to  get  anything,  but  I  will  get 
down  to  card  ®  price  if  you  order  me  to  do  so.” 

v::  ^  *  ❖  *  H« 

Yours  truly, 

'WET.  Brest. 


[From  the  files  of  the  Occident  Elevator  Co.] 

Hazelton,  N.  D.,  Sept.  1,  1919. 

Mr.  M.  R.  Devaney, 

Mpls,  Minn. 

Dear  Sir  :  I  am  in  receipt  of  your  letter  of  Aug.  30th  and  note  what  Mr.  Car¬ 
gill  says  regarding  these  prices  and  I  will  say  that  this  is  news  to  me. 

Hi  5l:  ❖  ❖  *  * 


I  had  an  idea  from  his  conversation  and  the  way  he  acted  that  he  had  some 
dirty  work  on  foot.  I  have  a  hunch  that  it  is  not  the  Farmers  Elev.  Co.  that 
he  is  after  but  us,  as  their  agent  makes  it  a  point  to  go  after  our  customers  and 
he  has  been  very  secretive  as  to  what  he  is  paying,  which  shows  on  the  face  of 
it  that  I  knew  nothing  about  these  fancy  prices  and  I  did  not  know  until  today 
that  he  was  paying  better  than  70  over  the  card  for  rye. 

I  think  he  is  exceeding  the  100  over  on  wheat  as  I  offered  a  man  today  100 
over  and  he  said  he  had  a  better  offer,  and  took  it  to  the  Victoria.  I  am  intend¬ 
ing  to  go  slow  on  these  fancy  prices  and  see  if  we  cannot  get  some  at  a  profit, 
as  I  do  not  figure  they  will  last  long  at  this  rate. 

Kindly  advise  me  just  how  you  want  me  to  handle  the  situation. 


Yours  truly. 


(Signed)  Leroy  Irvine. 


[Andrews  Grain  Co.  Receivers  and  Shippers  of  Grain,  General  Office:  Minneapolis, 

Minn.] 

Elevators  Commission 

Northwood,  N.  D.^  Station,  May  15th  1911. 

Andrews  Grain  Co. 

Mpls  Minn. 

Gentlemen  :  Yous  of  the  14th  and  allso  of  the  9th  at  hand  and  will  say  I 
has  seen  all  the  Elev.  man  and  we  are  coming  down  to  list  at  once  But  the 
Farmers  man  may  not  come  down  to  list  at  once.  But  I  think  he  will  befor 
long.  I  orded  cars  last  Friday  but  got  a  bad  order  car  but  am  promished  to 
get  one  in  the  morning. 

Yours  truly  H.  J.  Thorstenson. 


8  In  the  Northwest,  as  explained  earlier  in  this  volume,  the  Grain  Bulletin  daily  price 
card  is  in  general  use  and  in  a  large  proportion  of  the  letters  dealing  with  price  compe¬ 
tition,  reference  is  made  to  “buying  at  card”  or  “  list”  prices,  “paying  over  the  card 
or  “  list,”  etc.  All  of  these  statements  refer  to  the  price  being  paid  as  compared  with  the 
prices  listed  on  the  Grain  Bulletin  card  and  expressions  of  this  character  should  be  so 
interpreted  throughout  this  discussion. 

’At  this  station  there  were  6  elevators  as  follows; 

Andrews  Gr.  Co.  L. 

Cargill  Elev.  Co.  L. 

Great  Western  Gr.  Co.  L. 

Northwood  Farmers  Elev.  C. 

Northwood  Mill  &  Light  Co.  M. 

St.  A.  &  D.  Elev.  Co.  L. 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING. 


253 


Kimball,  Minn.,  Station  10-4  1916. 

O  McM  Elv  Co  " 

Mpls  Minn 

Gentlemen  :  The  Atlantic  Agt  is  paying  2t  over  list  for  Oats  and  10  over 
list  for  all  other  grain. 

I  am  paying  10  over  for  Oats  and  list  price  for  all  other  grain :  He  is  trying 
to  get  trade  by  that :  Now  I  will  pay  the  same  as  he  ontill  I  here  from  you  so 
please  let  me  know  by  phone  or  mail  at  once  what  to  do. 

Resp  Yours 

Fred  Meyer  Sr,  Agt. 

N.  B.  Me  and  the  Atl  Agt  agreed  to  pay  10  over  for  Oats  and  strictly  list 
price  for  all  others  grean  and  test  to. 

F  M  Agt 


FFrom  A.  A.  Von  Hagen,  Occident  Elevator  Co.,  to  Mr.  M.  R.  Devaney,  Minneapolis, 

Minn.,  Sept.  18,  1913.] 

If  you  can  get  the  Atlantic  thru  the  Mpls  office  to  get  their  man  here  at 
Coleharbor  down  to  list  I  think  it  would  be  a  good  thing  as  we  can  get  our  trade 
here  just  as  well  at  list  as  to  pay  over  for  it.  Their  man  is  paying  over  20 
today  and  yesterday  on  one  load  30  over  and  can’t  get  any  business  at  that  but 
it  makes  it  bad  for  us  as  we  are  getting  as  much  as  we  could  expect  and  could 
just  as  well  buy  it  at  list  as  I  figure  it  they  are  not  entitled  to  pay  over  with 
an  old  man  in.  We  are  the  ones  that  should  have  that  privilege  with  a  new 
man  in  here.  The  Farmers  man  here  would  like  to  get  the  list  down  to  130 
off  on  wheat  and  all  pay  the  same.  Now  if  we  can  get  the  Atlantic  down  it 
will  cinch  the  Rust  grain  for  us  as  he  has  promised  it  to  me  and  Atlantic 
man  leaves  him  alone  we  will  get  it,  but  Rust  told  me  that  the  Atlantic  man  had 
been  out  to  see  him  in  his  car  four  times  now  but  hadn’t  made  a  bid  and  if 
we  get  them  down  before  Rust  starts  hauling  why  he  wont  have  anything  to 
bid  on  and  we  can  get  it  at  the  old  figures,  12  off  and  get  out  of  it  afterward 
by  saying  that  I  made  the  deal  with  Rust  at  the  time  they  were  paying  over. 

Price  wars. — While  avoided  whenever  possible,  there  are  occasions 
when  the  foregoing  price  competition  leads  to  price  wars  at  country 
points,  some  one  or  more  of  the  elevators  running  up  their  prices  to 
freight  off  ”  ®  and  at  times  even  higher. 

The  following  letters  indicate  the  situation : 


[From  the  files  of  the  Atlantic  Elevator  Co.] 


Oct.  13th,  1919. 


Crosby,  N.  D. 

Dear  Sir  :  I  have  your  letter  of  the  10th  inst.,  and  note  what  you  say  in  regard 
to  the  market  conditions  and  the  prices  that  have  been  paid  there  are  altogether 
too  high,  and  it  seems  to  me  that  all  of  the  buyers  ought  to  get  down  to  a  more 
reasonable  basis  and  buy  their  stuff  somewhere  near  the  card.  There  is  no  use 
in  doing  business  entirely  for  nothing.  Of  course,  if  the  prices  at  Ambrose  are 
being  kept  up  on  account  of  the  prices  at  Crosby,  we  cannot  blame  the  fellows 
very  much  at  Ambrose.  It  seems  to  me,  however,  that  regardless  of  what  they 
are  paying  at  Ambrose,  they  ought  to  get  somewheres  near  a  basis  that  will  give 
us  a  little  margin  for  handling  the  grain,  and  we  hope  that  something  of  this  kind 


We  had  better  take  this  up  with  Geo.  Riebe  when  he  is  up  there  and  perhaps 
he  can  find  out  what  is  doing  at  Ambrose,  and  maybe  when  he  goes  up  that  way 
that  he  may  be  able  to  find  out  something.  We  are  anxious  to  get  down  at  your 
station  to  the  regular  card  basis,  with  the  proper  premium  for  Dark  Northern. 

Yours  truly, 

FCR  P 


8  Osborne-McMillan  Elevator  Company.  . 

0  Bv  buvine  “  freight  off  ”  is  meant  at  the  terminal  market  price 
the  elevator  allowing  no  margin  to  cover  either  its  costs  or  a  profit. 


less  freight 


rate, 


254 


COUNTKY  GRAIN  MARKETING. 


Occident  Elevator  Co., 

Mpls  Minn  9-22-13. 

Mr.  S.  J.  Epler, 

Billmgs,  Mont.  E^M. 

Dear  Sir  :  .Just  had  a  talk  with  the  McCaull  people  about  Wilsall  and  it  seems 
that  it  is  their  former  agent  who  is  getting  all  the  business  there,  and  he  seemed 
to  think  we  should  put  that  market  on  basis  of  freight  and  commission  off,  so 
please  get  your  card  out  on  that  basis  for  the  next  ten  days  or  two  weeks,  unless 
you  see  some  valid  objection. 

Yours  truly, 

Occident  Elevator  Company. 

Per  M.  R.  Devaney,  Gen-Mgr- 

Threats  of  price  wars. — In  certain  cases  threats  of  paying 
‘‘ freight  off  ”  ®  have  also  been  made,  presumably  with  intention  of 
bringing  competing  elevators  into  line. 

Occident  Elevator  Company, 

Mpls  12/ 1-1  It. 

Mr.  A.  A.  VonHagen,  Supt., 

Bismarck,  N.  D. 

Dear  Sir:  Have  your  letter  of  the  20th  and  I  wrote  you  further  about  the 
situation  at  New  Salem.  Since  getting  Nason’s  figures  I  feel  a  little  differently 
about  the  proposition  altho  if  the  independents  continue  to  get  the  bulk  of  the 
business  we  will  probably  have  to  show  our  teeth  there.  I  don’t  believe  in  24 
over  list  in  handling  this  bunch.  About  the  only  thing  that  makes  them  come 
across  is  freight  off  and  if  you  happen  to  stop  off  there  and  go  into  the  matter, 
in  a  quiet  way  without  making  any  threats  or  creating  any  feeling,  tell  them 
that  with  the  cutting  in  dockage  that  is  being  done  we  feel  they  are  paying 
practically  freight  off  and  that  if  they  do  not  discontinue  it  we  will  pay  4^-5^ 
over  list  or  freight  off. 

Yours,  truly, 

Occident  Elevator  Company, 
Per  M.  R.  Devaney,  Gen-Mgr. 

Section  6.  Competition  in  grading  and  dockage. 

An  indirect  form  of  price  competition  occurs  when  some  one  or 
more  of  the  local  elevator  purchasers,  instead  of  grading  and  docking 
the  grain  accurately,  grade  it  higher  than  its  quality  actually  warrants 
or  deduct  less  dockage  than  the  grain  contains.  Obviously,  in  either 
event,  the  result  is  to  give  the  farmer  a  higher  price  for  the  grain 
than  the  quality  in  the  one  case,  or  the  amount  of  foreign  material 
contained  therein  in  the  other,  would  warrant.  In  consequence,  over¬ 
grading  and  underdocking  are  usually  regarded  as  equivalent  to 
paying  higher  prices. 

Spaulding  Elevator  Company, 

Warren,  Minn.,  Aug.  28,  1916. 

Mr.  F.  M.  Smith, 

Minneapolis,  Minn. 

Dear  Sir  ;  *  *  *  ^s  you  do,  that  we  should  try  to  buy  everything 

at  list  price,  and  at  proper  grades  and  dockage,  and  we  do  not  intend  to  pay 
over  list  at  any  point  where  we  can  buy  it  on  the  proper  grade;  that  we  con¬ 
sider  overgrading  the  same  as  paying  over  list,  and  it  depends  entirely  upon  our 
competitors,  whether  we  have  to  meet  the  competition  by  paying  over  list  or  not. 


*  ^ 

*  * 

*  *  sH 

Yours  truly, 

Spaulding  Elevator  Co. 

CLS*EMP 

( Signed ) 

By  C.  L.  Spaulding, 

Enel. 

Pres.  Gen.  Mgr. 

“  The  terminal  market  price,  less  freight,  allowing  nothing  for  the  expense  or  profit 
of  the  elevator. 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING. 


255 


Oct.  7,  1915. 

C.  E.  Smith,  Agt., 

NorthrAlle,  S.  D. 

Dear  Sir  :  We  are  in  receipt  of  your  favors  of  the  5th  and  6th,  in  regard 
to  losing  grades  and  dockages. 

Now  you  cannot,  of  course,  expect  to  buy  grain  on  any  other  condition 
than  your  competitors  are  buying  it  on  and  we  do  not  expect  you  to ;  but 
cannot  you  see  that,  if  a  competitor  is  over-grading  or  under-docking,  they 
are  really  paying  just  that  much  over  list? 


* 


Yours  truly, 
CBR-W 


G.  W.  Van  Dusen  &  Co., 


Mgr. 


Both  overgrading  and  underdocking  are  important  factors  in 
country  marketing,  and  competition  in  grading  and  docking  is  fre¬ 
quent,  as  well  as  are  agreements  in  reference  to  these  matters. 

Mpls,  IMinn.,  Oct.  5,  1918. 

Mr.  S.  J.  Epler, 

Supt-BilUngs,  Mont. 

Dear  Sir  ;  *  *  *  When  I  took  the  matter  of  card  price  up  with  McCaull- 

Dinsmore  they  stated  their  man  was  overgrading  but  that  they  had  to  do  it 
in  order  to  meet  the  Occident.  I  told  them  that  we  were  not  overgrading; 
that  we  had  been  down  to  bedrock  on  discounts  on  smut,  and  suggested  that 
his  superintendent  get  in  touch  with  you. 


Yours  truly. 


mrd.  1. 


Occident  Elevator, 

Gen.  Mgr. 


[From  Empire  Elevator  Co.] 

Station-Hutchinson,  Minn., 

October  28,  1916. 

Mr.  J.  R.  McMillan, 

Minneapolis,  Minn. 

Dear  Sir:  I  have  now  seen  all  the  buyers  here  today  and  they  have  all 
agreed  to  grade  all  wheat  #3  that  contains  either  cockle  and  wild  peas  at 
all,  and  that  which  contains  any  noticeable  amount  will  be  graded  lower 
according  to  the  amount  it  contains,  and  all  the  boys  seemed  to  be  very  will¬ 
ing  to  do  so,  and  the  results  were  that  three  loads  of  wheat  drove  out  of  our 
elevator  this  forenoon  and  went  to  some  one  else  for  a  better  grade,  but  I 
did  not  find  out  if  they  got  it  or  not  as  they  went  over  on  the  G  N  line 
with  it,  but  I  think  the  farmers  will  soon  learn  that  they  cannot  get  any 
better. 


Yours  truly, 


(Signed) 


H.  Thompson,  Supt. 


[From  the  Northland  Elevator  Company  to  Geo.  E.  Arneson,  Agt.,  Overly,  N.  Dak., 

Dec.  7,  1914.] 

You  have  a  talk  with  the  Woodworth  agent  and  see  if  you  can’t  get.,-'^ 
him  to  stop  over-grading  your  customers.  Tell  him  that  you  will  simply  have 
to  protect  your  trade  and  that  you  are  not  going  to  sit  down  and  let  your  trade 
go  to  him  on  account  of  his  grading  higher  than  you  are  or  paying  over  list. 

Use  your  best  efforts  to  keep  your  market  quiet  and  buy  the  grain  right.  *  *  * 


256 


COUNTKY  GRAIN  MARKETING. 


The  Northwestern  Ei^vator  Company, 
Chamber  of  Commerce,  Minneapolis,  Minn., 

South  Shore,  II-IO-I4. 


C.  A.  Magnuson,  Prest., 

Mpls,  Minn. 

Dear  Sir  :  The  trouble  at  South  Shore  was  caused  by  the  Farmers  Elevator 
Agent  under-docking  grain  he  is  one  of  the  worst  on  the  line  under  his  contract 
with  the  Directors  he  is  only  held  for  Gross  weights  and  grades  this  season  he 
does  not  seem  to  care  at  what  dockage  he  takes  grain  They  put  in  a  cleaner 
this  season  and  he  says  what  he  loses  he  makes  up  on  the  screenings. 

:Ic  *  *  *  *  * 


Yours  truly 


Jas.  Hanna. 


[From  Andrews  Grain  Co.  to  N.  C.  Welter,  Agent,  Bowden,  N.  D.,  September  13,  1912.] 

*  *  *  The  best  thing  for  you  to  do  under  the  circumstances  is  to  talk  it 

over  with  the  agent  of  the  Farmers  Company  and  point  out  to  him  where  it  is 
necessary  to  have  heavier  dockage.  *  *  * 


[From  Andrews  Grain  Co.  to  O.  M.  Lee,  Agt.,  Northwood,  N.  D.,  Sept.  23,  1912.] 

*  *  *  At  the  same  time  of  course  we  expect  you  will  do  whatever  you  can 

in  using  your  influence  to  get  the  other  buyers  all  down  to  list  prices  and  get 
them  to  stay  there  and  grade  the  stuff  and  dock  it  right,  and  it  is  easy  of  course 
for  one  to  put  up  his  prices  because  the  other  fellow  does.  It  is  not  so  easy 
to  convince  the  other  fellow  that  he  is  wrong  but  that  is  the  thing  to  try  to  do 
rather  than  to  fall  into  the  error  of  his  ways.  *  *  * 

Section  7.  Competition  in  storage,  elevation,  and  cleaning  charges. 

Charges  made  for  cleaning,  elevation,  and  storage  by  country  ele¬ 
vators  are  likewise  subject  to  sharp  competition  and  also  to  agree¬ 
ments  and  understandings.  Although  a  small  fee  is  frequently,  if  not 
usually,  charged  for  the  performance  of  any  of  these  services,  any  one 
or  more  of  them  may  be  done  either  gratis  or  at  lower  than  the  usual 
rate  whenever  it  is  thought  that  a  competitive  advantage  may  be  se¬ 
cured  thereby. 

Minneapolis,  Minn.,  March  SO,  1916. 

Cargill  Elev.  Co. 

City. 

Gentlemen  :  Our  agent  at  Hensel  was  receiving  grain  from  a  man  named 
Bussee.  He  had  taken  about  2000  bu.  Mr.  Busse  had  about  6000  bu.  more 
and  the  International  Elevator  agent  persuaded  Mr.  Busse  to  haul  to  him,  with 
the  understanding  that  no  tickets  would  be  issued  for  the  grain,  and  that  no 
storage  would  be  charged. 

Our  agent,  learning  beyond  question  that  this  was  true,  took  a  few  loads 
from  Mr.  Bussee  on  that  plan  and  wrote  us  the  circumstances.  We  at  once 
wrote  him  to  give  Mr.  Bussee  free  storage  to  the  15th  of  June,  but  to  issue 
tickets  at  once  for  the  grain  which  he  already  had  in  the  house,  and  to  issue 
tickets  for  all  the  grain  that  he  hauled,  but  to  promise  Mr.  Bussee  that  if  he 
sold  at  any  time  between  now  and  June  15th  no  storage  would  be  collected. 

^  'I*  ¥  V 

Very  truly  yours, 

*  National  Elevator  Company 

L.  D.  Marshall  Manager. 


[From  the  Andrews  Grain  Company  to  the  Atlantic  Elevator  Company,  Minneapolis, 

August  4,  1914.] 

*  *.  *  we  believe  it  only  right  and  fair  besides  being  positively  neces¬ 
sary,  that  all  stored  grain  shall  be  subject  to  full  storage  charge,  and  we  would 
suggest  that  you  take  this  up  with  your  stations  and  endeavor  to  point  out  the 
necessity  to  the  others. 

Yours  truly, 

BCC-Mc  Andrews  Grain  Co. 


(Undated) 

Caegill  Elevator  Co. 

City. 

Gentlemen  : —  *  *  ♦  j  learn  also  that  a  former  customer  of  the  St. 

Anthony  and  D.  told  the  St  A  &  D  agent  he  would  haul  his  grain  to  him,  but 
he  would  not  stand  for  the  storage  charges,  consequently  insisting  on  the  storage 
charges  he  began  hauling  to  you,  and  he  presumes  you  are  storing  free  of  charge 
or  at  a  reduced  compensation  at  Ada. 


:  j 

k 


'I 

4 


* 

> 

't 


St 


Yours  truly, 


July  22,  1916. 

Northland  Elevator  Co., 

Chamber  of  Commerce,  City. 

(Attention  of  Mr.  F.  J.  Smith.) 

Gentlemen:  Please  note  attached  copy  of  a  letter  written  to  our  man  at 
Tolley  to-day  in  regard  to  storage  charges.  We  would  appreciate  it  if  you 
would  mail  us  a  copy  of  the  instructions  you  have  sent  your  man  as  to  storage. 
Yours  truly, 

Woodworth  Elevator  Co., 
By 


Is 


July  22,  1916. 

H.  S.  Gaskll,  Agt., 

Tolley,  N.  D. 

Dear  Sir  :  On  receipt  of  this  letter,  on  any  grain  on  which  you  issue  storage 
tickets  from  now  on,  have  it  understood  with  the  farmers  that  we  will  give  60 
days  free  storage,  and  that  we  will  expect  to  collect  per  month  after  the 
60  day  period  has  elapsed.  Of  course  any  agreements  that  have  been  made  on 
grain  previously  stored  on  which  we  have  agreed  to  give  free  storage,  we  will 
have  to  live  up  to. 

We  want  to  have  it  definitely  understood  on  any  grain  that  is  stored  in  our 
elevator  there  after  receipt  of  this  letter,  that  it  is  stored  on  the  above  terms, 
until  you  are  otherwise  instructed. 

Talk  with  the  other  buyers  and  see  if  you  cannot  work  along  these  lines. 
Also  report  to  us  any  failure  on  their  part  to  charge  storage  on  this  basis.  Be 
sure  and  turn  this  letter  over  to  Frank  Johnson  on  his  return. 

Yours  truly, 

Woodworth  Elevator  Co. 

RPW*B 


September  6,  1915. 

H.  J.  Thorstenson, 

Agent,  Northwood,  N.  D. 

Dear  Sir  :  Replying  to  yours  of  the  4th  wired  you  that  wheat  you  were  taking 
in  on  that  day  was  very  fine;  also  told  you  to  use  good  judgment  and  make 
such  reasonable  concessions  and  storage  charges  as  you  think  necessary  to  meet 
your  competition.  At  the  same  time  point  out  to  these  fellows  that  it  is  very 
absurd  for  them  to  give  free  storage  because  they  will  be  loaded  up  with  grain 
to  the  roof  pretty  soon  and  will  have  to  take  chances  therefore  on  shipping  out 
stored  grain  and  selling  it  without  any  idea  of  what  it  would  cost  to  buy  it 
back. 

A  little  interview  among  them  at  the  present  time  might  do  some  good  so  see 
if  you  can’t  convince  them  that  they  should  charge  full  storage  rates  by  talking 
to  them  earnestly.  If  you  make  any  concessions  please  mark  whatever  the 
concession  is  on  the  storage  ticket  plainly  so  we  can  tell  what  it  is,  but  we 
can’t  of  course,  give  any  indefinite  storage  period.  Two  or  three  months,  or 
something  like  that,  ought  to  be  sufficient. 

Yours  truly, 

Ai^PBEws  Grain  Co. 

9964®— 20 - 17 


258 


COUNTRY  GRAIN  MARKETING, 


■jri 


[From  the  files  of  G.  W.  Van  Dusen  &  Co.] 


Jno.  Kriebs,  Agt.f 

Bellingham,  Minn. 


Sept.  10,  1913. 


Dear  Sir:  We  had  a  talk  with  Mr.  Rndning  today  and  he  has  promised  to 
charge  full  storage  provided  we  do.  Now  of  course  we  will,  so  consequently 
he  will. 

Yours  truly, 


LDG-OK. 


Inter  State  Grain  Co., 
Sec. 


[From  a  letter  of  the  Cargill  Elevator  Company  to  F.  R.  Durant,  Oct.  30,  1917.] 

Honeyford,  N.  D.  Freight  off,  but  getting  no  receipts,  due  mainly  to  practice 
of  competitors  cleaning  grain  for  customers  and  returning  screenings.^ 


[From  the  Empire  Elevator  Co.  to  H.  Thompson,  Auditor,  Oakes,  N.  Dak.,  Sept.  3,  1914.] 


*  *  *  When  you  are  at  Frederick,  you  better  go  and  see  the  Auditor  for 

the  Dak.  Grain  Co.  and  tell  him  that  there  is  no  reason  in  the  world  why  his 
man  should  ship  anything  through  their  house  there  at  Winship  for  a  cent  a 
bushel,  and  that  it  would  only  hurt  their  business  when  they  start  up.  *  *  * 


One  of  the  interesting  ramifications  of  competition  in  connection 
with  storage  is  the  practice  of  holding  storage  tickets  for  the  farmers 
while  the  market  is  rising,  buying  them  in  after  the  market  has  gone 
down,  but  paying  the  farmer  and  reporting  the  price  prevailing  be¬ 
fore  the  drop. 

Spaulding  Elevator  Co., 

Warren,  Minn.  9/16/13. 


F.  C.  Riebe, 

Atlantic  Elev.  Co.,  Minneapolis,  Minn. 


Dear  Sir:  The  writer  would  like  to  have  you  advise  him  how  to  meet  the 
competition  at  Fonda  and  probably  which  you  are  aware  of,  namely  the  hold¬ 
ing  up  of  storage  tickets  and  selling  for  farmers  on  the  drop.  I  have  been  told 
by  farmers  that  the  Minnekota  Elev.  Co.  would  do  that  at  any  and  all  times, 
and  if  we  wanted  to  do  any  business  there  we  would  have  to  allow  our  agent 
to  do  the  same. 

This  may  be  good  business  but  in  the  writer’s  mind  it  is  a  poor  business  policy 
to  pursue.  I  notified  Mr.  Gooch,  last  season,  of  the  Minnekota  people  giving 
names,  dates,  etc.,  and  the  same  was  admitted  as  being  true  but  they  still  allow 
their  agent  to  do  the  same.  The  whole  country  knows  they  can  depend  on  that. 

Before  taking  any  steps  in  the  matter  would  like  to  have  your  opinion  in 
regard  to  the  same. 

Yours  truly, 


CLS/JMP. 


Spaulding  Elevator  Co., 
By  C.  L.  Spaulding, 

General  Manager. 


Stamped:  Return  to  Minneapolis  office  at  once. 


“Equivalent  either  to  making  no  charge  for  cleaning,  or  cleaning  at  a  very  low  rate. 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING. 


259 


9 


Sept.  19th,  1913. 


••  C.  L.  Spaulding, 


Pres.  Spaulding  Elev.  Co.,  Warren,  Minn. 


Dear  Sib:  Have  your  letter  of  the  IStli  with  reference  to  Fonda  and  I  have 
'•*  this  matter  up  v/ith  the  Minnekota  Elev.  Co.  and  they  requested  that  I  let  them 


.  use  your  letter,  as  they  wish  to  fix  this  up  with  their  superintendent  and  they 
'  state  that  if  their  man  does  not  stop  the  practice,  that  they  will  fire  him,  I 
. .  am  in  hopes  of  getting  this  fixed  up  so  that  there  will  be  no  further  complaints 
from  this  matter.  It  is  a  bad  practice  and  a  competition  that  is  pretty  hard 
to  meet  and  the  best  way  to  do  is  to  get  them  to  cut  it  out  if  we  can.  If  we 
can’t  get  them  to  make  their  agent  stop  it,  then  we  might  have  to  send  some 
money  in  order  to  get  the  practice  stopped.  I  am  in  hopes  very  much  however 
in  getting  them  to  stop  the  matter  and  if  you  have  any  other  complaints  from 
there  in  reference  to  the  same  please  advise  me  promptly.  I  thank  you  very 
kindly  for  calling  this  matter  to  our  attention. 


Yours  truly, 


Atlantic  Elev.  Co., 


By 


[From  the  flies  of  the  Northwestern  Elevator  Company.] 


(Undated.) 


Cargill  Elevator  Co. 

City. 


Gentlemen  :  *  *  *  Another  conversation  between  your  agent,  and  a 

farmers  was  about  to  this  effect :  The  farmer  asked  your  agent  if  he  had  sol^ 
his  (the  farmer’s)  wheat  your  man  said  yes,  whereupon  the  farmer  remarked: 
‘‘Then  it  went  down,  did  it?”  So  it  looks  as  tho  he  undertook  to  sell  the 


farmer’s  grain  at  the  price  before  the  drop  when  there  is  a  drop. 
Yours  truly, 


fi 

/ 


C.  A.  Magnuson,  Prest. 


Osborne-McMillan  Elevator  Co., 
Minneapolis,  Minn.,  October  7,  1916. 


Mr.  F.  C.  Reibe,  Sed*y, 
'.A'  Atlantic 


Atlantic  Elevator  Co.  Bldg. 


Dear  Sir:  We  are  in  receipt  of  your  letter  of  the  6th  and  note  contents  care- 
_  fully. 

•«r  If  you  will  be  kind  enough  to  furnish  us  with  some  specific  case  where  our 
agent  at  Kimball  has  held  grain  in  the  house  and  then  issued  tickets  for  it  after 
Yf;  having  received  a  reduction  in  the  market  we  will  be  greatly  obliged  to  you,  as 
we  are  just  as  anxious  to  stop  anything  of  this  kind  as  you  are.  We  cannot 
^  very  well  stop  it,  however,  by  just  telling  our  agent  that  we  understand  he 
^  is  doing  it.  If  we  could  get  ahold  of  some  specific  case  then  we  could  take  the 
S.  matter  up  with  him  in  such  a  way  that  it  will  not  occur  again. 

*  *  * 


Yours  truly. 


Osborne-McMillan  Elevator  Co. 
By  F.  J.  Smith.  \ 


FJS  :OM 

Section  8.  Competition  in  side  lines. 


The  side-line  business  is  of  varying  importance  as  between  types 


of  elevators,  different  localities,  and  even  between  different  types  of 
elevators  at  the  same  point.  Wherever  there  is  more  than  one  eleva¬ 
tor  at  a  station  carrying  one  or  more  of  the  same  side  lines  there  is 
sometimes  competition  between  such  elevators  in  this  business,  while 


in  other  cases  prices  of  side  lines  may  become  subject 
derstandings  and  agreements  between  the  interested  paj-tjioo. 


260 


COUNTRY  GRAIN  MARKETING. 


Nov.  11,  1918. 


Northland  Elevator  Co.,  ^ 

City, 

Gentlemen  :  We  are  advised  by  our  agent  at  Overly  that  the  different  coal 
dealers  there  have  talked  the  matter  over  and  have  decided  to  make  the  fol-  C 
lowing  prices  on  coal: 


$11.  75 
9.00 
9.50 
10.50 


Hard  coal 
Hocking  _ 


Millers  Creek 


Smokeless 

* 


Yours  truly, 


Woodworth  Elevator  Co. 
(Signed)  ByR.  P.  Woodworth,  Sec. 


RPW-E 


Feb.  12,  1916. 


Atlantic  Elevator  C« 


Gentlemen  :  Our  agent  at  Calio,  N.  D.  advises  us  that  you  are  selling  to 
Millers  Creek  coal  at  $8.00  per  ton  at  Calio. 


We  see  no  good  reason  why  we  cannot  get  $8.50  per  ton  for  Millers  Creek 
coal  at  Calio,  and  we  think  that  all  you  need  to  do  is  to  write  your  agent  to 
make  the  price  $8.50  and  he  will  get  it.  We  are  getting  $7.50  per  ton  for 
Hocking  and  on  that  basis  we  should  get  $8.50  for  Millers  Creek. 


^Kindly  advise  us  as  to  what  you  decide  to  do  in  regard  to  this  matter,  and 
greatly  oblige. 


Yours  truly, 


Northland  Elevator  Company. 


FJS :  OM 


Minneapolis,  Minn.,  Aug.  2^^  1914. 


Henry  Haugland,  Agt., 

Loma,  N.  D. 

Dear  Sir  :  We  are  in  receipt  of  your  letter  of  the  21st,  stating  that  the  At¬ 
lantic  Elevator  Co.’s  agent  at  your  station  is  selling  steam  coal  out  of  the  shed 
at  $7  per  ton.  Go  and  have  a  talk  with  him  and  ask  him  at  what  price  he  is 
selling  coal  out  of  the  shed  for  to  threshers ;  that  if  he  is  going  to  sell  at  $7 
per  ton,  of  course,  the  rest  of  us  will  have  to  sell  at  the  same  price,  but  if  he 
will  make  his  price  $7.25  we  will  do  likewise. 

Yours  truly. 


Northland  Elevator  Company. 


Section  9.  Character  of  cooperative,  or  farmer,  and  mill  elevator  compe¬ 


tition. 


There  are  numerous  indications  that  the  mill,  and  especially  the 
farmers  or  cooperative  elevators,  are  the  most  serious  factors  in 
country  competition.  Both  these  types  frequently  embark  upon 
policies  in  prices,  grades,  dockage,  etc.,  that  have  little  or  no  ref¬ 
erence  to  the  policies  of  their  independent  or  commercial  line  com¬ 
petitors  as  appears  from  the  following  letters. 


Crosby,  N.  D.,  Oct.  24,  1919. 


Atlantic  Elev.  Co., 

Minneapolis,  Minn. 


Dear  Sir:  The  Farmers  Elevator  here  is  paying  $2.56  for  wheat — ^being  10c 
over  card  price,  and  $4.00  for  flax — being  11  cents  over  card  price.  We  have 
all  been  card  price  on  flax  and  5c  over  on  wheat,  and  the  Farmers  Elevator  is 
getting  the  biggest  part  of  the  grain  at  that.  ♦  ♦  * 

Yours  very  truly, 


J.  A.  Kappadall. 


[From  the  files  of  the  Northwestern  Elevator  Company.] 

Nov.  2(?),  1917. 

Grain  Bulletin, 

Chamh  of  Com.,  City. 

Gentlemen  :  Will  you  please  take  up  with  the  Millers’  Committee  in  relation 
to  Casselton,  N.  D.?  This  mill  is  operated  by  Baldwin,  and  they  are  paying 
$2.10  for  wheat  regardless  of  the  amount  of  inseparable  matter  it  may  contain, 
and  drawing  wheat  5  or  6  miles  to  the  south  of  Everest  and  all  around  that 
country. 

♦  *  ^  *  *  *  ♦ 

Yours  truly, 

(Unsigned)  Gen.  Supt. 


Occident  Elevator  Company, 

Billings  Mont  10-29-17. 

Mr.  M.  R.  Devaney,  Gen-Mgr. 

Mpls  Minn. 

Dear  Sir:  *  *  *  Hardin,  Laurel,  and  Silesia  are  our  strong  competitive 

points  owing  to  the  Farmers  Elev  at  Hardin  and  the  mill  at  Laurel.  Of  course 
had  conditions  been  different  at  Laurel  and  Billings  our  receipts  and  profits 
would  show  up  much  better  t  Yegen,  Laurel  and  Silesia.  We  have  lost  con¬ 
siderable  business  from  these  stations  on  account  of  the  liberal  grades  and 
dockages  allowed  by  the  mills.  In  a  way  one  cannot  blame  them  as  it  is  the 
cheapest  wheat  they  can  get  but  it  deals  us  lots  of  grief. 

Yours  truly 

S  J  Epler 


The  Northwestern  Elevator  Company 

South  Shore,  1-21-16 


Mr.  C.  A.  Magnuson,  Brest. 

Minneapolis,  Minn. 


Dear  Sir:  The  situation  here  is  not  good  the  Farmers  are  taking  two-thirds 
of  all  stuff'  coming  to  town.  They  are  paying  all  kinds  of  prices,  and  are  awful 
loose  on  dockage. 

******* 


Yours,  truly. 


Northwestern  Elevator  Co., 

Old  Chamber  of  Commerce. 


Jas.  Hanna. 

Empire  Elevator  Co. 

Sept.  22,  1916. 


Gentlemen  :  Answering  your  letter  of  the  17th  concerning  price  of  grain  at 
Granite  Falls  will  say  that  the  Red  Wing  Milling  Co.  and  ourselves  are  only 
paying  over  list  for  old  wheat.  We  would  be  very  glad  to  get  down  on  a 
reasonable  basis  if  the  Red  Wing  Milling  Co.  would  but  the  way  the  matter 
stands,  we  cannot  allow  them  to  pay  over  us.  If  you  have  any  further  sugges¬ 
tions  to  make  would  be  pleased  to  hear  from  you. 

Yours,  truly, 

Empire  Elevator  Co. 
(Signed)  J.  R.  McMillan,  Asst.  Secy. 

JRM-M. 


Sept.  28,  1916. 

M.  G.  Blaha,  Agt., 

Hurdsfield,  N.  D. 

Dear  Sir  :  We  have  yours  of  the  26th  informing  us  that  the  Farmers  Elevator 
Co.  are  now  getting  over  list  on  all  kinds  of  barley  and  wanting  to  know 
what  to  do. 

Yours,  truly, 

(Signed)  Andrews  Grain  Company 
By 


Bcc-Mc 


262 


COUNTRY  GRAIN  MARKETING. 


Sept.  21,  1915. 

H.  J.  Thoestenson,  Agt., 

Northwood,  N.  D. 

Deak  Sie  :  Your  letter  of  the  19th  is  received  and  noted  very  fully.  It  is 
quite  apparent  that  our  friend  at  the  Mill  is  up  to  his  old-time  tactics  of  getting 
business  without  regard  to  the  manner  in  which  he  gets  it,  but  I  think  you  did 
perfectly  right  in  calling  the  attention  of  one  of  the  directors  in  the  Mill  to 
this  condition.  I  rather  think  it  may  have  some  rather  good  effect.  If  it  has 
not,  I  would  suggest  that  you  take  other  directors  of  the  Mill  Co.  into  your 
confidence.  In  fact,  I  believe  it  would  be  a  very  wise  thing  for  you  to  try  to 
have  a  little  conference  with  all  the  directors  of  the  Mill ;  also  to  have  a  little 
meeting  among  the  buyers  of  grain  in  your  market  so  as  to  talk  these  matters 
over  and  see  if  there  is  not  some  possible  chance  for  uniformity  of  action. 

It  might  be  possible  to  accomplish  something  in  this  direction.  At  least  it  is 
worth  an  effort  which  I  hope  you  will  put  forth  at  once.  But  if  you  find  that 
there  is  no  chance  to  do  anything  in  that  direction  then  you  will  have  to  jump 
in  and  take  your  share  of  the  grain  on  as  good  a  basis  as  you  can  get  it. 
Please  advise  me  further  in  regard  to  this  in  a  day  or  two. 

Yours,  truly, 

BCC-Mc  By  Andeews  Geain  Co. 


Minneapolis,  Minn.,  Aug.  17,  IQlIf. 

Thoepe  Elevatoe  Co., 

City. 

Gentlemen  :  I  understand  that  at  Ada,  Minn.,  the  Farmers  Elev.  Co.,  are 
giving  free  storage.  It  is  also  stated  that  some  of  the  line  people  at  Ada  will 
start  paying  3^  over  list  on  #1°  and  2  Nor.  wheat.  As  our  list  only  gives  us  a 
margin  of  it  looks  to  me  as  though  it  was  a  losing  game  from  the  start  to 
do  that. 


li:  $ 

Yours  truly, 


*  >|C  4;  * 

C.  A.  Magnuson,^ 

Prest. 


Section  10.  Reasons  for  severity  of  mill  competition. 

The  disturbance  in  the  country  markets  which  is  frequently  created 
by  the  mill  elevator  is  due  chiefly  to  its  desire  to  supply  its  grinding 
requirements.  Since  the  mill  elevator  is  in  many,  if  not  most,  cases 
in  business  for  the  purpose  of  supplying  wheat  to  the  mill,  ele¬ 
vators  of  this  type  necessarily  become  a  serious  factor  in  the  market 
whenever  the  receipts  at  the  local  station  are  small,  or  other  local 
marketing  conditions  are  such  that  the  mill  is  not  obtaining  its  grind¬ 
ing  requirements.""  At  such  times  the  mills  as  a  rule  will  pay  any 
price,  more  or  less,  regardless  of  their  competitors. 

The  other  principal  types  of  elevators  are  grain  merchandisers  and 
derive  their  profits  from  such  merchandising  operations.  The  mills, 
on  the  other  hand,  derive  their  profits  chiefly  from  the  manufacture 
of  flour,  and  many  of  them  either  do  not  merchandise  grain  at  all  or 
only  to  a  limited  extent.  While  the  mills  do  not,  of  course,  wish  to  pay 
more  for  wheat  than  is  necessary,  yet  when  they  require  it  for  grind¬ 
ing  they  are  often  willing  to  pay  prices  that  leave  the  merchandising 
elevators  little  or  no  profits. 


Northwestern  Elevator  Company. 

12  This  applies  to  mill  line  as  well  as  individual  mill  elevators,  in  so  far  as  the  former 
are  engaged  in  supplying  mill  requirements. 


! 


t 

i 

1 


I 

li 


'J- 

*  |! 


COMPETITIVE  CONDITIONS  IN  COUNTKY  BUYING. 


263 


August  28,  1919. 

Albeet  Kunze,  Agent, 

St.  Bonifacius,  Minn. 

Dear  Sir:  Note  what  you  say  about  the  mill  at  Waconia  having  paid  some 
premium  for  wheat. 

*  ♦  *  ♦  *  «  ♦ 


How  would  it  do  for  you  to  slip  over  to  Waconia  and  find  out  exactly  what  is 
doing — have  a  heart  to  heart  conference  with  the  mill  people  and  do  what  you 
can  to  induce  them  to  come  down  to  the  card  basis.  If  they  refuse  to  do  so, 
we  have  no  alternative  but  to  authorize  you  to  pay  their  price  at  St.  Bon  in 
case  you  have  difficulty  in  holding  deliveries  tributary  to  your  territory.  In 
other  words,  we  don’t*  propose  to  be  losing  wheat  from  St.  Bon  territory  to 
Waconia — would  rather  meet  the  Waconia  price  occasionally  than  do  so. 
Report  further  with  a  word  on  this  sheet. 

Yours  truly, 

PowExts  Elevator  Company 
By  W.  K.  P.,  Mgr. 

WKP*K  8-29. 


Dear  Sir:  Just  had  a  talk  with  the  Mill  people  this  evening.  They  told 
me  they  would  pay  card  price  from  now  on  unless  they  can’t  get  wheat  enough 
to  run  their  mill.  They  say  the  farmers  are  holding  back  their  grain  this 
year. 

Yours  truly, 

Albert  Kunze. 


Received  10-28-14. 

Hurdsfield,  N.  D.,  10/26/14. 

Andrews  Grain  Co., 

Minneapolis,  Minn. 

Gentlemen:  Market  conditions  are  beginning  to  get  bad  here  already.  I 
expected  it,  but  did  not  look  for  it  so  early  in  the  season.  The  Occident  have 
been  paying  a  cent  over  list  for  Marquis  and  admit  that  they  are  willing  to  pay 
over  for  any  good  wheat  for  milling,  because,  “  loe  are  millers  and  need  good 
milling  wheat.”  Sounds  like  Grobe  to  me. 

*  H:  *  *  *  * 


Yours  truly, 


W.  M.  Thompson. 


Minneapolis,  Minn.,  Aug.  17,  1914- 


Thorpe  Elevator  Co., 

City. 


Gentlemen  :  *  *  *  The  Mill  is  undoubtedly  paying  over  list  to  get  wheat 

•o  grind.  I  understand  also  they  are  giving  free  storage  on  all  kinds  of  grain. 

:  wish  you  v/ould  advise  me  what  you  think  of  the  situation,  and  what  in  your 

)pinion  ought  to  be  done  at  that  point. 

Yours  truly,  ^  « 

G.  A.  Magnuson,” 

Brest. 


Andrews  Grain  Co., 

North  WOOD  N.  D.  Station,  June  4t  1913. 

Andrews  Grain  Co., 

Minneapolis,  Minn. 

Dear  Sir*  The  market  condition  here  is  the  same  as  it  has  been  the  Mill  is 
advertising  ’in  the  paper  for  wheat  and  the  Farmers  man  is  right  after  it. 
♦  *  * 


Yours  truly, 


(Signed)  O.  M.  Lee. 


18  Northwestern  Elevator  Company. 


264 


COUNTRY  GRAIN  MARKETING. 


Andrews  Grain  Co., 

Northwood  N.  D.  Station,  Sept.  25,  1912. 

Andrews  Grain  Co., 

Minneapolis,  Minn. 

B.  C.  C. 

Dear  Sirs  :  Mr.  Larson  Mgr.  of  the  Mill  here  told  me  he  was  going  to  pay  2^ 
over  list  for  milling  wheat  for  a  while  in  order  to  get  enough  to  grind. 

I  trid  today  to  get  the  line  agents  to  come  down  to  list  but  the  Cargills  agent 
thinks  he  will  have  to  pay  over  list.  I  hardley  think  the  mill  will  stay  up 
very  long  but  can  not  tell. 

Yours  truly, 

(Signed)  O.  M.  Lee. 


Section  11.  Reasons  for  the  severity  of  cooperative  competition. 

Opposition  to  line  companies. — Several  factors  are  undoubtedly 
responsible  for  the  competitive  conditions  created  by  the  cooperative 
or  farmers’  elevators.  Of  prime  importance  among  such  factors  must 
be  reckoned  the  more  or  less  unfriendly  attitude  of  many  farmers  and 
farmers’  organizations  toward  the  line-elevator  companies  because 
of  injuries  which  the  farmers  believed  they  have  suffered  at  their 
hands.  This,  of  course,  operates  to  a  certain  extent  to  prevent  the 
various  line  companies  from  procuring  grain  even  though  they  offer 
equal  or  higher  prices  therefor. 


[From  the  files  of  the  Van  Dusen-Harrington  Company.] 


Fessenden,  N.  D.,  11/6/17. 


Mr.  H.  A.  Fietus, 

Minneapolis,  Minn. 

Dear  Mr.  Fietus  :  I  want  to  ask  you  as  a  special  favor  not  to  use  letter  heads 
as  per  the  enclosed  in  writing  to  any  of  my  former  e.evator  accounts,  as  it  has 
the  same  effect  on  them  as  shaking  a  red  cloth  at  a  Bull,  as  there  is  an  awful 
strong  sentiment  among  the  average  farmer  elevator  companies  against  com¬ 
mission  houses  who  own  a  large  line  of  old  line  elevators  and  letter  heads  like 
this  certainly  advertises  us  in  good  shape  along  this  line. 

Just  to  show  you  how  a  great  many  farmers  organizations  feel  about  doing 
business  with  what  they  call  old  line  firms,  the  farmers  organized  at  Armaur- 
dale,  N.  D.  I  did  not  waste  any  time  going  to  see  them  at  all  as  I  was  told 
just  what  they  were,  but  they  made  arrangements  early  with  Kellogg  Commis¬ 
sion  Co.,  and  threw  them  over  when  they  learned  they  owned  the  Atlantic  Elev. 
Co.,  and  made  arrangements  with  the  Brown  Grain  Co.  only  to  learn  later  on 
that  they  were  the  St.  Anthony  &  Dakota  and  finally  landed  with  McCarthy 
Bros,  a  strictly  commission  house. 

This  crowd  at  Wimbledon  are  somewhat  Equity  inclined  and  the  manager 
asked  me  today  if  Van  Dusen-Harrington  owned  all  these  line  of  Elevators.  I 
put  him  off  by  telling  him  you  were  joint  traffic  manager  for  all  the  above  com¬ 
panies  but  I  could  see  he  did  not  seem  satisfied  and  I  know  such  letter  heads  as 
this  should  not  be  used  in  correspondence  with  our  local  shippers  and  I  hope 
your  stenographer  will  be  instructed  thoroughly  so  that  they  will  not  use  it 
especially  when  writing  to  Farmers  Elev.  Co. 

Yours  truly. 


(Signed)  E.  O.  Dilling. 


[From  the  files  of  the  Powers  Elevator  Company,] 

Halliday,  N.  D.,  1/7/15. 

Mr.  W.  K.  Powers, 

Minneapolis,  Minn. 

Dear  Sir  :  The  Farmers  Elevator  people  are  pretty  sore  at  me  for  going  over 
list. 

:)c  4:  4:  *  4:  *  * 

I  offered  one  of  his  stock  holders,  the  limit  on  wheat  today  and  he  laughed 
at  me  and  told  me  that  he  had  been  told  that  if  I  gave  him  more  than  list  price. 


COMPETITIVE  CONDITIONS  IN  COUNTKY  BUYING. 


265 


I  would  get  it  back  some  way  either  in  dockage  or  weight.  I  just  told  him  to 
try  me  and  see  where  he  got  the  most  money,  as  it  was  money  that  he  wanted 
for  his  grain. 

Yours  truly, 

J.  P.  Havens. 


Andeews  Grain  Co. 
Northwood  N  D  Station,  June  1918. 

Andrews  Grain  Co 

Minneapolis  Minn. 

Dear  Sir  *  *  *  There  is  about  125  wagons  loads  daily  in  town  but  I 

cant  buy  it  the  Farmers  think  this  house  was  bought  to  stop  a  good  market  and 
thay  wont  patronise  us  if  they  can  help  it. 

Yours  truly 

(Signed)  O.  M.  Lee. 

Friendly  attitude  of  farmers  toward  cooperatives. — As  con¬ 
trasted  with  the  foregoing  attitude  on  the  part  of  the  farmers  toward 
the  line  house  is  the  friendly  disposition  manifested  toward  the 
farmers’  elevators.  In  part  this  is  due  to  the  belief  that  farmers’ 
(and  also  mill  elevators)  are  a  protection  to  the  farmer  and  in  part 
also  to  a  desire  to  support  a  farmers’  institution. 

[From  the  files  of  the  Powers  Elevator  Company.] 

Halliday,  N.  D.  1/7/15. 

Mr.  W.  K.  Powers, 

Minneapolis,  Minn. 

Dear  Sir:  *  *  *  I  gave  our  printer  the  grain  prices  for  this  weeks  paper, 

and  I  put  wheat  and  Durum  up  at  the  advanced  prise — ^The  Farmers  buyer  told 
me  he  would  not  have  to  raise  the  price  as  he  had  enough  stock  holders  who 
would  stay  by  him. 

*  Hs  ♦  *  *  *  * 

Yours,  truly, 

J.  P.  Havens. 


Andrews  Grain  Co. 
Regan  N.  D.  Station,  11/2,  19 Vi. 


Andrews  Grain  Co 

Minneapolis  Minn. 

Dear  Sirs  \  We  don’t  see  any  real  need  of  paying  20  over  as  it  seems 

we  are  not  able  to  move  some  of  these  farmers  at  any  price  at  least  I  have 
been  told  by  several  that  they  would  not  haul  a  bushel  away  from  the  Farmer’s 
Elevator  even  if  I  could  pay  them  250  more  than  the  Farmers  were  able  to  pay. 
*  ^  ♦ 


They  are  very  easy  on  grades  and  dockage  also. 
Yours  very  truly 

(Signed) 


A.  B.  Greenfield. 


Charbonneau,  N.  D.,  12/26,  1914. 

Victoria  Elev.  Co., 

Mpls,  Minn. 

Gentlemen  •  *  *  *  I  have  done  all  in  my  power  to  get  our  share,  and  I 

have  tryed  every  thing  I  can  think  of  to  get  our  share  but  can’t  get  any  hoult 
I  have  talked  to  the  farmers  to  try  us,  and  they  say  we  would  haul  to  you  but 
we  have  got  our  Farmers  Elev.  here  and  we  must  support  that,  as  long  as  we 
are  treated  right,  so  what  can  I  do?  There  are  about  90%  of  the  farmers 
around  here  interested  in  the  Farmers  Elev.  so  the  only  thing  I  can  see  to  do 
is  to  wait  till  the  turn  comes  when  some  of  the  stock  holders  get  dissatisfied 
they  are  hauling  now  to  the  Farmers  Elev.  for  2c  less  than  we  are  paying. 

*  *  '^  •  ♦  *  * 

Yours  truly, 


C.  F.  SCHOEN. 


266  COUNTRY  GRAIN  MARKETING.  '  ~  I  ■ 

f 

Andrews  Grain  Co.,  \ 

Northwood  N.  D.  Station,  Jan.  16,  1913.  ^ 

Andrews  Grain  Co.,  f 

Minneapolis,  Minn.  ^  4. 

Dear  Sirs  :  I  have  trid  for  a  week  to  get  some  wheat  at  one  cent  over  the  ^ 
price  the  rest  is  paying  but  can  not  tutch  it  at  that  I  have  talked  to  the  ^ 
farmers  and  asked  them  why  they  would  not  hall  some  here  and  they  say  they  r  ' 
would  sooner  the  Mill  or  the  Farmers  elevator  would  get  it  as  they  was  run  |  ■ 
to  protect  the  farmer.  I ; 

Yours  truly,  f 

(Signed)  O.  M.  Lee. 

It  must,  of  course,  be  noted  that  the  loyalty  of  the  farmer  toward 
the  farmers’  elevator  and  the  cooperative  movement  is  not  always  |, 
altruistic,  and  that  he  may  be  very  largely  influenced  in  his  attitude  |  ^ 
by  the  expectation  of  dividends,  either  stock  or  patronage,  or  both. 
Giving  full  weight  to  this  factor,  hov/ever,  it  is  none  the  less  "f; 
true  that  many  farmers  are  influenced,  in  some  degree,  to  patron-  £ 
ize  the  cooperative  or  farmers’  house  by  the  belief  that  in  so  doing  t 
they  are  assisting  not  only  the  farmers’  house  but  also  the  entire  I-, 
farmers’  cooperative  movement,  in  which  many  of  them  are  firm  |  ■ 

believers.  | 

Effect  of  dividends. — In  the  early  days  of  the  farmers’  or  coopera-  I 
tive  elevator  movement  the  penalty  clause  often  constituted  an  induce-  " 
ment  to  the  farmers  to  haul  to  the  farmers’  elevator.  But  as  this  type  v 
of  house  became  a  more  significant  factor  in  marketing  grain,  the  f  . 
penalty  clause  declined  in  importance,^^  and  its  function  as  an  inducer  | 
of  patronage  was  usurped  by  the  large  dividends,  either  stock  or  } 
patronage,  or  both,  which  such  houses  gradually  became  able  to  dis-  ^  : 
tribute.  To-day  these  dividends  probably  constitute  one  of  the  most  |  “ 
important  elements  in  the  competition  in  the  buying  of  grain  in  the  ( 
country.  i 

[From  the  files  of  the  Occident  Elevator  Company.]  | 

Law  Office  of  H.  A.  Armstrong,  f 

Hazelton,  N.  D.,  September  16,  1919.  |  < 

Ron.  William  Langer,  T  -i 

Attorney  General,  Bismarck,  N.  D.  ^ 

In  re ;  Occident  Elevator  Company. 

Dear  Sir:  *  *  *  When  the  Farmers’  Elevator  was  started  in  our  town  I 

attempted  to  secure  some  stock  in  it  but  was  informed  that  I  was  not  a  farmer, 
although  I  was  having  about  500  acres  farmed  to  small  grains  each  year.  A 
lot  of  the  grain  raised  on  my  land  was  hauled  to  this  Elevator  and  sold  there,  by 
my  tenants,  and  when  the  Elevator  came  to  make  their  annual  settlement  they 
declared  a  dividend  reported  to  me  by  a  stockholder  of  almost  100%.  It  was 
very  difficult  for  me  to  feel  that  I  was  getting  a  “  square  deal  ”  out  of  the  transac¬ 
tion;  for,  if  they  could  declare  any  such  a  dividend  as  the  one  I  have  quoted 
they  were  certainly  not  paying  me  the  full  price  for  my  grain.  In  consequence, 
very  little  of  my  grain  has  gone  to  the  Farmers  Elevator  since.  I  feel  that  it 
is  possible  that  there  are  two  sides  to  the  question. 

Respy.  Yours,  (Unsigned.) 

1*  Many  of  the  cooperative  or  farmers  elevators  organized  in  recent  years  have  not 
included  this  clause  in  their  by-laws  at  all,  and  at  present  the  evidence  in  the  possession 
of  the  Commission  indicates  that  the  clause  is  practically  never  enforced. 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING. 


267 


[From  the  files  of  the  Northwestern  Elevator  Company.] 


Oct.  31,  1917. 

Grain  Bulletin, 

City. 

Gentlemen  :  *  *  *  At  Rothsay  we  can  not  do  any  business  without  paying- 
over  list,  inasmuch  as  the  Farmers  Elevator  is  cooperative,  and  they  are  paying 
back  to  those  hauling. 

*  *  *  *  *  ♦ 


Yours  truly, 


(Signature  not  decipherable.) 

Gen.  Supt. 


Aug.  19th,  1915. 

Sawyer,  Trenton  CJiarhonneau. 

Dear  Sir  :  Does  the  Farmers  Elevator  at  your  station  pay  a  dividend  at  the 
end  of  the  crop  for  the  amount  of  grain  hauled,  and  does  the  Manager  adver¬ 
tise  this  to  draw  trade?  If  so,  this  is  competition  that  we  have  a  right  to 
meet,  and  you  have  the  right  to  put  the  price  up  on  grain  to  the  amount  of  the 
dividend  which  the  Manager  of  the  Farmers  claims  to  be  dividing  at  the  end 
of  the  year. 

I  expect  to  be  out  there  within  the  next  two  weeks  and  will  talk  this  matter 
over  with  you,  so  please  do  not  use  this  until  after  I  am  out  there,  and  try  and 
keep  the  market  as  smooth  as  possible  until  that  time. 

Yours  very  truly, 

Victoria  Elevator  Co. 

RGC.  MBL. 


Charbonneau,  N.  D.,  12,  26,  191Jf. 


Victoria  Elev  Co., 

Mpls,  Minn. 

Gentlemen  :  Yours  of  the  22  instant  at  hand  and  note  what  you  say  about 
the  Farmers  getting  most  all  the  wheat. 

*  *  *  *  *  * 


Please  dont  think,  that  I  am  pleased  and  contented,  with  the  way  business 
goes  here,  there  is  nothing  harder  on  my  nerves  and  gives  me  more  werreau 
then  when  I  have  to  sit  around  and  cant  do  anything  If  the  future  wont  turn 
out  any  better  than  the  past  Then  I  am  sorrow  that  we  ever  built  here.  I 
have  got  about  $1300  invested  in  a  house  I  wish  both  house  and  Elev.  was 
somewhere  else.  You  may  do  better  by  sending  some  one  else  here  but  as 
long  as  them  Farmers  stock  holders  think  they  will  clear  about  $100  on  a  $25 
share  it  is  hard  to  get  them  to  go  pass  the  Farmers  Elev. 

Yours  truly, 

C.  F.  SCHOEN. 


Section  12.  Independent  elevator  competition. 

Although  there  are  a  considerable  number  of  independent  ele¬ 
vators  in  the  four  northwestern  grain  States,  their  relative  impor¬ 
tance  is  much  less  in  this  area  than  east  of  the  Mississippi.  Possibly 
it  is  in  part  due  to  this  fact  that  the  correspondence  contains  such 
relatively  infrequent  references  to  the  competition  of  this  type  of 
house.  Such  letters  as  do  refer  to  the  operations  of  independent 
houses  usually  indicate  that  they  tend  to  work  in  harmony  with  their 
line  competitors.  Moreover,  the  mere  lack  of  reference  to  the  com¬ 
petition  of  this  class  of  house  would  in  itself  seem  to  indicate  that 
their  competition  is  not  especially  severe. 


268 


COUNTKY  GRAIN  MARKETING, 


Section  13.  Line-elevator  price  policy. 

F rom  a  careful  examination  of  the  correspondence,  it  appears  rea¬ 
sonably  safe  to  conclude  that  as  a  matter  of  general  policy  the  line 
companies  endeavor  so  far  as  possible  to  stick  to  card  or  list 
prices. 

Sept.  4,  1919. 

F.  E.  Bye,  Agent 

Gilby,  N.  D. 

Dear  Sib:  *  *  *  The  receipts  seem  to  be  dividing  up  rather  fairly  and 

under  these  circumstances,  we  do  not  want  to  give  you  any  instructions  to  pay  up 
for  such  stuff  as  is  represented  by  these  samples,  or  for  any  others.  We  still 
feel  that  a  reasonable  amount  of  business  done  at  a  reasonable  margin  is  a 
great  deal  better  than  lots  of  business  done  at  no  margins.  We  down  here 
who  are  furnishing  the  money  on  which  our  agents  buy  grain  and  footing  the 
bills  covering  the  expense  of  doing  business  at  their  stations,  cannot  lose  sight 
of  the  fact  that  this  money  must  come  back  to  us  in  some  way  or  we  will  have 
to  shut  up  shop.  The  only  way  we  have  of  getting  this  back  is  to  buy  our  grain 
in  the  country  on  a  fair  margin  and  cannot,  consequently,  let  ourselves  become 
blinded  with  this  fact  by  a  competitor’s  doing  a  little  business. 


Yours  very  truly, 


HGT:  ML 

CC:  Mr.  Cochrane. 


Andrews  Grain  Co. 


By 


The  Northwestern  Eeevator  Company. 

August  25th,  1919. 

Circular  No.  11. 

To  All  Agents: 

I  notice  that  a  good  many  of  you  are  paying  a  good  deal  over  the  card  price. 
I  w’ould  like  to  have  you  write  me  as  to  whether  or  not  you  have  tried  to  get 
the  market  down  to  card  price  or  as  near  card  price  as  possible.  If  you  have 
not  already  done  so,  will  you  try  to  do  so.  You  will  understand  of  course, 
that  in  order  to  make  a  fair  profit  we  have  got  to  buy  the  grain  as  near  card 
price  as  possible. 


Yours  truly, 
(Pencil  note) 


C.  A.  Magnuson,  Prest. 


Arthur,  N.  D.  8/26/19. 

The  St.  Anthony  has  agreed  to  come  to  list,  but  we  can’t  do  anything  with  the 
Farmers  Elev  Agent,  but  we  are  going  to  pay  list  after  today  and  see  how 
it  works  out. 

Yours  truly,  (Signed)  H.  W.  Buchanan. 


Sept.  9,  1919. 

Mr.  B.  G.  Cochrane, 

Detroit,  Minn.  612  Fourth  St.  So. 

Dear  Sir:  We  have  yours  of  the  6th  relative  to  the  situation  at  Cashel,  and 
also  have  yours  of  the  8th  and  note  that  you  will  be  at  Cashel  to-day,  and  have 
asked  us  to  call  you  up  if  we  have  any  special  instructions  to  give  you. 


Competitively,  the  mill  line  is  sometimes  to  be  considered  as  a  mill  and  sometimes 
as  a  commercial  line.  In  so  far  as  a  mill  line  serves  as  a  feeder  for  the  mill,  it  will 
compete  to  obtain  grain  more  or  less  regardless  of  its  other  line  competitors.  Many  of  the 
northwestern  mill  lines,  however,  are  operated  largely,  if  not  chiefly,  as  merchandising 
propositions  in  the  same  way  as  any  commercial  line  and  their  policy  coincides  in  general 
with  that  of  the  commercial  lines.  Except  in  so  far,  therefore,  as  the  discussion  refers  to 
the  competition  of  mill  lines  to  obtain  grain  for  grinding,  the  term  “line”  as  used  in  the 
discussion  is  intended  to  include  both  commercial  and  mill  lines. 

»*  Prices  issued  by  the  Grain  Bulletin  service.  (Ch.  VIII,  sec.  1.) 


COMPETITIVE  CONDITIONS  IN  COUNTKY  BUYING. 


269 


We  have  just  called  up  the  Equity  on  this  situation  again,  and  he  claims  that 
their  man  was  delayed  in  getting  to  that  point  but  that  he  is  giving  Landousky 
strict  instructions  to  come  down  to  list.  Now  we  do  not  believe  that  they  are 
trifling  around  on  this  proposition  and  feel  absolutely  certain  that  they  want 
to  buy  grain  right  at  that  point,  as  well  as  at  all  others.  In  view  of  this,  we 
doubt  its  being  good  policy  to  spring  prices  at  that  point  until  we  have  exhausted 
all  reasonable  means  of  getting  the  station  on  the  right  basis.  It  is  easy 
enough  to  put  these  prices  up,  but  it  is  something  else  to  bring  them  down. 
We  are  not,  however,  going  to  fool  around  on  this  thing  all  winter,  but  do  not 
feel  just  yet  like  putting  that  station  at  freight  off,  which  is  undoubtedly  the 
only  other  step  open  to  us. 

Yours  very  truly, 

Andrews  Grain  Co., 
By 

HGT  :ML 


November  4th,  1916. 

Mr.  P.  J.  Smith, 

Sec.,  Northland  Elevator  Co.,  City. 

Dear  Sir  :  We  note  your  letter  of  the  2nd  and  also  the  letter  from  your  agent  at 
Ambrose.  The  general  buying  of  our  grain  at  Colgan  has  been  very  satisfactory 
to  date.  However,  there  was  quite  a  stir  made  by  our  agent  as  well  as  all  of 
the  other  buyers  in  that  territory  on  account  of  your  agent  having  received  a 
special  schedule  of  prices  to  buy  on  and  all  of  the  buyers  then  got  excited  and 
since  that  time  the  thing  has  been  somewhat  demoralized.  Our  agent  wrote  in 
here  and  wanted  to  know  why  it  was  that  the  Northland  at  Ambrose  were 
sending  out  special  cards  of  their  own  and  not  following  the  grain  Bulletin 
Card.  I  have  had  the  same  question  come  up  before  and  I  do  not  know  whether 
this  is  going  to  lead  to  demoralization  in  a  general  way  or  not.  However,  we 
are  checking  up  our  buying  at  Ambrose  and  we  certainly  do  not  propose  to  pay 
Minneapolis  prices  for  wheat  at  Colgan  if  we  can  help  it. 

Yours,  truly, 

Atlantic  Elevator  Co., 
By 


FCR/c 

Occident  Elevator  Co., 

Minneapolis,  Minn.,  8-31-16. 

Osborne-McMillan  Co., 

City. 

Gentlemen  :  I  have  your  letter  of  the  30th  and  return  herewith  letter  from 
your  agent  at  Bergen.  Our  agent  at  Bergen  was  in  here  about  ten  days  ago 
and  we  impressed  on  him  the  fact  that  receipts  at  his  point  were  going  to  be 
light  and  that  we  wanted  him  to  buy  the  stuff  at  the  card.  We  have  been  advis¬ 
ing  him  since  to  follow  the  card,  and  if  he  has  not  been  doing  this  I  would  like 
speciflc  cases. 

♦  sc  Hi  *  *  *  * 

Yours,  truly, 

Occident  Elevator  Company, 

Per  (Signed)  M.  R.  Devaney, 

mrd  1. 
end. 

Section  14.  Relation  of  Grain  Bulletin  to  price  competition. 

This  policy  of  the  line  elevator  companies  in  attempting  to  hold 
the  markets  at  which  they  operate  to  the  Grain  Bulletin  card  or  list 
price  is  presumably  based  upon  the  fact  that  the  card  deducts  from 
terminal  market  prices,  not  only  freight,  but  also  a  handling  mai:gin 
of  several  cents,  which  is  sufficiently  liberal  to  cover  both  expenses 
and  a  margin  of  profit.^^  (Ch.  VIII,  sec.  1.)  If  this  card  or  list 
price  can  be  maintained,  therefore,  the  line  house  is  usually  assured 


”  This  would  probably  apply  to  all  houses  except  those  very  Inefficiently  operated  or 
which  handle  a  very  small  volume  of  grain. 


270 


COUNTRY  GRAIN  MARKETING. 


of  a  profit  subject  only  to  being  able  to  procure  a  fair  volume  of  S 

grain.  ...  J 

Basis  for  agreements. — It  is  difficult  to  estimate  how  important  a  « 
part  this  card  plays  in  the  competition  of  country  elevators.  The  1 
fact  that  it  quotes  a -buying  price  for  each  station  and  is  generally  in  1 
use  throughout  the  Northwest  would  appear,  in  a  technical  way,  m 
to  facilitate  agreements  by  reason  of  the  fact  that  the  elevators  at 
each  point  thus  have  a  minimum  buying  price  upon  which  agree- 
ments  or  understandings  could  readily  be  based.  ^ 

Nov.  30th,  1915.  i 

Mr.  G.  H.  WisHEK,  Pres.,  A 

Zeeland  State  Bank, 

Zeeland,  N.  Dak. 

Dear  Sir:  Your  letter  of  the  29th  received.  We  are  writing  Mr.  Schatz.  J 
today  to  try  and  get  him  down  to  card  basis,  also  that  he  must  not  take  « 
wheat  lower  than  54  pounds  to  the  bushel  for  better  than  4  wheat  and  2  grade  J 

must  test  56  pounds.  .  ^ 

The  trouble  with  Zeeland  is  that  the  buyers  are  all  working  on  their  own  J| 
basis,  and  not  on  a  common  basis.  We  would  suggest  that  you  and  the  other 
buyers  in  town  take  the  Grain  Bulletin  card  which  is  sent  out  from  Aberdeen,  j 
S.  Dak.,  every  night  and  you  would  get  this  on  the  noon  train  showing  the 
previous  days  market,  and  all  agree  to  buy  on  that  basis.  We  are  enclosing  you  ^ 
herewith  a  copy  of  the  Zeeland  card  for  the  29th  and  you  will  see  by  this  that  J 
wheat  closed  at  Minneapolis  at  $1.02-3/8  to  $1.02-7/8  which  leaves  you  a  good  « 
margin  and  cuts  out  all  chances  for  difference  in  judgment  and  gives  us  a  S 
common  basis  to  work  at.  If  you  all  agiee  to  buy  on  this  basis  there  could  be  no  S 

differences  in  opinions.  M 

If  you  can  put  this  work  through  think  you  will  be  a  benefactor  to  all  the 
Grain  men  in  Zeeland  and  we  will  stick  to  this  kind  of  agreement. 

This  Grain  Bulletin  card  will  cost  each  of  you  .90  cents  per  month,  and  it  ^ 
would  be  a  good  plan  to  cut  out  the  C.  N.  D’s  as  they  only  make  trouble.  * 

Yours  very  truly,  « 

RGC.  MBL  ViCT  Elev.  Co.  J 

Secondly,  the  technical  method  of  distribution  of  Grain  Bulletin  * 
telephonic  and  telegraphic  price  changes  offers  a  means  of  facilitat-  .1 
ing  agreements.  In  order  to  reduce  the  expenses  of  this  service,  a  J 
station  having  two  or  more  elevator  subscribers  receives  as  a  rule  ■* 
only  oRe  message.  The  agent  receiving  the  same  then  distributes  the 
information  to  the  other  elevators  at  that  point.  Frequently  the  j 
agents  work  in  rotation  in  receiving  and  delivering  the  changes,  one  ^ 
doing  it  one  week,  another  the  next,  and  so  on,  and  this  system  sup-  i 
plies  good  opportunities  for  talking  oyer  prices,  etc.  J 

There  is  also  in  existence  some  evidence  that  F.  E.  Durant,  the  J 
proprietor  of  the  Grain  Bulletin,  formerly  had  weekly  conferences  "m 
with  the  operators  of  certain  important  Minneapolis  line  elevator  ® 
companies. 

[Cargill  Elevator  Files.] 

Minneapolis,  Minn.,  Sept.  17,  1915.  9 

Cargill  Elv.  Co.,  D.  D.  McMillan. 

Imperial  Elv.  Co.,  P.  L.  Howe.  » 

Monarch  Elv.  Co.,  A.  Stewart.  » 

National  Elv.  Co.,  L.  D.  Marshall. 

Northwestern  Elv.  Co.,  C.  A.  Magnuson.  1*; 

St.  A.  &  D.  Elv.  Co.,  C.  A.  Brown.  ^ 

At  a  meeting  held  about  a  week  ago,  it  was  suggested  that  the  companies*, 
named  above  meet  each  Friday  afternoon  at  3  o'clock  in  my  ofiBce,  for  consulta-^j 
tion  of  matters  of  general  interest.  S 

Please  be  represented  this  afternoon.  » 

F.  B.  Durant.  a  i 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING.  271 

Probable  influence  of  Grain  Bulletin. — It  should  not  be  in- 
'  ferred,  however,  that  these  meetings  necessarily  involved  illegitimate 
discussions  or  resulted  in  illegitimate  action  of  any  sort.  If  it  be 
assumed  (and  there  is  some  evidence  to  support  the  view)  that  Mr. 
Durant  attempts  to  make  the  card  show  a  fair  minimum  buying  price 
I  in  the  country,  it  is  necessary  that  he  have  a  thorough  knowledge  of 
the  character  of  the  crop  and  similar  conditions  throughout  the  entire 
Northwest.  The  officers  of  the  line  companies  have  from  their  agents’ 
1  reports  such  a  knowledge  of  crop  conditions  at  their  local  stations, 
and  owing  to  the  wide  territory  covered  by  the  lines,  consultations  by 
Mr.  Durant  with  a  few  line  officers  is  sufficient  to  supply  him  with  an 
i  amount  of  information  otherwise  difficult,  if  not  impossible,  to  obtain. 

It  is  not  intended  at  all  to  imply,  however,  that  this  was  the  purpose 
■;  of  the  Durant  conferences  with  the  line  elevators,  but  only  to  suggest 
!  that  there  may  have  been  entirely  legitimate  reasons  for  such  con¬ 
ferences. 

It  may  be  regarded,  however,  as  somewhat  doubtful  that  Durant 
!  has  employed  the  card,  at  least  in  recent  years,  in  furtherance  of  the 
1  line  elevator  interests.  The  reasons  for  this  view  are  found  in  several 
‘  facts.  First,  the  lines  at  present  constitute  a  minority  of  the  sub- 
^  scribers  to  the  card  and  considerably  more  than  one-half  of  the  sub¬ 
scribers  are  elevators  of  other  types.  Secondly,  there  are  numerous 
indications  that  Durant  has  essayed,  at  least  in  recent  years,  to  make 
!  the  card  price  at  any  station  reflect  what  the  buyers  at  that  particular 
-  station  are  willing  to  pay  for  grain.  Third,  following  the  passage 
of  the  antidiscrimination  laws,  Durant  took  the  position  that  he  could 
I  not  adjust  card  prices  at  a  station  on  the  request  of  a  line  company 
I  unless  he  did  it  for  the  line  as  a  whole,  though  he  would  adjust  the 
[  price  upon  the  request  of  an  individual  operator.  Fourth,  the  cor- 
r  respondence  and  other  data  examined  failed  to  show  any  clear 
’  evidence  that  the  Grain  Bulletin  is  now  operated  in  the  interests  of 
i  the  line  elevators. 

If  the  foregoing  is  a  correct  view,  the  chief  influence  of  the  Grain 
1  Bulletin  competitively  is  the  frequency  with  which  its  prices  are  em- 
i  ployed  as  the  basis  of  agreements  among  competitors.^® 

:  Section  15.  Line-elevator  competitive  policies  on  grades,  dockages,  etc. 

Grades,  dockages,  and  weights. — As  elsewhere  indicated  (Ch.  VIII, 
'  secs.  10-11),  the  line  companies  may  lose  on  grades,  a  portion  of 
which  loss,  at  least,  is  compensated  for  by  a  profit  on  dockages 
i  and  weights.  The  line  agents  are  constantly  checked  by  their  head 
’  offices  as  to  their  grades  and  dockages  and  instructed  against  either 
overgrading  or  underdocking.  On  the  basis  of  the  letters  of  instruc¬ 
tion  to  agents  and  other  statements  contained  in  the  correspondence, 
it  may  be  stated  that,  on  the  whole,  the  policy  of  the  line  companies 
is  to  prevent  both  overgrading  and  underdocking.  Moreover,  from 
correspondence  examined,  it  appears  that  the  lines,  with  some  possible 

For  a  further  discussion  of  the  Grain  Bulletin  and  Durant’s  activities  consult  the 
chapter  on  the  Grain  Bulletin  in  Vol.  Ill  of  this  report.  In  that  volume  will  be  found 
a  detailed  discussion  of  the  relation  of  the  line  alevators  to  the  Grain  Bulletin  so  far 
as  it  was  ascertainable  and  a  comparison  of  actual  prices  paid  in  the  country  with 
'  the  Grain  Bulletin  prices,  together  with  a  detailed  discussion  of  the  relation  of  the  card  to 
i  prices  in  general.  The  foregoing  discussion  relates  only  to  the  matter  of  the  competitive 
'  effects  of  the  card  at  individual  stations. 


272 


COUNTRY  GRAIN  MARKETING. 


exceptions,  desire  their  agents  to  be  as  accurate  as  possible  in  these 
matters  and  also  in  weights. 


The  Northwestebn  Elevator  Company, 

August  25th,  1919. 


Circular  No.  11. 
To  All  Agents: 


* 


I  want  to  say  this,  that  we  do  want  to  get  our  full  share  of  the  grain,  but  if 
in  order  to  get  it,  we  have  to  pay  a  high  price  for  it,  we  want  no  losses  on 
shortage  in  dockage,  shortage  in  grades,  or  shortage  in  weights.  I  want  you  to 
write  me  fully,  particulars  in  relation  to  these  matters  on  this  sheet  for  refer¬ 
ence. 

Yours  truly, 


O.  A.  Magnuson,  Prest. 


May  15,  1917. 


A.  B.  Greenfield,  Agt., 

Regan,  N.  D. 

Dear  Sir  :  We  have  yours  of  the  12th.  Very  glad  to  note  that  the  buyers  in 
your  market  are  all  down  to  strictly  list  prices  and  proper  grades  and  dock¬ 
ages.  Reference  to  our  general  letter  of  the  14th  and  again  the  one  of  today, 
will  show  you  the  grave  importance  of  paying  nothing  more  than  list  price. 

Yours  truly. 


Andrews  Grain  Co. 


By 


BCC-Mc 


Occident  Elevator  Company, 

Billings,  Mont.,  10-26-17. 


Mr.  M.  R.  Devaney,  Gen.  Mgr. 


Mpls,  Minn. 


Dear  Sir:  *  *  *  I  was  at  Boyd  this  week  investigating  a  report  to  me 

that  we  were  overgrading  and  docking  but  find  that  our  man  there  has  bought 
his  grain  so  far  right  and  far  cheaper  than  our  competitor.  I  never  had  as 
much  trouble  before  trying  to  work  in  harmony  with  our  competition  and  keep¬ 
ing  the  buyers  down  to  proper  grade  and  dockage. 

Yours  truly, 


S.  J.  Epler. 


overgraded  you  on  this  stuff  but  you  did  not  give  us  a  specific  case.  I  mean 
you  did  not  give  us  the  man’s  name  nor  the  date  nor  the  price  paid.  If  you 
would  do  that  I  would  take  it  up  with  the  Occident  Co.  and  think  they  would 
take  steps  to  get  their  agent  in  line.  They  are  not  anxious  to  overgrade  the 
stuff  nor  pay  any  more  than  it  is  worth. 


* 


* 


Yours  truly, 


Andrews  Grain  Co. 


By 


BCC-Mc 


Minneapolis,  Minn.,  Sept.  6,  1915. 


Mr.  L.  D.  Marshall,  Mgr., 

National  Elev.  Co.,  Minneapolis,  Minn. 

Dear  Sir:  Your  letter  of  the  4th  relative  to  our  Dresden  agent’s  cutting 
dockage  is  received,  and  I  can  assure  you  that  this  is  a  practice  that  we  do  not 
want  our  agent  to  reason  to. 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING. 


273 


I  will  write  our  agent  a  good  strong  letter  relative  to  maintaining  proper 
dockage  and  will  also  write  it  in  a  way  that  he  will  not  think  there  has  been 
any  complaint. 

Thanking  you  for  the  information  which  your  letter  contained,  I  remain, 
Yours  very  truly, 


Cargill  Elevator  Company. 


WY-P 


Occident  Elevator  Company 

■  12-22-15. 


Mr.  F.  C.  Rtere, 

%  Atlantic  Elev.  Co.,  City. 


Dear  Sir:  Have  your  letter  of  the  21st  and  note  what  you  say  about  the 
situation  at  North  Valley  City,  which,  of  course,  is  a  little  worse  this  year  than 
heretofore,  on  account  of  difficulty  in  grading  the  stuff.  I  am  inclined  to  agree 
with  your  agent  that  we  cannot  do  very  much  in  the  matter  of  price,  but  my 
idea  would  be  to  issue  rigid  instructions  to  our  men  to  grade  and  dock  properly, 
or  let  the  stuff  go. 

Yours  truly, 

Occident  Elevator  Company, 
PerM.  R.  Devaney,  Gen-Mgr. 


mrd  1. 


Aug.  22,  1914. 

Spaulding  Elevator  Co., 

TVorren,  Minn. 

Gentlemen  :  According  to  samples  that  we  are  receiving  from  Silva,  N.  Dak., 
we  are  inclined  to  believe  that  your  Agent  is  badly  overgrading. 

We  give  this  information  in  order  that  you  may  be  on  the  lookout  for  that 
station.  We  received  a  number  of  samples  from  our  Agent,  all  of  which  he 
overgraded,  and  we  went  after  him  bard. 


Yours  truly, 


Osborne-McMillan  Elevator  Company. 


FJS :  OM 


Minneapolis,  Minn.,  Sept.  12,  1914. 

Cargill  Elevator  Co., 

Mr.  D.  D.  MacMillan, 

City. 

Dear  Sir:  T  have  yours  of  Sept.  11th.  and  I  fully  agree  with  you  on  every 
proposition  you  make,  that  the  Line  Companies  are  largely  to  blame  for  over¬ 
grading  and*  under-docking  in  the  country.  I  do  not  heheve  this  is  on  account 
of  any  instructions  i.ssued  direct  from  the  offices  of  the  Elevator  Companies  at 
Minneapolis.  I  cannot  conceive  how  any  office  should  undertake  to  give  any 
leeway  in  regard  to  grades  and  dockage  without  having  their  ^vhoIe  line  de¬ 
moralized  to  such  an  extent  that  they  would  naturally  feel  that  they  were 
having  a  loss.  I  will  have  our  Supt.  go  to  .Tohn.son  at  once,  and  I  wish  he  and 
Mr.  Hanson  could  go  together,  because  there  is  certainly  no  reason  why  there 
should  be  any  friction  at  .Tohnson  that  I  can  see.  The  fact  of  it  is  that  we 
have  lost  grades  and  dockage  both  on  shipments  from  .Johnson,  and  that  T  have 
taken  our  Agent  there  severely  to  task  in  the  matter.  There  is  no  disposition 
on  our  part  to  permit  it  at  Johnson  or  any  other  station,  and  we  will  not  do  it  if 
we  know  it,  and  if  anyone  can  send  out  anv  stronger  letters  than  I  have  in  this 
respect,  then  I  lack  a  knowledge  of  English. 

Yours  truly, 

C.  A.  Magnuson,  Prc.st.“ 

Northland  Elevator  Co., 

Thief  River  Falls,  Station,  Oct.  24  1914. 

Agent  Nor.  Elv.  Co., 

Bronson. 

Dear  Sir:  On  receipt  of  this  letter  you  can  pay  over  list  for  all  kiuls  of 
wheat  but  I  do  not  want  you  to  overgrade  one  bushel  nor  take  any  for  less 


”  Northwestern  Elevator  Co. 


9964°— 20 - 18 


274 


CXHJITTKY  GKAIN  MARKETING. 


dockage  than  Is  necessary  to  clean  it.  If  you  can’t  see  your  way  clear  to 
follow  those  instructions  and  handle  the  grain  business  like  other  people  there 
is  only  one  way  for  me  to  do  and  that  will  be  this  check  you  out  and  get  an¬ 
other  man  to  run  our  House  at  Bronson.  I  want  you  to  file  this  letter  away 
so  that  you  will  know  that  I  have  advised  you  of  what  is  coming  if  you  don’t 
follow  my  instruction  in  this  the  wheat  we  took  in  from  Erickson  for  1°  will 
not  grade  better  then  2®  so  don’t  take  another  load  except  at  2°  with  a  good 
dockage. 

Yours  Rep 

C  W  Nelson. 


Elevation  and  storage  charges. — Similarly,  with  reference  to 
elevation  and  storage  charges,  etc.,  there  are  indications  in  the  line 
company  correspondence  that  these  concerns  do  not,  as  a  rule,  favor 
the  reduction  or  elimination  of  such  charges  as  a  means  of  obtaining 
business : 

Mpls  Nov.  5-19 IS. 

Andrews  Grain  Co., 

Mpls,  Minn. 


Gentlemen  :  We  have  your  letter  of  Nov  4th  with  your  Edmunds  agent’s 
letter  attached  and  will  say  regarding  this  that  our  agent  at  Edmunds  has  in¬ 
structions  to  collect  storage  after  Nov  1st.  It  seems  that  in  some  cases  he  had 
to  give  free  storage  at  Edmunds  on  account  of  Mr.  Alfson  giving  free  storage 
to  farmers  in  that  territory  but  we  had  this  matter  up  fully  with  him  a  short 
time  ago  and  the  understanding  is  that  he  is  to  collect  storage  at  that  station 
after  Nov.  1st.  and  I  do  not  think  that  you  will  have  any  reason  to  complain 
regarding  the  matter  of  storage  at  that  station  from  now  on. 

Yours  truly 

Occident  Elevator  Company, 
Per  F.  A.  Cousins,  Asst.  Gen.  Mgr. 


[From  McCaull-Webster  Fllea] 

Mpls.  Minn.,  Aug.  11,  1914. 

Mr.  E.  E.  Conner, 

Aberdeen,  S.  D. 

Dear  Sir:  *  *  *  Now  in  regard  to  storage,  the  others  can  do  as  they 

like  in  regard  to  this,  but  we  will  not  give  free  storage  on  this  crop  for  longer 
than  thirty  days.  If  we  did,  it  would  simple  mean  that  when  our  elevator  was 
filled  with  stored  wheat  that  we  would  have  to  ship  and  it  is  impossible  to 


protect  yourself  on  this  option. 

♦  *  * 

* 

♦ 

«  * 

Yours  very  truly, 

DW/B 

Vice  President. 

Minnekota  Elevator  Company 

March  29th  1916. 


Atlantic  Elevator  Co., 

Chamber  e  f  Commerce,  Minneapolis,  Minnesota. 


Gentlemen  :  We  are  in  receipt  of  letter  from  our  agent  at  Fonda,  North 
Dakota,  relative  to  the  report  that  he  had  been  offering  to  store  grain  free, 
and  he  advises  as  follows : 

“  I  am  not  offering  free  storage  to  anyone,  and  am  not  forced  to  do  so.  I 
presume  that  some  farmer  has  made  this  claim  to  the  Atlantic  Agent  in  order 
to  induce  him  to  cancel  storage  charges.” 

We  can  assure  you  that  if  our  agent  should  fail  to  collect  storage  at  any 
time  in  the  future,  the  amount  due  us  will  be  deducted  from  his  salary. 

We  trust  this  makes  our  position  clear  on  this  subject. 

Yours  truly, 


Minnekota  Elevator  Company, 
By  W.  H.  Gooch. 


G-T 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING.  275 

Section  16.  Line-elevator  policies  in  meeting  competition. 

Paying  competitors’  prices.— Although  the  indications  are  that 
the  lines  greatly  prefer  to  stick  to  list  prices  and  to  grade  and  dock 
correctly  and  direct  a  great  deal  of  energy  to  procuring  these  results 
through  agreements  or  understandings,  or  otherwise,  it  is  also  their 
policy  to  meet  competition  whenever  necessary.  As  a  rule,  this  is 
to  be  interpreted  to  mean  that  the  line  company  will  pay  whatever 
{irices  its  competitors  pay.  The  indications  are,  however,  that  the 
lines  are  not  usually  willing  to  go  further  than  this.  In  other  words, 
while  the  line  companies  frequently  go  over  list  in  the  prices  which 
they  pay,  the  indications  are  that  they  tend,  on  the  whole,  to  follow 
rather  than  to  lead  their  competitors  in  bidding  up  the  local  market 
prices. 

Josephine,  N.  Dak.  Sept.  10,  1919. 

Powers  Elevator  Co., 

Minneapolis,  Min/n. 

Gentlemen  :  In  regard  to  your  letter,  can  say  that  I  have  been  paying  ac¬ 
cording  to  card  price  on  all  the  durum,  with  the  exception  of  Dan  Moneghan, 
which  he  said  that  he  could  get  $2.06  at  Farmers  for  test  60#  and  I  told  him’ 
that  I  would  give  him  the  same  if  he  would  haul  over  here  which  he  did,  other¬ 
wise  the  others  were  paid  at  card  prices. 

*  ****** 
Yours  truly, 

(Signed)  Carl.  C.  Anderson. 


Crosby,  N.  D.,  Oct.  24,  1919. 

Atlantic  Elev.  Co., 

Minneapolis,  Minn. 

Dear  Sir;  The  Farmers  Elevator  here  is  paying  $2.56  for  wheat — ^being  10c 
over  card  price,  and  $4.00  for  flax — being  11  cents  over  card  price.  Shall  we 
meet  competition  or  not?  The  Northland  agent  is  also  taking  it  up  with  the 
company  too. 

Yours  very  truly, 

J.  A.  Kappadall. 


August  27,  1919. 

Carl  Anderson,  Agent, 

Josephine,  N.  Dale. 

Dear  Sir:  *  *  *  We  are  anxious  to  get  our  share  of  the  run  and  it  is 

quite  necessary  that  we  get  it  right.  I  have  authorized  you  to  pay  a  reasonable 
premium  if  the  Farmers  are  not  satisfied  with  Grain  Bulletin  margin,  but  we 
do  not  propose  to  follow  them  into  a  loss. 

#  3):  4:  4t  :!:  * 


Yours  truly, 


WKP/P 


By 


Powers  Elevator  Company, 

Manager. 


[From  the  flies  of  the  Occident  Elevator  Company.] 

* 

Cleveland,  N.  D.  Sept.  23d,  1919. 

Mr.  F.  T.  Hurley,  Asst.  Genl.  Mgr., 

Mpls,  Minn. 

Dear  Sir:  I  have  your  circular  letter  instructing  us  to  pay  list  price  on 
everything.  I  wish  to  ask  permission  to  pay  14  over  on  rye,  that  being  as 
low  as  my  competitors  are  willing  to  go. 

Yours  truly, 


(Signed) 


Geo.  Johnson. 


276 


COUNTRY  GRAIN  MARKETING. 


Minneapolis,  Minn.  Sept.  24,  1919. 

Mr.  Geo.  Johnson, 

Agent,  Cleveland,  N.  D. 

Dear  Sir  :  You  can  meet  your  competitors’  price  on  rye. 

Yours  truly, 

fth.l.  Asst.  Gen.  Mgr. 


Mr.  J.  E.  Pridgen,  agent, 

Glen  JJlUn,  N.  D. 


Occident  Elevator  Company, 

Mpls,  Minn,  9-28-17. 


Dear  Sir:  Have  your  letter  and,  of  course,  while  we  don’t  want  to  spring  | 
the  price  there  unless  the  other  people  do,  I  now  give  you  authority  to  pay  up  * 
to  freight  off  in  order  to  meet  competition,  providing  they  spring  the  price.  i 
We  certainly  cannot  allow  these  people  to  take  our  business  away  from  us. 

Yours  truly,  ‘ 

Occident  Elevator  Company,  j 
Per  M.  R.  Devaney,  Gen-Mgr. 


Nov.  1,  1916. 

H.  J.  Thorstenson,  Agt., 

Northwood,  N.  D, 

Dear  Sir:  Replying  to  yours  of  the  31st  would  say  that  I  presume  you  can¬ 
not  help  but  follow  the  prices  being  paid  by  the  Farmers  Elevator  Co.,  but  we 
hope  that  they  will  be  agreeable  to  taking  the  stuff  at  list  price. 

Yours  truly, 

Andrews  Grain  Co. 

BCC-Mc  By 

V  .  Sept.  16,  1915. 

Henry  Rambold,  Agt., 

Bowden,  N.  D. 

Dear  Sir  :  Your  letter  of  the  13th  received  stating  that  the  market  conditions  , 
at  your  station  were  not  on  a  very  firm  basis. 

Inasmuch  as  you  are  a  new  man  in  the  position  we  presume  it  will  be  diffi¬ 
cult  for  you  to  work  up  a  trade  unless  you  have  privileges  of  meeting  com¬ 
petition. 

I  desire  above  all  things,  to  keep  the  market  conditions  down  on  a  normal 
basis  and  in  order  to  accomplish  that  I  wish  you  would  interview  all  of  the  other 
buyers  at  once  on  receipt  of  this  letter  and  see  if  you  cannot  get  them  all  to 
agree  to  stick  to  list  and  to  stick  to  grades  and  dockages  and  let  me  know 
what  the  result  is,  but  in  the  meantime  if  you  are  unable  to  get  your  share 
because  of  the  others  overpaying  you  can  meet  their  prices,  whatever  they 
happen  to  be  in  order  that  you  get  some  business  coming.  But  keep  me  posted 
as  to  what  you  are  doing  and  be  very  strict  on  grades  and  particularly  strict 
on  dockages. 

Mr.  O’Shea  will  probably  be  there  in  a  few  days  and  will  help  you  straighten 
this  thing  out.  We  are  writing  him  to-day  in  your  care.  Please  see  that  he 
gets  the  letter  when  he  comes.  a 

Yours  truly,  M 

BCC-Mc  (Signed)  Andrews  Grain  Co.  .9 


[From  the  files  of  the  McCaull-Webster  Company.] 

Dec.  18,  1913.  ; 

Mr.  H.  E.  Pasek,  .j 

Buffalo,  Montana.  \ 

^  Dear  Sir  :  I  note  your  letter  of  the  15th  in  regard  to  B.  C.  White’s  Durum 
and  I  note  that  your  list  has  been  too  high  and  has  now  been  corrected.  You^ 
had  better  compare  prices  with  the  farmers’  every  day  so  as  to  be  sure  and 
remain  equal.  1 

I  note  from  your  load  report  of  the  15th  that  the  farmers’  are  bidding  one 
cent  over  list.  If  they  insist  upon  doing  this,  you  of  course  can  do  the  same' 
thing ;  but  if  you  can  talk  it  over  with  them  and  persuade  them  to  keep  down' 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING. 


277 


to  list,  you  will  both  get  the  same  amount  of  grain  and  a  better  margin. 
Please  do  this  and  let  me  hear  what  you  have  accomplished. 

Very  truly  yours, 


9 


Vice  President. 
August  28,  1913. 


DW/B 


H.  J.  Thorstenson,  Agt.y 

Northwood,  N.  D. 

Dear  Sir:  *  *  *  We  have  your  letter  of  the  27th,  saying  that  the  Farmers’ 

agent  has  begun  to  stir  around,  and  it  looks  like  market  conditions  are  going 
to  be  disrupted.  I  have  been  expecting  that  sort  of  thing.  It  is  the  usual  con¬ 
dition  at  Northwood.  But  you  want  to  watch  the  situation  closely,  and  do  not 
get  excited;  but  any  of  the  customers,  or  any  of  the  farmers  who  have  been 
in  the  habit  of  hauling  their  grain  to  us,  or  any  of  the  others,  that  you  want  to 
get  for  customers,— meet  the  competitors,  the  Farmers’  Company,  or  anybody 
else,  and  take  your  share  if  you  can  get  it. 


* 


* 


* 


* 


Yours  truly, 


Andrews  Grain  Co. 


By 


BCC  B 


Reasons  for  paying  competitors’  prices.— This  policy  of  merely 
meeting  competitors’  prices  is  due  not  only  to  the  fact  that  the  line 
companies  desire  to  buy  at  the  lowest  prices  possible  and  endeavor  to 
hold  the  markets  to  that  basis  but  also  to  the  influence  of  the  State  laws. 
In  several  States  laws  have  been  passed  with  reference  to  buying 
grain  which  make  it  illegal  for  the  line  companies  to  discriminate 
in  prices  between  stations  except  to  meet  competition ;  so  that  if  the 
price  is  raised  at  one  station,  except  it  be  to  meet  competition  at  that 
station,  the  price  must,  theoretically  at  least,  be  raised  at  all  stations 
of  the  line  company  within  that  State,  if  such  company  is  to  avoid 
possible  charges  of  discrimination.^® 

[Copy  of  mimeograph  [circular  letter?)  from  the  files  of  the  Powers  Elevator  Company.) 


State  of  North  Dakota, 

Office  of  Attorney  General,  ' 


Bismarck,  Sept.  18th,  1919. 


Dear  Sir  •  Last  week  I  arrested  the  agents  of  the  Occident  Elevator  Company 
at  Hazelton,  Temvik,  and  Linton  for  unlawful  discrimination,  and  brought  three 
different  criminal  proceedings  against  the  Occident  Elevator  Company  itself. 

Grain  from  the  same  stack,  (being  from  the  same  field),  sold  to  the  same 
company  at  three  different  points,  brought  different  prices  at  the  three  towns. 

I  feel  that  the  Occident  Elevator  Company  is  one  of  the  main  cogs  in  the  big 
machine  known  as  the  Grain  Trust,  and  that  they  are  trying  to  crush  all 
farmers’  interests  and  wipe  out  local  competition  wherever  it  exists.  We 
already  have  a  lot  of  good  evidence,  evidence  which  I  believe  will  convict  them, 
but  I  am  desirous  of  putting  up  as  strong  a  case  as  possible. 

If  you  have  sold  grain  lately  to  any  old  line  elevator,  I  wish  you  would  write 
me  telling  me  to  whom  you  sold,  what  it  graded  and  the  price  you  secured,  and 
when  it  was  sold,  and  mail  me  any  sale  slips  that  you  might  have. 

An  early  reply  will  be  much  appreciated.  We  will  not  implicate  you,  if  it 
will  embarrass  you  in  any  way.  We  simply  want  to  do  all  we  can  to  protect 
you  and  the  other  farmers’  interests,  and  I  am  asking  for  your  help. 

With  kind  regards,  I  am 


Yours  very  truly. 


(Signed)  William  Langer, 

Attorney  General. 


WL/R 


u  f^r  ^are  of  th©  receipts  at  the  station. 


278 


COUNTRY  GRAIN  MARKETING. 


Nov.  6th,  1915. 

Mr.  H.  J  Linde, 

Attorney  General,  Bismark,  N.  Dak. 

Deae  Sie:  *  *  *  We  certainly  want  to  comply  with  the  laws  of  your 

State  and  think  that  you  will  admit  that  we  have  hard  competition  at  Williston  i 
and  all  we  want  there  is  a  fair  share  of  the  business  which  we  are  entitled  to. 
Our  agent  has  positive  instructions  to  follow  the  Mill  on  prices  up  to  .4  cents 
over  and  after  that  to  let  the  grain  go.  We  are  not  trying  to  discriminate 
against  anyone  in  that  market  and  if  we  can  do  anything  to  bring  about  a 
change  whereby  we  can  get  some  grain  at  more  of  a  profit  than  we  are  getting 
now,  it  is  our  desire  to  do  so. 

Our  agent  is  reporting  every  day  on  his  reports,  or  sending  in  letters  stating 
what  the  Mill  is  paying  and  we  are  keeping  close  watch  what  is  going  on,  and 
should  we  receive  any  information  which  we  think  would  be  of  benefit  to  you  to  ' 
clear  up  the  matter  we  would  be  very  pleased  to  forward  same  to  you. 

Kindly  return  Mr.  Sawyer’s  letter  for  our  files  here. 

Yours  very  truly, 

DLR,  MBL  ViCTOEiA  Elevator  Co. 


Jan.  5th,  1915. 

B.  F.  Kieth,  Agt., 

Trenton,  N.  Dak. 

Dear  Sie;  *  *  *  if  necessary  you  can  pay  .4  cents  over  list  to  take  your 

share.  *  *  * 

W’e  have  seen  a  lawyer  about  this  and  we  have  the  right  considering  the 
way  the  receipts  have  been  going  at  your  station  this  crop  to  pay  up  enough  to 
get  some  wheat  at  that  station.  *  ♦  ♦ 

Yours  very  truly, 

RGC.  MOL.  ViCTOEiA  Elevator  Co. 


Nov.  2,  1914. 

A.  B.  Greenfield,  Agt., 

Regan,  N.  D. 

Dear  Sir:  We  have  your  letter  of  the  29th  and  note  same  fully.  Glad  to 

find  that  you  have  all  gotten  down  to  the  basis  of  10  over  list.  Also  pleased  to 

learn  that  you  were  not  the  first  to  raise  the  price.  So  long  as  you  follow  the 
others’  prices  I  have  no  fear  whatever  with  reference  to  any  violation  of  the 
Anti-discrimination  law. 

Naturally,  I  have  been  a  little  disappointed  with  the  recent  load  reports  I 

showing  we  are  dropping  behind  a  little.  Perhaps  that  is  only  temporary  and  ij 

that  you  will  get  your  good  share  again  shortly. 

Yours  truly,  L 


Andrews  Grain  Co. 


BCC-Mc 


By 


'  Meeting  competition  on  grades,  dockages,  etc. — As  stated,  the  i 
lines  appear  to  be  opposed  on  principle  to  cutting  dockage  or  over-  i 
grading,  and  also  object,  though  perhaps  in  a  less  degree,  to  the  cut-  3i 
ting  of  storage,  elevation,  and  other  charges.  As  a  result,  when  | 
forced  to  meet  competition  of  this  character,  the  lines  usually  resort  1 
to  “  springing  ”  the  price  rather  than  to  meeting  their  competitors  J 
on  their  own  ground  by  overgrading,  underdocking,  etc.  In  fact,  ^ 
comparatively  little  correspondence  was  obtained  containing  instruc-  t, 

tions  to  meet  this  kind  of  competition  other  than  by  increased  prices.  | 

Noethwood,  N.  D.  Feb.  16-16.  ft 

Andrews  Grain  Co.  j| 

Minneapolis,  Minn.  c; 

Gentlemen  :  We  the  line  companies  was  around  and  maid  agrement  with  the  Si 
Mill  and  the  Farmers  Elev.  Co.’  to  pay  one  cent  over  list  and  not  over  three  S 
cents  on  Barley  and  we  all  keep  to  the  agrement  for  about  six  weeks  but  thay  m 
started  to  over  grade  and  cut  dockage  on  us  and  thay  was  getting  all  the  grain,  ? 
so  we  put  the  price  up  three  cents  to  make  them  pay  for  their  over  grading.  I  A 
am  sticking  to  the  grades  and  docking,  and  should  come  out  all  right  Durum  4 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING. 


279 


we  are  buying  at  list,  I  do  not  think  we  can  cpme  down  to  list,  becaus  if  we  do 
thay  will  give  a  grade  better  and  take  all  the  grain.  Please  let  me  know  what 


'  you  think  about  it. 
Yours  truly 


(Signed)  H  J  T. 


Oct.  7,  1915. 

C.  E  Smith,  Agt., 

Northville,  S.  D. 

Dear  Sir:  *  *  *  Now  we  have  never  asked  our  agents  to  buy  grain  for 

less  money  than  the  farmer  could  sell  it  for  to  someone  else  but,  if  one  of  your 
competitors  is  taking  #2  grain  at  #1  price  and  grading  it  #1,  you  will  have 
to  pay  #1  price  for  it  but  we  want  you  to  grade  it  and  ship  it  as  #2.  This 
also  applies  to  dockage.  We  want  our  reports  to  show  the  exact  grade  and  the 
exact  dockage  contained  in  our  wheat.  In  price  you  will  have  to  meet  your 
competition ;  but  keep  your  grades  and  dockages  absolutely  correct. 

^  •  H<  ♦  *  *  *  * 


Yours  truly, 
CBR-W 


G.  W.  Van  Dusen  &  Co.  Mgr. 


Sept.  22nd  1915 

F.  R.  Knittle,  Agt., 

Anamoose,  N.  Dak. 

Dear  Sir: — Think  that  you  had  better  start  and  pay  over  list  a  little  for 
wheat,  and  take  full  dockage,  I  cannot  understand  what  the  O  &  M  people  are 
doing,  somebody  is  going  to  lose  a  job  and  get  a  black  eye  and  never  get  it  back. 
He  must  be  doing  this  on  his  own  hook,  as  I  do  not  think  the  office  will  O.  K. 
anything  of  this  kind. 

You  can  pay  up  to  5  cents  over  list,  but  we  must  have  the  proper  dockage. 
Yours  very  truly, 

Victoria  Elevator  Co. 


RGC.  MBL 


The  Northwestern  Elevator  Company, 

Pickert,  N.  D.  9-3-15. 

Gentlemen  : — We  have  gotten  started  at  this  station  and  that  is  about  all. 

»  The  Far.  Elev.  agent  thru  his  greed  and  jealousy  did  us  an  underhand  trick  to 
start  with.  A  party  who  is  a  neighbor  of  our  agent,  and  told  him  he  would 
haul  to  him  brought  a  load  to  us  and  one  to  the  farmers.  Our  load  docked 
and  the  one  to  the  Farmers’  7#  but  the  Far.  Elev.  agent  told  him  he  would 
take  it  for  6#.  I  have  just  been  over  to  see  him  about  it  and  after  some  hesi¬ 
tation  he  acknowledged  having  done  it,  but  promised  that  it  should  not  occur 
again.  I  told  him  that  the  policy  of  our  company  was  to  protect  their  agents 
on  their  outcome,  and  if  a  competitor  persisted  in  doing  such  things  as  he  had 
done,  they  would  grade  and  dock  the  stuff  right,  and  if  they  made  the  customers 
any  concessions  it  would  be  in  cash. 

Yours  truly, 

(Signed)  W.  E.  Taplin. 


'  Oct.  8,  1915. 

F.  J.  Pottner,  Agt., 

Oriska,  N.  D. 

Dear  Sir  :  We  have  yours  of  the  6th  stating  that  you  and  the  Monarch  agent 
are  paying  over  list,  and  probably  overgrading  as  well.  I  told  you  that  under 
no  circumstances  would  we  care  to  have  you  overgrade,  but  you  might  meet 
competition  on  price. 

Why  is  it  that  you  and  the  Monarch  agent  are  paying  over  list  after  you  all 
apparently  agreed  not  to  do  that? 

Yours  truly, 

Andrews  Grain  Co. 

Bcc-Mc  By 


21  Osborne-McMillan  Company. 


280 


COUNTRY  GRAIN  MARKETING. 


[Prom  the  files  of  the  McCaull-Webster  Company.] 


Mr.  E.  R.  Lynn, 

Geraldine,  Mont. 


Oct.  22,  191C). 


Dear  Sir:  I  have  your  telegram  saying  we  do  not  grade  high  enough  to  get 
the  bullv  of  the  stuff  coming  in. 

We  cannot  grade  2  for  3  stuff. 

*  *  *  *  ♦  -4,  * 


I  have  just  wired  you  to  meet  your  competitors  prices  at  all  times  on  the 
same  class  of  wheat  and  to  send  us  samples  daily,  showing  how  graded. 

We  will  pay  the  same  price  that  our  competitors  are  paying  for  the  same 
ciass  of  wheat,  regardless  of  the  grade.  We  may  want  to  put  our  own  grade 
on  it,  but  the  farmers  will  get  just  as  much  money  from  us  as  they  will  from 
anyone  else,  and  money  is  what  he  is  after. 

**♦♦♦#* 


Yours  very  truly, 
JLMC  FHH 


President. 


Cooperation  of  line  companies  in  meeting  competition. — In 
meeting  competition  there  are  numerous  indications  that  the  line 
companies  have  not  infrequently  worked  together  in  endeavoring 
not  only  to  prevent  competition  among  themselves,  but  also  to  take 
business  from  their  competitors  of  other  types. 


[From  the  files  of  the  Northwestern  Elevator  Company.] 


Nov.  19,  1915. 

From :  Cargill  Elevator  Co.  Minneapolis,  Minn. 

To :  Northwestern  Elev.  Co.,  City. 

Gentlemen:  We  herewith  return  papers  relating  to  the  South  Shore  situa¬ 
tion.  We  think  perhaps  your  complaint  well  founded.  However,  South  Shore 
has  been  for  sometime  a  market  to  go  it  as  you  please.  Last  year  our  agent 
complained  that  your  agent  afforded  him  much  worse  competition  than  the 
Farmers,  and  so  it  goes. 

We  have  written  our  South  Shore  agent  to  be  particularly  careful  not  to  be 
aggressive  with  your  trade,  but  to  confine  his  aggressive  efforts  to  the  Farmers, 
more  especially. 

Yours  truly, 

DDM  W  Cargill  Elevator  Company. 

Enel. 


J.  W.  Brenner, 

Agt.,  Oriska,  N.  D. 


Sep.  5,  1914. 


Dear  Sir  :  *  *  *  Be  as  conservative  as  you  can,  but  meet  competition  from 

any  direction.  Inasmuch  as  you  seem  to  be  getting  along  with  the  Acme  and 
Monarch  agents  it  might  be  well  for  you  to  confer  with  them  and  see  if  you  can 
not  work  it  out  together,  without  going  after  one  another  as  long  as  others  are 
right  with  you. 

♦  **♦♦♦* 


Yours  truly, 
BCC-B 


Andrews  Grain  Co., 
By 


[From  the  files  of  the  Victoria  Elevator  Company.] 


Jacob  Strobel, 

Agt.,  Oriska,  N.  Dak. 


Sept.  5th,  1914. 


Dear  Sir:  We  saw  a  letter  the  Andrews  Grain  Co.  received  from  their  agent 
in  which  he  says  the  Farmers  are  paying  3c  over  list  for  Barley,  and  they  have 
written  their  man  to  meet  competition  and  take  their  share  of  the  stuff.  Now 


COMPETITIVE  CONDITIONS  IN  COUNTKY  BUYING. 


281 


you  understand  this  matter,  and  it  is  a  question  of  working  together  and  keeping 
from  cutting  each  other  throat,  but  I  think  you  are  the  oldest  nran  there  and 
have  had  a  lot  of  experience  and  can  keep  them  in  line.  We  want  to  get  some 
grain,  and  take  it  up  to  an  even  thing  if  necessary,  but  do  not  pay  over  other  line 
buyers,  but  work  with  them. 

Yours  very  truly, 

RGc.  MBL 


[From  the  flies  of  the  St.  Anthony  &  Dakota  Elevator  Co.] 

Nov.  17,  1913. 

Northwesteen  Elevator  Co., 

Minneapolis. 

C.  A.  Magnuson 

Gentlemen  :  We  are  enclosing  you  copy  of  letter  from  our  Mr.  Sheffield  in 
regard  to  conditions  at  Hillsboro.  Now,  I  believe  you  look  at  Hillsboro  just  as 
we  do.  It’s  anything  to  get  that  stuff  away  from  the  Farmers’  house,  and  we 
are  trying  to  do  that  and  not  interfere  with  anyone  else’s  business,  and  I  think 
we  have  been  able  to  make  quite  a  hole  in  their  business  so  far,  without  paying 
much  attention  to  what  your  agent  has  done,  but  it  would  seem  that  in  the 
future  we  should  try  and  maintain  the  list  price  there  and  let  the  man  that  can 
get  the  stuff  get  it,  I  don’t  care  whether  it  is  you  or  ourselves.  At  any  point 
where  we  have  got  Farmers’  competition  and  where  they  are  getting  all  the  busi¬ 
ness,  it’s  the  live  wire  at  the  station  who  should  get  the  business  and  not  be 
hampered  by  the  rest  of  us.  I  think  you  will  agree  with  us  on  this. 

Yours  truly, 

C.  D.  JUNKIN, 

Gen'l  Supt. 


[From  the  flies  of  the  St.  Anthony  &  Dakota  Elevator  Co.] 


■  International  Elev.  Co., 

Duluth. 


11/12/13. 


Gentlemen  :  Answering  yours  of  the  11th :  I  am  very  sorry  that  any  misun- 
,  derstanding  or  irregular  transaction  should  have  occurred  at  Humboldt  to  cause 
any  feeling  to  arise  that  our  two  companies  are  not  dealing  fairly  with  each 
other. 

We  are,  of  course,  very  anxious  and,  as  you  knowj  have  been  anxious  all 
the  season  to  get  a  better  share  of  the  business  at  that  station,  as  we  are  much 
below  the  average  and  below  you,  who  are  our  nearest  competitor.  It  is  our 
desire  and  intention,  however,  to  draw  business  from  the  Farmers  Elevator  Co., 
as  they  get  more  than  both  of  us  combined,  and  I  do  not  approve  for  a  moment 
,  our  agent’s  interfering  with  any  of  your  customers.  I  enclose  copy  of  a  letter 
which'  I  have  today  written  to  our  agent  at  Humboldt,  which  I  trust  may  have 
the  effect  of  preventing  anything  of  this  kind  in  the  future. 

I  return  herewith  your  agent’s  letter. 

Yours  truly, 


Enc. 


C.  A.  Brown, 

General  Manager. 


Sept.  7,  1912. 

W.  M.  Thompson,  Agt., 

Rurdsfield,  N.  D. 

Dear  Sir;  *  *  *  Now,  Thompson,  I  want  to  try  to  show  you  wherein  we 

have  confidence  in  your  judgment.  We  feel  that  you  are  always  working  for 
our  interests  but  we  do  not  wish  to  make  any  effort  whatever  to  beat  out  the 
Occident  Co.  either  in  quantity  or  otherwise  unless  we  can  get  it  on  a  perfectly 
even  break. 

Hi  Jif  *  *  *  * 

In  other  words,  you  and  the  Occident  man  work  together  on  this  proposition 
and  don’t  try  to  take  any  grain  from  one  another  but  take  it  from  the  other 


282 


COUNTRY  GRAIN  MARKETING. 


fellows  if  you  take  it  from  anybody.  Wish  you  would  write  me  by  return  mail 
stating  whether  or  not  you  understand  what  I  mean. 

Yours  truly, 

Andrews  Grain  Co. 

By 

BCC 

Section  17.  Division  of  receipts. 

Competition  for  “fair  share”  of  business. — Competition  un¬ 
questionably  becomes  most  pronounced  in  the  country  when  some  one 
or  more  of  the  local  elevators  fail  to  obtain  a  fair  share  of  the  busi¬ 
ness  at  the  station.  In  such  an  event  competition  almost  certainly 
breaks  out  and  any  local  working  arrangements  or  understandings 
are  disrupted,  for  in  practically  no  case  will  an  elevator,  line  or 
otherwise,  receiving  little  or  nothing  stand  by  and  allow  the  other 
houses  to  obtain  the  grain  without  strenuous  efforts  to  procure  its 
share. 

Spaulding  Elevator  Co. 

Warren,  Minn.,  Oct.  29,  1914- 

Atlantic  Elev.  Co., 

Minneapolis,  Minn. 

Gentlemen  :  Your  letter  of  the  28th  In  regard  to  conditions  at  Fonda  re¬ 
ceived  and  noted. 

In  reply  beg  to  state  that  up  to  date  we  have  handled  about  5000  bus.  at  that 
point,  while  both  yourself  and  the  Minnekota  people  have  handled  consider¬ 
ably  more.  We  have  made  up  our  mind  that  from  this  time  on  we  will  try  to 
handle  our  share  of  the  receipts  at  that  point  irrespective  of  price,  and  we 
stand  willing  to  throw  away  $1000.00,  or  more,  if  necessary  to,  bring  this  about. 

As  long  as  the  Minnekota  people  are  some  50,000  bus.  ahead  of  us  and  you 
about  20,000  bus.  ahead,  if  you  showed  the  right  spirit  you  would  be  willing  to 
let  our  man  pay  a  little  more  to  get  some  of  the  business.  We  notice  that  our 
competitors  never  lay  down  when  they  are  ahead  and  give  us  a  chance  to 
catch  up,  and  we  have  done  so  several  times  in  the  past  for  our  competitors  at 
points  where  we  were  ahead. 

We  know  there  is  no  money  in  this  proposition.  Neither  is  there  any  money 
in  it  as  it  has  been  heretofore.  We  have  been  trying  up  until  recently  to  get 
some  little  business  right.  Each  and  every  time,  he  has  been  overgraded  or 
under-docked  and  same  taken  away  from  him.  If  this  is  the  policy  which  you 
people  deem  to  be  correct  in  regard  to  that  station,  we  can  see  no  other  way 
than  to  fight  it  out.  We  do  not  care  a  rap  if  it  teai*s  up  things  over  the  entire 
line,  by  our  action  at  that  point. 

We  will  never  agree  to  buy  any  wheat  right  at  Fonda  as  long  as  the  stand 
taken  by  our  competitors  is  such  that  we  can  not  get  one  tenth  of  the  grain 
marketed  there.  Next  year,  with  any  crop,  we  propose  to  start  right  in  and 
get  our  share  from  the  start.  It  will  depend  entirely  on  what  my  comi>etitors 
pay  as  to  what  we  shall  pay.  We  only  want  one  third.  We  have  an  investment 
there  equal  to  the  rest  of  you,  and  we  feel  that  we  are  entitled  to  some  of  this 
business.  We  would  even  be  satisfied  with  less  than  one  third,  as  in  the  past, 
but  it  seems  to  be  the  plan  outlined  by  both  the  Minnekota  people  and  your¬ 
selves  that  we  shall  get  nothing. 

In  conclusion,  beg  to  state  that  it  will  depend  what  we  pay  at  that  point 
whether  the  rest  of  you  will  let  us  get  anything  or  not.  We  do  not  think  that 
you  are  as  much  to  blame  for  conditions  as  the  Minnekota.  They  have  let  their 
man  pay  No.  2  for  practically  all  the  No.  3  wheat  in  that  country.  In  fact,  he 
has  been  practically  one  grade  over  Rolette  all  the  time. 

Yours  truly, 

Spaulding  Elevator  Co. 
By  0.  L.  Spaulding, 

General  Manager, 


CLS/EMP 


COiVIPETlTIVE  CONDITIONS  IN  COUNTRY  BUYING. 


283 


Minneapolis,  Minn.,  Aug.  SO,  1919. 

Mr.  Leroy  Irvine, 

Agent,  Hazelton,  N.  D. 

Dear  Sik  :  I  received  your  wire  in  regard  to  the  Victoria  paying  70  over  on 
rye  and  I  took  this  up  wth  Mr.  Cargill  and  he  stated  that  he  had  authorized 
his  agent  to  pay  100  over  on  wheat  and  durum,  200  over  on  flax,  40  over  on 
oats,  70  over  on  barley,  100  over  on  rye. 

He  further  stated  that  he  explained  this  all  to  you  and  that  you  understood 
it  thoroughly.  I  did  not  question  his  word,  but  I  wish  you  would  write  me  a 
letter  giving  the  facts  in  regard  to  your  conversation  with  Mr.  Cargill,  and  if 
it  is  a  fact  that  he  told  you  he  was  going  to  authorize  his  agent  that  he  might 
pay  these  prices  in  order  to  get  the  business.  Cargill,  of  course,  intimated  that 
his  man  would  not  go  to  these  limits  unless  he  had  to,  but  he  undoubtedly  will, 
and  you  are  authorized  to  use  your  judgment  about  the  price  you  will  pay.  Of 
course  I  would  prefer  to  have  the  Victoria  take  the  lead  so  if  there  is  any  in¬ 
vestigation  about  who  is  responsible  for  paying  freight  off  there,  it  will  lie 
with  the  Victoria  Elevator  Company,  and  I  don’t  believe  that  the  Farmers  will 
submit  to  us  paying  freight  off  there  without  a  roar  to  McGovern’s  office,  and 
we  are  apt  to  get  in  very  bad.  My  idea  would  be  to  handle  this  very  cautiously 
because  I  don’t  believe  we  are  justified  in  paying  freight  off,  except  to  protect 
our  business,  and  I  want  the  responsibility  for  this  to  rest  entirely  with  the 
Victoria,  and  you  want  the  Farmers  elevator  man  to  understand  you  are  not 
responsible  for  paying  freight  off. 

Be  sure  and  let  me  have  the  letter  I  have  asked  for  as  I  am  interested  to 
know  just  what  conversation  you  had  with  Mr.  Cargill. 

Yours  truly, 

Occident  Elev.  Co. 

W.  B.  Grobe.  Gen.-Mgr. 

MRD.  1. 


[From  the  files  of  the  McCaull-Webster  Company.] 


Mr.  T.  M.  Reimers, 

Buffalo,  Montana. 


Minneapolis,  Minn.  Nov.  6th,  1917. 


Dear  Sir:  I  have  just  wired  you  that  you  are  continually  running  behind 
on  your  share  and  to  pay  70  over  list  if  necessary  to  get  your  share.  It 
probably  won’t  be  necessary  to  pay  this  much  over  list  on  all  you  buy,  but 
when  it  is  necessary  go  ahead  and  pay  it. 

You  are  away  your  share  so  far  you  will  have  to  get  more  than  your  share 
from  now  on. 

I  asked  you  to  wire  us  every  night  the  number  of  loads  in  town  and  the 
number  you  received.  You  can  put  this  in  a  night  message. 

Yours  truly, 


JLMcC  F 


J.  L.  McCaull, 

President. 


Dear  Sie:  I  have  set  the  price  at  60  over  list  and  I  think  wo  will  get  our 
share  at  this.  Now  I  hope  you  will  pay  this  for  the  bals.  of  the  season  or 
it  might  have  a  bad  effect.  As  it  is  now  I  think  we  will  establish  a  grain 
business  for  next  year.  But  we  must  pay  them  all  alike.  We  cannot  pay 
one  man  one  price  and  the  next  man  another.  If  we  are  going  to  build  up 

our  grain  business  here  in  Buffalo,  they  must  all  be  treated  alike.  The  last 

two  days  we  have  received  a  little  more  than  half  the  grain  coming  into  town. 

So  far  this  season  the  farmers  ele.  has  bought  about  28000  bu.  Montana 
13000  and  I  figure  there  will  be  about  90000  bu.  marketed  herein  Buffalo  this 
season.  But  I  am  sure  if  we  stick  to  the  60  we  will  be  able  to  get  our  full 

share  and  get  a  business  start  that  will  help  us  out  for  next  year. 

Yours  truly. 


T.  M.  Reimers,  agt. 


284 


COUNTRY  GRAIN  MARKETING. 


[From  the  files  of  the  McCaull-Webster  Company.] 


Nov.  6th,  1917. 


Wm.  Olson, 

Hobson,  Mont. 

Six  load  reports  received  from  you  last  week  show  a  total  of  forty-nine 
loads  received  Hobson  out  of  which  you  received  one.  You  have  been  run¬ 
ning  behind  for  several  weeks.  Wired  you  on  twenty-ninth  to  keep  us 
posted  by  mail  or  wire.  Take'  your  full  share  of  grain.  If  necessary  pay 
freight  off  Minneapolis.  For  ten  days  wire  us  every  night  total  loads  received 
by  you  and  total  loads  in  town. 

J.  L,  McCaull. 


Dec.  22nd  1914. 


Roy  C.  Udy,  Agt., 

Epping,  N.  Dak. 

Deae  Sir  :  We  find  upon  investigation  that  you  have  taken  less  than  half  your 
share  of  the  receipts,  and  that  the  St.  Anthony  people  have  taken  over  twice 
the  grain  that  you  have.  Now,  we  have  not  received  a  letter  from  you  kicking 
about  this,  and  you  have  set  down  all  season  and  let  this  thing  go  on.  While 
it  has  been  the  fault  of  this  office  that  we  have  not  given  you  enough  rope,  you 
have  never  kicked  or  let  us  know  the  situation,  and  to  that  extent  you  are 


responsible. 

We  are  enclosing  herewith  a  letter  from  Mr.  Sawyer  and  we  want  you  to 
follow  this,  and  we  also  want  you  to  send  us  in  load  reports  each  day,  and  if 
you  can  not  get  your  half  of  the  grain  coming  in  we  want  to  know  the  reason 
why,  and  if  at  any  time  anything  happens  that  the  other  man  gets  more  than 
his  share  we  want  you  to  keep  yelling  until  the  matter  is  fixed,  as  that  is  as 
much  your  duty  as  buying  wheat. 

Yours  very  truly,  ^ 

Victoria  Elevator  Oo. 


RGC.  MBL. 


[From  the  files  of  the  Monarch  Elevator  Company.] 

Jan.  17,  1913. 

Mr.  E.  Bogren, 

Agent,  Drayton,  N.  D. 

Dear  Sir  :  *  *  ♦  Now  we  want  you  to  get  in  the  market  and  take  your 
full  share  of  the  business  from  this  time  on  and  you  get  out  on  the  street  and 
bid  on  every  fourth  load  of  grain  that  comes  into  town  if  you  have  to  pay  as 
high  as  4^  over  list  for  it,  but  don’t  take  any  more  than  your  fourth. 

Now  unless  you  can  get  your  share  of  the  business,  it  will  be  necessary  for 
us  to  close  up  your  house,  as  we  have  fooled  around  all  this  year  and  done  no 
business  there  and  do  not  propose  to  sit  down  any  longer  and  let  the  other 

people  do  all  the  business.  „  .r  « 

Yours  truly,  Smith. 

Agreements  and  understandings  on  division  of  receipts. — In¬ 
stead  of  putting  up  prices  and  thus  competing  to  obtain  a  fair  share 
of  the  business  at  the  local  station,  a  division  of  receipts  is  fre¬ 
quently  brought  about  either  through  outright  agreements  or  under¬ 
standings  and  cooperative  arrangements  of  various  kinds. 

As  earlier  indicated  (Ch.  IV,  sec.  9),  there  were  in  effect  prior  to 
1905  numerous  pooling  arrangements-  with  attendant  systems  of 
penalties,  but  most,  if  not  all,  of  these  agreements  appear  to  have 
been  abandoned.  In  those  days  it  seems  to  have  been  the  practice  to 
determine  in  advance  the  proportion  of  grain  each  elevator  at  the 
station  was  to  obtain,  all  concerns  being  required  to  report  to  some 
disinterested  party  the  amount  of  their  purchases.  At  the  end  of  a 
given  period,  often  a  month,  this  party  figured  the  amount  of  grain 
purchased  by  each  and  compared  these  amounts  with  the  percentage 
apportioned  by  the  agreement.  Those  concerns  buying  more  than 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING. 


285 


their  share  paid  a  penalty  (usually  2J  cents  per  bushel  on  wheat) 
for  each  bushel  over  their  share  to  the  party  acting  as  the  clearing 
agency,  who  in  turn  paid  the  money  thus  received  to  those  who  failed 
to  purchase  their  share.^^ 

More  recently  the  business  at  local  stations  has  often  been  divided 
among  those  elevators  interested,  but  without  any  system  of  penalties 
being  involved. 

The  Nobthwestebn  Elevatob  Co., 

Minneapolis,  Minn.,  Dec.  iJf,  1917. 

McCaull  Webstee  Elev.  Co., 

City. 

Gentlemen  :  I  have  yours  from  Albee  and  if  those  people  are  willing  to  behave 
and  not  hog  the  stuff,  and  want  to  come  down  to  card  price  and  make  a  fair 
division  of  it,  I  don’t  know  of  any  reason  why  we^  should  not  be  able  to  work  in 
that  way.  I  will  take  it  up  with  our  agent  at  Albee  and  see  what  we  can  thrash 
out  of  it. 

Yours  truly,  C3.  A.  Magnijson, 

President. 


[From  the  files  of  the  Northland  Elevator  Company.] 

Atlantic  Elevatob  Co., 

Detroit,  Minn.,  8-6-16. 

Nobthland  Elevatob  Co., 

Minneapolis,  Minn. 

Gentlemen  ;  *  *  *  i  also  notice  that  your  house  handles  about  2/3  of  the 

grain  marketed  there,  both  agents  seem  to  have  been  there  about  the  same 
length  of  time,  and  unless  there  is  some  special  reason  for  this  I  hope  to  handle 
nearer  our  share  if  it  is  possible,  and  of  course  wish  your  cooperation  if  agree¬ 
able  to  you.  May  I  bank  on  it? 

Yours  truly,  (Signed)  S.  I.  Milleb. 

«  Memorandum  of  Agreement  at  Worthington,  Minn.— Effe^ive  Au^  1,  1^00-  U.  E. 
Torrence  (7):  Swedish  Mercantile  Co.  (20);  Hubbard  &  Palmer  Co.  (26);  Peavey 
Elevator  Co.  (32)  :  H.  N.  Douglas  (36)  :  St.  John  Bros^^^  (40)  :  each  to  receive  one-sixth 
(J)  or  the  entire  receipts  of  all  the  grain  handled  at  Worthington. 

Prices  to  be  made  by  H.  N.  Douglas,  but  are  to  be  as  nearly  as  possible  on  following 

*^^wVeat  at  12  cents  and  fraction  off  Minneapolis  delivered  close.  Oats  at  6  cents  and 
fraction  off  Minneapolis;  flax  at  16  cents  off  Minneapolis;  corn  at  10  cents  off  Min- 
neanolis ;  tiomthy  seed  at  65  cents  per  cwt.  off  Chicago,  x  v.  .  «  *■ 

Penalties  to  be:  Wheat,  2i  cents;  oats,  1|  cents;  corn,  2  cents;  barley,  3  cents  ;  rye, 
4  cents ;  flax,  4  cents ;  timothy,  10  cents.  Full  rates  of  storage,  as  shown  on  S  tandard 

^^Mfnhnunf ^ScSge®  t?^^be^*l^'pound  per  bushel,  and  a  sieve  test  to  be  made  of  all 
wheat  showing  over  2  dockage.  All  parties  agree  not  to  pay  over  list. 

Closed  house  to  get  one-half  penalty.  „  ^  .l  j  .x.. 

Statements  to  bl  rendered  each  week  to  H.  N.  Douglas,  who  is  to  render  monthly 

renorts  to  F.  R.  Durant.  .  ,  i, .  j.  x  .  x.. 

The  books  of  any  party  to  this  agreement  are  to  be  subject  to  examination  at  any 
time  This  agreement  to  continue  in  effect  for  one  year  from  date,  provided  however, 
ttat'any  party  may  withdraw  by  giving  fifteen  days  notice  in  writing  to  that  effect  to 
^ch  party  to  this  agreement  and  by  paying  the  penalties  to  the  expiration  of  said  fifteen 

days.^  ^  *  .  *  •  •  * 

All  statements  will  be  made  up  by  number  instead  of  name.  „ 

The  names  corresponding  to  numbers  at  Worthington  are :  23,  H.  E.  Torrance ;  24, 
Swedish  Wcantile  Company;  25,  H.  N.  Douglas;  26,  Peavey  Elevator  Company  ;  37,  St. 
jJhn  Brothers ;  58,  Hubbard  &  Putnam  Company.  Please  keep  this^for  reference. 
***** 

STATEMENT. 

November  4,  1901. 

Mr  H.  E.  Torrence  with  F.  R.  Durant.  Worthington.  October 

1"  to  - - - 1% 

15"  to  31" _ 

172.  99 

Settlement -  • 

Check  to  follow - 

(Exhibits  No.  1.  2,  and  3  to  testimony  of  F.  R.  Durant,  Op.  cit.,  S.  Doc.  278,  pp. 
970-72.) 


286 


COUNTRY  GRAIN  MAEIKETING. 


^  Dec.  14,  1914. 

Mr.  J.  P.  Havens,  Agt., 

Halliday,  N.  D. 

Dear  Sir:  In  confidence  will  say  we  have  to-day  had  conference  with  Mr. 
Devany  concerning  conditions  at  Halliday — we  are  both  pretty  much  in  the 
same  boat  and  we  don’t  propose  to  set  back  and  see  the  other  fellow  take  the 
entire  run. 

Now  both  Mr.  Devany  and  myself  have  confidence  in  our  Halliday  representa¬ 
tives — you  are  men  of  good  judgment,  have  had  experience  and  are  to  be  trusted, 
therefore  we  have  agreed  simply  to  give  you  both  instructions  to  work  together 
and  to  “  take  your  share  of  the  run.”  • 


^  *  4c  4c  .  4: 

Now  confirm  this  with  the  Occident  agent  and  pull  together  from  the  time  you 
receive  these  instructions,  but  see  to  it  that  you  take  your  full  share,  and  by 
that  we  mean  at  least  one-third — do  what  you  can  to  help  him  to  get  his  portion 
while  we  expect  him  to  assist  you  in  getting  yours — between  the  two  of  you  I 
think  you  can  handle  two-thirds  of  the  run  with  the  leeway  we  have  given  you. 


Return  this  letter  to  me  after  reading,  and  confirm  with  the  Occident  man — 
don’t  want  it  in  your  files. 

Yours  truly, 

Powers  Elevator  Co., 

M  By - ,  Mgr. 


Sept.  4,  1914. 

H.  Thompson, 

Oakes,  N.  Dak. 

Dear  Sir:  *  *  *  The  principle  thing,  however,  is  to  get  them  to  work 

together,  and  divide  the  grain  as  nearly  equal  as  possible.  We  only  want  our 
share  and  that  is  all  the  other  people  want. 

Yours  truly, 

Osborn-McMillan  Elevator  Compant. 

FJS :  OM 


[From  the  files  of  the  McCaull-Webster  Company.] 

Randolph,  Neb,,  July  22nd,  1914- 

D,  Webster, 

Minneapolis,  Minn. 

Dear  Sir  :  I  got  Ruden  &  Felsen  and  the  rest  of  the  Crofton  boys  together 
and  the  only  hitch  was  that  Ruden  &  Felsen  think  they  are  entitled  to  20,000 
over  our  equal  share.  This  will  not  work  cut.  Mr.  Felsen  is  here  to-day, 
(Randolph)  and  now  he  is  inclined  to  divide  up  equally,  so  we  are  going  to  get 
together  again  in  the  course  of  a  week.  There  is  not  going  to  be  any  trouble  at 
Crofton  this  year.  Will  also  have  Mr.  Roberts  come  over. 

Yours  truly, 

C.  Gleysteen. 


Minneapolis,  Minn.,  Sept.  26,  1913. 
From :  The  Northwestern  Elevator  Co.,  Minneapolis. 

To :  Jas.  Hanna,  Supt. 

Dear  Sir:  I  wish  you  would  meet  Mr.  Hanson®®  at  South  Shore  on  Monday. 
The  Farmers’  Elevator  Co.  at  South  Shore  want  to  make  an  arrangement 
whereby  there  will  be  sort  of  a  phisical  division  of  the  business  at  South  Shore 
on  the  same  plan  as  Litchfield,  and  if  that  is  the  purpose;  handle  it  in  the 
same  way. 

Yours  truly, 

(Signed)  C.  A.  Magnuson,  Prest. 

A  division  of  receipts,  whether  specifically  agreed  or  not,  can  be 
effected  by  a  further  mutual  understanding  or  agreement  to  allow 


2*  Cargill  Elevator  Co. 


CX)MPEnTIVE  OaNDITIOITS  IN  COUNTKY  BUYING.  -  2S7 

the  elevator  falling  behind  to  pay  a  higher  price  than  its  competitors 
at  this  station,  and  this  occasionally  is  done. 

[From  the  files  of  the  Monarch  Elevator  Company.] 

% 

Oct.  8,  1917. 

Mr.  R.  H.  Boswokth, 

%  Agent,  Bird  Island,  Minn. 

Dear  Sir  :  When  you  are  out  at  Milan  I  wish  you  would  see  what  is  the 
trouble  with  our  man  there  and  get  him  into  the  market  so  that  he  will  get  some 
business. 

There  was  an  agreement  made  the  other  day  that  we  would  be  allowed  to  pay 
a  cent  over  list  until  we  caught  up,  but  it  seems  the  other  fellows  are  hogging  it 
all.  I  would  like  to  have  you  find  out  what  is  the  matter  and  see  if  you  can 
not  do  something  to  enable  him  to  get  some  business. 

Yours  truly, 

WLS/B 


[From  the  files  of  the  Victoria  Elevator  Company.] 

Hazelton,  N.  D.  Sept.  25  15. 

Mr.  R.  G.  Cargell, 

Minneapolis,  Minn. 

Dear  Sir:  In  regard  to  this  paying  over  proposition  at  Hazelton  will  say 
that  we  got  together  and  agreed  to  put  the  market  down  to  2  cents  over  list 
,and  in  order  to  come  to  this  point  we  had  to  promise  the  Columbia  man  that 
he  could  pay  Ic  more  than  the  Victoria  or  Occident  providing  that  he  go  after 
the  farmers  elevator  customers  and  leave  our  trade  alone  this  extra  cent  is  a 
gi’eat  advantage  and  as  soon  as  he  gets  his  full  share  of  trade  we  will  have  to 
bring  him  down  again  to  an  equal  markets 
Yours  truly, 

B.  C.  Hanson. 


Dec.  10,  1915. 

Spaulding  Elevator  Co., 

Warren,  Minn. 

Gentlemen  :  We  are  in  receipt  of  yours  of  the  9th  and  note  contents. 

We  think  something  should  be  done  at  Silva  to  protect  our  trade  there,  and  if 
agreeable  to  the  rest,  we  would  suggest  that  we  pay  2(j:  over  list  for  a  while 
at  least.  *  ,  ^  ' 

4:  ^  4  4= 

Awaiting  your  reply,  we  remain. 

Yours  truly, 

PJS-N  Osborne-McMillan  Elev  Co 


The  Northwestern  Elevator  Company, 

Benson,  Minn.  8-4-14- 

N.  W.  Elevator  Co., 

Minneapolis,  Minn. 

Dear  Sir:  It  is  with  regret  that  I  have  to  answer  your  circular  No.  1  the 
way  I  do,  but  it  is  useless  to  even  think  of  buying  on  card  at  this  station  and 
get  any  business  at  all;  I  called  the  Cargill  and  the  Farmers’  buyer  together 
to-day  to  talk  things  over,  without  any  results,  for  this  reason :  The  Cargill  man 
was  willing  that  w^e  should  all  have  our  share,  getting  our  grade  and  dockage 
and  follow  list,  but  the  Farmers  buyer,  while  willing  to  get  down  to  card  price 
would  not  concede  anybody  their  share,  (that  is,  he  would  take  it  all  if  he 
could  get  it)  we  were  talking  of  buying  out  Moores,  and  I  told  him  that  if  we 
did  I  would  allow  him  20,000  bu.  to  go  on  but  not  any  more  and  all  get  proper 
grade  and  dockage,  but  that  he  (the  Farmers’  buyer)  would  not  go  in  on,  say¬ 
ing  he  was  only  too  glad  to  buy  o^  card  but  would  take  all  he  could  get  as  N  W 
elev.  had  never  had  their  share,  and  could  not  expect  it.  I  then  told  the  boys 
it  was  useless  to  talk  agreement  of  any  kind  unless  we  got  within  at  least 
20,000  bu.  of  our  share,  as  they  knew  well  enough  that  we  would  come  closer 
than  that  to  our  share  on  an  open  market. 

Yours  very  truly. 


(Signed) 


U.  O.  Jensen  (?). 


288 


COUNTRY  GRAIN  MARKETING. 


Section  18.  Closing  and  wrecking  elevators  on  a  rental  kasis.  I 

Explanation  of  practice. — A  practice,  amounting  in  effect  to  a  1 
pooling  of  receipts,  is  that  of  closing  or  wrecking  elevators  on  a  1 
rental  basis.  While  the  indications  are  that  these  arrangements  are  1 
made  chiefly  by  line  elevator  companies,  it  is  possible,  if  not  probable,  1 
that  other  types  of  elevators  have  also  been  participants  therein.  I 
The  method  is  usually  resorted  to  whenever  one  or  more  of  the  1 
line  companies  operating  at  a  particular  station  conclude  that  there  I 
are  too  many  houses  interested  at  the  point  as  compared  with  the  I 
volume  of  grain  to  permit  any  money  to  be  made.  In  such  a  situa-  I 
tion  the  line  houses  interested  sometimes  arrange  for  the  closing  or  | 
tearing  down  of  one  or  more  of  the  houses  involved,  upon  the  agree-  u 
ment  or  understanding  that  the  other  line  companies  will  pay  a  cer¬ 
tain  amount  of  compensation  to  the  line  company  closing  or  wreck¬ 
ing  the  house.  In  the  case  of  closing,  the  practice  apparently  is  for 
the  houses  remaining  open  to  lease  the  closed  house  and  leases  in  j 
due  form  are  apparently  drawn  to  cover  such  transactions  and  signed  ^ 
by  the  interested  parties.  As  a  rule  the  arrangements  have  appar-  : 
ently  been  handled  through  F.  K.  Durant,  of  the  Grain  Bulletin,  who  < 
appears  to  have  been  a  sort  of  clearing  house  for  operations  of  this  . 
character : 

August  9,  1916. 


Mr.  P.  R.  Durant, 

Grain  Bulletin,  City. 

Dear  Sir:  We  will  be  closed 


at  the  following  Great  Northern  stations,  or 


are  willing  to  negotiate  closing  with  those  interested 

• 

Waverly 

Graceville 

Addison 

Howard  Lake 

Bement 

Everest 

Cokato 

Truro 

Galesburg 

Dassel 

Honeyford 

Roseville 

Litchfield 

Burch 

Portland 

Roscoe 

Huffton 

Sharon 

Paynesville 

Montrose 

Inkster 

Spicer 

Smith  Lake 

Westhope 

Kerkhoven 

Hankinson 

Lidgerwood 

Clontarf 

Colfax 

Bathgate 

Hancock 

Kindred 

Claremont 

The  above  stations  constitute  just  50%  of  our  G  N  points  if  1  have  counted 
right,  eliminating  Montana.  •  ^ 

Yours  truly, 

Cargill  Elevator  Company. 

DDM  W 


[The  Grain  Bulletin,  Minneapolis,  Minn.  F.  R.  Durant,  Manager.] 


Mr.  C.  A.  Magnuson," 

Minneapolis. 


March  15,  1915. 

I  * 


Dear  Sir:  Attached  you  will  find  statement  of  rentals  for  1915-16,  the  mark 
#  in  front  of  a  name  indicates  that  that  house  was  closed  the  past  year  on  \\ 
rental  basis. 

I  am  somewhat  busy  just  at  present  with  other  matters  and  will  appreciate 
it  if  you  will  give  this  your  usual  prompt  attention  and  advise  me  what  changes, 
if  any,  you  would  wish  to  make  for  the  coming  year  so  that  the  leases  may  be 
drawn  and  if  possible  the  delays  of  past  years  avoided. 

At  Fisher  the  Monarch  house  will  be  wrecked  on  the  basis  agreed  upon. 


“  Northwestern  Elevator  Company. 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING. 


289 


At  Maynard,  Thorpe  decline  to  pay  for  wrecking  the  Monarch  house  unless 
the  New  London  is  also  wrecked,  and  further,  they  decline  to  pay  any  rental 
in  the  future,  the  New  London  say  they  have  a  good  flour  trade  there  and  do 
not  care  to  wreck  and  unless  they  can  receive  rent  for  a  few  years  more  will 
put  their  house  in  shape  and  open  it  for  the  next  crop. 


Yours  very  truly, 


(Signed)  F.  R.  Durant. 


April  23,  1915. 


Cargill  Elevator  Co., 

Minneapolis,  Minn. 

Gentlemen  ;  Below  is  statement  of  closed  houses  for  1915—16. 


Clontarf -Cargill - 

Everest  “  - 

Inkster  “  - 

Kempton-National  $275.00 

Lidgewood  Cargill - 

Newberg  Imperial  202.50 
Portland  St.  A»&D  185.00 

Sherwood  Cargill - 

Truro  “  - 

Westhope  “  - 


495.00 
315.  00 
390.  (X) 

900.  00 


930.  00 
300.  00 
420.  00 


Erie  omitted  as  offset  to  Clifford. 

Leases  will  be  prepared  May  1st,  please 
to  that  date. 

Yours  very  truly, 


advise  any  changes  in  above  prior 


F.  R.  Durant. 


[From  the  files  of  the  Northwestern  Elevator  Company.] 


Northwestern  Elevator  Co. 


May  29,  1914. 


^  Rental  1914-1915. 

Checks  to  (due  on  or  before  August  1st,  1914)  : 

Cargill  Elevator  Co.  Benson - 

Clontarf _ 

Everest _ 

,  Litchfleld - 

Duluth  Elevator  Co.  Fisher - 

Maynard - 

Wales _ 

Glasston _ , - 


$166.  66 
510.00 
360.  00 
220.  00 
585.  00 
645.  00 
615.  00 
170.00 


$1, 256.  66 

1,  845.  00 
170.  00 


$3,  271.  66 


Checks  from: 

St.  A.  &  D.  Elevator  Co.  Climax  — 

Fisher _ 

.  National  Elev.  Co.  Evansville 

Wales _ 

Duluth  Elevator  Co.  Hillsboro  _ 

G.  W..Van  Dusen  &  Co.  Maynard-. 

Amenia  Elevator  Co.  Pickert  — 


$720.  00 

292.  .50  $1,  012.  50 

240.  00 

307.  50  547.  50 

525.  00  525.  00 

215.  00  215.  00 

405.  00  405.  00 


$2, 180.  00 


(Stamped)  F.  R.  Durant. 

(Lead  Pencil) 

How  about  Hamilton-Milton 

Rates  for  closing. — Usually  the  rental  to  be  paid  for  a  closed 
house  is  a  sum  obtained  by  applying  a  rate  of  cents  per  bushel 
to  that  proportion  of  the  average  handlings  by  all  the  houses  par- 
ticipatino-  which  is  represented  by  the  division  of  this  average  by 
the  total  number  of  participating  houses,  whether  open  or  closed. 

9964°— 20 - 19 


■  'X' 


290 


COUNTRY  GRAIN  MARKETING. 


[From  the  flies  of  The  Grain  Bulletin,  Minneapolis,  Minn.l 


March  12th,  1914. 

New  London  Milling  Co., 

Willmar. 


Gentlemen  :  The  rental  values  at  Maynard  and  Raymond  figure  for  the  com¬ 
ing  year  as  follows : — 


Maynard — 

9-10 

10-11 

11-12 

12-13 

13-14 

Northwestern  _  _  _ 

*>•> 

47 

44 

78 

87 

Thorpe 

-  93 

91 

61 

28 

33 

Duluth 

c 

c 

c 

c 

c 

VanDusen 

99 

90 

61 

97 

122 

New  London-  —  — 

c 

c 

c 

c 

214 

228 

166 

203 

242 

228 

27 

166 

203 

269 

1080- 

-216-43 

$645.  00 

Raymond — 

9-10 

10-11 

11-12 

12-13 

13-14 

Thorpe  -  - 

- - -  _  52 

34 

41 

c 

c 

Duluth 

_  111 

62 

70 

79 

100 

New  London  — -  _ 

_  115 

63 

53 

46 

49 

278 

159 

164 

125 

149 

159 

17 

164 

125 

166 

892- 

178-59 

$885.  00 

It  is  hoped  to  make  the  same  arrangement  at  these  stations  as  was  in  effect 
last  year,  except  that  Thorpe  will  probably  insist  on  the  regular  amount  due  at 
Raymond  instead  of  $700.00  as  in  the  past,  they  have  had  the  matter  up  with 
Mr.  Johnson,  I  think ;  and  in  this  connection,  it  is  a  fact  Raymond  is  the  only 
station  out  of  75  or  80  where  houses  have  been  closed  under  this  arrangement 
where  the  regular  amount  has  not  been  paid. 

The  writer  expects  to  leave  for  a  vacation  on  the  24th  of  this  month  and  the 
Northwestern  people  insist  on  knowing  what  houses  are  to  be  closed  before 
the  first  of  April  so  it  would  be  greatly  appreciated  if  you  vqu  take  the  matter 
under  advisement  and  come  to  a  conclusion  as  much  before  the  24th  as  possible. 

Yours  very  truly. 

Thus  in  the  case  of  the  station  at  Eaymond  the  tliree  line  houses 
handled  a  total  of  892,000  bushels  of  grain  from  1909-10  to  1913-14,^® 
an  average  for  the  station  of  178,000  bushels  a  year,  or  59,000  bushels 
per  elevator,  which  at  a  rate  of  1^  cents  per  bushel  would  amount 
to  $885. 

The  closing  of  houses  on  a  rental  basis  is  not  necessarily  a  perma¬ 
nent  thing,  and  houses  closed  may  be  opened  up  subsequently  if  the 
management  considers  it  desirable,  as  is  not  infrequently  the  case. 


[From  the  files  of  the  Northwestern  Elevator  Co.] 


July  23,  1913. 

Mr.  P.  R.  Durant, 

City. 

Dear  Sir  :  Will  you  please  notify  the  parties  in  interest  at  Osnabrock,  Wales 
and  Glasston  that  we  wish  to  open  up  at  those  points  this  year,  and  that  we 
are  perfectly  willing  that  any  of  those  who  have  been  open  there  the  last  few 
years  should  close  under  the  same  conditions  as  would  apply  to  us  if  we  re¬ 
mained  closed.  We  consider  that  we  have  been  closed  long  enough  at  those 
points,  and  that  there  have  been  good  crops  enough  so  that  no  one  who  has  been 
open  there  has  suffered  by  reason  of  being  closed,  and  we  don’t  want  our  houses 
at  either  of  those  points  to  become  a  dead  issue,  and  consequently  as  they  have 


17,000  bushels  apparently  beiuj?  estimated  amount  yet  to  come  to  elevator  from 
Mar.  12,  the  date  of  the  letter,  to  June  30,  the  end  of  the  crop  year. 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING. 


291 


been  put  in  shape  to  operate  we  prefer  to  operate  them  on  this  basis.  I  am 
going  away  Saturday  night  to  be  gone  until  the  11th  of  Aug.  hence  this  letter. 
Yours  truly, 

(Signed)  •  C.  A.  Magnuson,  Prest. 


[Prom  the  files  of  the  Monarch  Elevator  Co.] 


March  16,  1915. 

Mr.  F.  R.  Durant,  Mgr., 

Grain  Bulletin,  City. 


Dear  Sir  :  In  regard 
will  keep  open  at 

to  houses  on 

the  Great  Northern,  would  say  that  we 

Angus 

Edinburg 

Nash 

Backoo 

Hendrum 

Northcote 

Bantry 

Hillsboro 

/  Portland 

Borup 

Litchfield 

/  Raymond 

Cando 

Merrifield  ^ 

•  St.  Thomas 

Crary 

Milton 

Wolford 

Cummings 

Mohall  ^ 

*  ♦ 

* 

*  * 

There  are  I  think  two  houses  that  we  want  open  that  we  had  closed  last  year, 
i.  e.,  Wolford  and  Nash. 

Yours  truly 


Wrecking  and  not  rebuilding. — In  some  cases  houses  are  wrecked 
or  torn  down  instead  of  closed,  in  consideration  of  compensation 
paid  bj  the  other  elevators.  When  elevators  are  destroyed  by  fire, 
explosion,  or  any  other  cause,  at  towns  having  more  than  one  ele¬ 
vator,  there  have  also  been  instances  where  the  remaining  elevators 
have  arranged  to  pay  compensation  for  not  rebuilding  to  the  com¬ 
pany  owning  the  destroyed  house. 


I  Prom  the  files  of  the  St.  Anthony  &  Dakota  Elevator  Co.] 


5/6/14. 

Mr.  F.  R.  Durant, 

c/o  Grain  Bulletin,  Minneapolis. 

.  Dear  Sir  ;  As  you  are  doubtless  aware,  our  elevator  at  Northwood,  N.  Dak., 
burned  about  March  1st.  As  you  know,  the  volume  of  business  at  Northwood 
is  very  good  and  it  has  been  a  particularly  good  station  for  us — in  fact,  about 
the  best  we  had.  .  It  was  the  original  point  for  Mr.  Heising,  where  he  first 
started  his  business. 

However,  in  harmony  with  the  general  policy  of  the  elevator  companies  not 
to  rebuild  burned  elevators  where  it  can  be  avoided,  we  would  like  to  have 
you  submit  to  the  other  elevators  at  the  station  the  conditions  under  which 
we  will  be  ’willing  not  to  rebuild. 

If  the  other  three  elevators  will  buy  our  one-quarter  interest  in  the  old 
Andrews  elevator  owned  jointly,  at  co.st,  and  pay  us  on  the  regular  wrecking 
basis,  we  will  give  up  our  business  at  that  station. 

Please  Hpt  us  know  the  results ^of  your  conference  at  soon  as  possible. 

Yours  truly. 


Heising  Grain  Co. 
By  C.  A.  Brown, 


July  7,  1915. 

Mr.  Clarence  L.  Spaulding,  Pres., 

Spaulding  Elevator  Co.,  Warren,  Minn. 

Personal. 

Dear  Sir  :  We  have  talked  to  the  Minnesota  Elevator  Company  in  regard 
to  the  situation  at  Fonda,  and  if  you  do  not  rebuild  at  Fonda  you  will  receive 
the  usual  closed  house  penalty  for  three  years. 

4:  «  «  *  «  * 


Yours  truly. 


Atlantic  Elevator  Company 

By 


Vice  Pres. 


292 


COUNTRY  GRAIN  MARKETING. 


So  far  as  the  Commission  was  able  to  ascertain  there  has  been  no 
such  customary  charge  for  wrecking  or  not  rebuilding  destroyed 
elevators  as  has  existed  in  the  case  of  closing  houses.  In  the  last 
letter  quoted  above,  the  compensation  for  not  rebuilding  appears 
to  have  been  the  closed  house  penalty  for  three  years.  The  same 
basis  also  appears  to  have  been  used  for  wrecking  in  at  least  one  case 
at  Hallock,  Minn.  Generally  speaking,  the  information  obtained 
indicates  that  other  items  than  the  rental  charges  are  taken  into 
account  in  arrangements  for  wrecking  or  not  rebuilding  and  that  the 
compensation  in  such  cases  is  determined  largely  with  reference  to 
such  other  items.  This  appears  in  a  measure  in  the  following  plan 
of  determining  wrecking  compensation  which  was  employed  in  about 
a  dozen  cases. 

M'^RECKING  ELEVATORS. 

Each  proposition  to  wreck  to  be  volnntary  on  the  part  of  owner  and  only 
permissible  with  the  consent  of  a  majority  of  his  competitors  participating  in 
this  arrangement  at  the  station. 

When  an  owner  has  signified  his  willingness  to  wreck  a  rented  house  under 
this  plan,  if  he  is  not  permitted  to  do  so,  he  shall  no  longer  be  under  the 
obligations  to  keep  the  house  in  repair  in  order  to  secure  his  rental. 

When  a  house  is  to  be  wrecked  and  rebuilt  elsewhere  it  must  not  be  located 
at  a  station  occupied  by  any  of  the  comrpetitors  who  help  to  pay  for  the 
wrecking,  without  their  consent. 

COMPENSATION. 

The  basis  to  be  one  and  one-half  times  the  rental  value  at  the  station  using  last 
computation  in  the  Grain  Bulletin  office;  (1)  deduct  five  per  cent  (5%)  for  each 
consecutive  year  previous  to  the  time  of  wrecking  that  the  house  has  been 
kept  closed  under  the  rental  plan;  (2)  add  ten  per  cent  (10%)  for  each  5,000 
bushels  of  capacity  in  excess  of  20,000  bushels  up  to  50,000  bushels;  (3)  add 
'^>100.00  for  each  competitor  at  the  station  who  participates.  (The  purpose  of 
this  clause  is  to  give  the  wrecked  elevator  a  part  of  the  general  benefit  arising 
from  distributing  the  burden  among  two  or  more  competitors. ) 

The  maximum  compensation  for  wrecking  a  house  in  no  case  to  exceed  $2,000. 


EXAMPLE. 

Station  having  four  (4)  elevators,  one  of  30,000  bushels  closed  for  two  years 
at  rental  the  last  year  of  $400.00 ; 


Rent — 
50% — 


Deduct  (1) 
Add  (2)  — 
Add  (3)  — 


,$400.  00 

200.  00 


600,00 

60.00 


540.00 
108.  00 


648.  00 
300.  00 


948.00 

Another  interesting  method  of  compensation  for  the  elimination  of 
elevators  from  the  competitive  field  was  encountered  in  one  instance. 
Many  of  the  line  companies  are  also  cash  commission  houses  or  have 
a  subsidiary  commission  branch.  The  Cargill  Elevator  Co.,  having  a 
subsidiary  commission  firm  (Cargill  Commission  Co.),  agreed  not  to 
rebuild*  a  house  that  had  been  destroyed  by  fire  at  Willow  City, 
N.  Dak.,  provided  that  other  elevators  interested  at  the  station  where 
the  fire  occurred  would  ship  on  consignment  to  the  subsidiary  com- 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING. 


293 


mission  firm  a  proportion  of  their  receipts  at  Willow  City  over  a 
period  of  years.  - 

Cargill  Elevator  Co. 

April  IJf, 

St.  Anthony  &  Dakota  Elev.  Co. 

Chamher  of  Commerce,  City. 

Gentlemen  :  Mr.  Cook  of  Willow  City  is  willing  to  give  us  20%  of  his  con¬ 
signments  for  a  period  of  five  years  if  we  do  not  rebuild  or  reenter  that  market. 
Til  is  seems  a  liberal  proposition  and  we  are  writing  to  ascertain  if  you  care 
to  do  anything  in  the  premises.  Of  course,  we  expect  no  contribution  from 
the  Farmers’  Elevator  Co. 

Yours  truly,  Cargill  Elevator  Co. 

DDM-W 


No  signature. 


In  concluding  this  subject  it  may  be  stated  that  it  is  claimed  that 
these  practices  existed  for  only  a  few  years  and  applied  to  only  a 
few  companies.  Mr.  Durant  states  that  the  last  time  he  compiled 
figures  for  this  purpose  was  the  crop  year  1915-16.  The  Commission 
is  not  in  a  position  to  confirm  this,  but  the  correspondence  obtained 
relating  to  this  particular  matter  all  bore  a  date  prior  to  191Y . _ 

Section  19.  Relation  of  commission  houses  to  local  competition,  y 
In  occasional  instances  the  independent  and  cooperative  elevators 
employ  the  commission  firms  to  which  they  ship  as  a  medium  of  com¬ 
munication  with  the  line  companies  at  their  station  with  reference  to 
competitive  conditions  and  also  their  adjustment. 


Occident  Elevator  Company 

Mpls.  Minn.  10-22-17. 

Mr.  S.  J.  Epler,  Supt. 

Billings,  Mont.  %  R-M. 

Dear  Sir  :  The  Broadview  Farmers  Elevator  Company  wired  their  commission 
firm,  Beecher  and  LaBree,  this  morning  stating  the  Occident  was  paying  3^ 
over  on  spring,  over  on  winter,  stating  they  would  have  to  close  if  this  was 
continued,  and  asking  that  the  matter  be  referred  to  the  proper  authorities. 
The  -Commission  company  very  kindly  took  the  matter  up  with  Mr.  Carey, 
which  is  characteristic  of  those  people,  and  I  happened  to  be  in  his  office  when 
the  telegram  was  sent  down  to  him. 

I  presume  there  is  considerably  more  in  this  than  the  Farmers  have  put  forth, 
although,  of  course,  on  the  face  of  it  I  do  not  think  we  should  arbitrarily 
raise  the  price  unless  the  other  people  do  so. 

I  would  ask  that  you  write  me  a  letter  giving  me  the  facts  and  put  it  in  such 
form  that  I  can  pass  it  on  to  Mr.  Carey. 

Yours  truly, 

Occident  Elevator  Company, 

1,  Per  M.  R.  Devaney,  Gen.-Mgr. 


Oct.  8,  1914. 


W.  M.  Thompson,  Agt., 

Hurdsfield,  N.  D. 


Dear  Sir  :  After  receiving  your  letter  the  other  day  in  regard  to  the  situation 
there  at  your  station  concerning  the  Farmers  Co.,  I  took  the  matter  up  with 
the  Van  Dusen-Harrington  Co.,"*®  and  they  told  me  that  they  would  look  into  the 
matter  very  carefully  and  see  what  they  could  do  to  put  that  fellow  in  line. 

Wish  you  would  write  me  by  early  mail  as  to  whether  or  not  the  conditions 
are  any  different  now  than  they  were  when  you  last  wrote. 


Yours  truly, 


Andrews  Grain  Co. 


BCC-Mc 


By 


I 


Presumably  the  commissioii  branch  of  the  Van  Dusen-Harrington  interests. 


/ 


294 


COUNTRY  GRAIN  MARKETING. 


Similarly,  the  line  companies  occasionally  employ  the  same  agency 
for  the  purpose  of  influencing  their  cooperative  or  independent  com¬ 
petitors,  though  instances  of  this  character  are  apparently  very  rare. 


Powers  Elevator  Co., 
Minneapolis  Minn.  2/26/16. 

M.  M.  Sauer,  Agt., 

Royalton,  Minn. 

Dear  Sir  :  Refresh  my  memory  concerning  the  commission  house  with  whom 
.T.  B."”  works— is  it  Quinn-Shepardson  &  Co.  to  whom  he  consigns?  There 
must  be  some  institution  financing  him  and  if  you  will  tell  me  who  they  are 
I  will  have  them  write  him  a  special  letter  on  the  importance  of  docking  rye 
for  what  there  is  in  it  for  the  reason  that  the  state  officials  put  on  dockage  at 
terminals — reply  on  this  sheet  first  mail. 

Yours  truly, 

Powers  Elevator  Co. 

W.  K.  P  A.  By  AV.  K.  P.  Mgr. 


Gentlemen  :  J.  B.^  has  been  shipping  to  Hagen  Burg  Co.  or  some  such  name. 
I  dont  know  if  I  have  it  just  right. 

Yours  truly, 

M.  M.  Sauer. 


Section  20.  Agreements  and  understandings  among  local  agents.  Jj 

Local  elevator  agreements. — While  it  is  probably  the  desire  to  11 
those  promoting  or  entering  into  the  agreements  and  understandings  J. 
to  have  them  cover  as  many  branches  of  country  grain  marketing  as 
possible,  the  agreement  frequently  includes  only  a  single  point.  Thus  ' ' 
an  arrangement  which  covers  grading  or  docking  may  not  include 
price,  or  vice  versa.  Or  the  parties  may  not  be  able  to  agree  on  taking  ^ 
full  dockage,  for  instance,  but  will  agree  to  dock  the  grain  a  fixed 
number  of  pounds. 

A  considerable  proportion  of  the  agreements  and  understandings 
with  reference  to  prices  and  other  matters  are  effected  directly  be¬ 
tween  or  among  the  local  agents  involved. 


[From  the  files  of  the  Atlantic  Elevator  Co.] 


Crosby,  N.  D.,  Oct.  10,  1919 

Atlantic  Elev.  Co., 

Minneapolis,  Minn. 

Gentlemen  :  Have  your  letter  of  the  7th  and  note  what  you  say  in  regard 
to  paying  over  card  price. 

The  Northland  buyer  made  the  rounds  to  all  elevators  this  morning  and  all 
were  willing  to  come  to  list  price  except  the  National  agent,  and  the  agents  at 
Ambrose  are  also  willing  to,  so  we  are  coming  closer  to  business  now  I  think. 
Yours  truly, 

J.  A.  Kappadall. 


Andrews  Grain  Co., 

Regan  N.  D.  Station,  5/12/17. 

Andrews  Grain  Co., 

Minneapolis,  Minn. 

Dear  Sirs:  Regarding  your  letter  of  May  9th  can  say  I  have  taken  the 
matter  up  with  the  other  buyer  here  and  we  have  agreed  to  buy  all  grain  at 
strictly  list  prices.  We  have  been  doing  this  in  the  past,  excepting  very  few 
cases  and  these  were  parties  who  live  very  close  to  StilU 

So  we  will  hardly  have  any  trouble  here  as  regards  the  matter  referred  to. 
Yours  very  truly, 

(Signed)  A.  B.  Greenfield. 


■ 

m 

*  1 


J.  G.  Bargabos  &  Son,  an  independent  elevator  operator  at  Royalton,  Minr 


COMPETITIVE  CONDITIONS  IN  COUNTKY  BUYING. 


295 


[From  the  files  of  the  Atlantic  Elevator  Co.] 

Oakes  Station,  July  28,  1916. 

Atlantic  Elev.  Co. 

Deak  Sirs  :  I  have  seen  the  Salzer  man  and  Knox  Grain  Co.  and  the  following 
is  what  we  have  agreed  on  as  coal  prices. 


Stove  Size 

Hard 

$n.oo 

$9.60 

Nut 

ii 

11.25 

9.85 

« 

H.  V.  “ 

n 

7.75 

6.15 

Millers  Creek 

a 

8.75 

7.00 

this  is  out  Bin 

I  had  two  talks  with  the  Hawkeye  Elev.  man  hut  didn’t  get  any  satisfaction 
Can’t  you  take  the  matter  up  with  the  Hawkeye  people  there  and  let  we  know 
Yours  truly, 

R.  O.  Smith. 


[From  the  files  of  the  Victoria  Elevator  Co.] 

Epping  N.  D.  10-12,  1915. 

Victoria  Elev.  Co. 

Minneapolis 

Gentlemen  Well  we  have  got  together  on  the  hard  wht  proposition  again 
and  have  agreed  on  paying  hard  for  only  wheat  that  would  grade  hard  and  to 
grade  the  wheat  down  where  it  belongs. 

4=  sH  4:  * 

Yours  resp, 

R.  C.  Udy. 


[From  the  files  of  the  Northwestern  Elevator  Co.] 


C.  A.  Magnuson,  Pres., 

N.  W.  Elev.  Co.,  Minneapolis,  Minn. 


Sept.  7,  1915. 


Dear  Sir  :  I  had  a  talk  with  the  other  elevator  boys  in  town  yesterday  and 
the  prices  agreed  upon  are  as  follows : 

Wheat  2^  and  freight  off,  Minneapolis 
Oats,  20  and  freight  off,  “ 

Barley  and  rye  30  and  freight  off  Mpls. 

Flax  40  and  freight  off,  Minneapolis. 

These  were  the  prices  that  you  suggested  before,  and  taking  Into  considera¬ 
tion  the  conditions  that  exist  here  at  the  present  time,  I  think  they  will  have 
to  serve  for  this  season.  I  think  tho  that  they  are  a  little  bit  too  high  for  any 
profit  on  this  year’s  business,  but  at  the  same  time,  I  do  not  think  that  we  can 
exxiect  any. 

Yours  truly, 


A.  W.  Kron,  Sec., 

The  Farmers  Elevator,  Litchfield,  Minn. 


[Prom  the  files  of  the  Victoria  Elevator  Co.] 

Roger,  N.  D.  Dec  7,  1915. 

Acme  Grain  Co. 

Minneapolis,  Minn.  ^ 

Dear  Sir  :  We  are  paying  2  ct  over  list  here  as  card  price.  We  was  to  come 
to  card  price  Monday  but  the  rest  of  the  Grain  Thieves  here  would  not  agree,  to 
it  so  we  are  paying  2  over. 

4>  «  «  *  *  *  « 


Respy, 


G.  L.  Britten. 


296 


COUNTRY  GRAIN  MARKETING. 


[From  the  files  of  the  McCaull-Webster  Co.] 

Randolph,  Neb.  Oct.  25th,  1913. 

D.  Webster, 

Minneapolis,  Minn. 

Dear  Sir-  I  phoned  Mr.  Kennedy  yesterday  about  reducing  Osmond  but  he 
will  not  do  a  thing  at  present.  He  says  the  minute  they  mark  the  market  down 
the  Farmers  Elevator  snap  up  something.  Dennis,  farmers  buyer  is  per  ec  y 
willing  to  reduce.'  Mr.  Kennedy  is  coming  out  next  week  and  I  think  we  can 
get  that  market  in  shape. 

Yours  truly,  '  Gi.etsteen. 

Agreements  by  direction  of  head  office.  In  so  fur,  Iiowbvgt,  as 
the  line  company  agents  are  responsible  for  the  initiation  of  mutual 
arrangements  as  to  prices,  etc.,  the  correspondence  indicates  that 
action  is  usually  taken  only  upon  instructions  from  the  head  ouice. 
The  correspondence  obtained  by  the  Commission  records  numerous 
instances  where  the  head  offices  have  directed  their  agents  to  call  on 
their  competitors  with  reference  to  effecting  agreements  or  at  least 
more  harmonious  action  on  prices,  grades,  dockage,  etc. 

Alamo,  N.  D.  Aug.  20-1919. 

Occident  Elevator  Co. 

Mpls,  Minn. 

Gentlemen  :  The  Farmers  Elev.  Manager  from  Appam  was  here  and  asked 
me  what  I  was  going  to  pay  for  wheat  this  fall.  I  told  him  I  did  not  ha^ 
any  instructions  to  pay  any  other  price  except  card.  He  said  Grenora,  Hanks  ^ 
Zahl,  Appam  was  trying  to  get  together  and  just  pay  the  2.01  and  2.03  for  is 
reason— he  said  if  they  paid  up  card  price  and  before  they  got  a  carload  the 
Government  would  take  the  premium  off  and  they  would  be  the  loser.  I  told 
him  I  had  no  authority  whatever  to  make  any  agreement  of  this  kind  and 
would  have  to  take  it  up  with  my  Co.  I  think  if  the  Farmers  got  hold  of  t  is 
that  it  would  cause  trouble,  and  that  I  will  pay  card  price  for  wheat  until  I  got 
instructions  to  do  different. 

(Signed)  Ale.  Everson. 

Minneapolis,  Minn.  Aug.  22,  1919. 

Mr.  Ai.r.  Everson,  agent. 

Alamo,  N.  D. 

Dear  Sir:  I  have  your  letter  of  the  20th  and,  of  course,  we  would  not  go  J 
into  any  deal  to  depress  the  prices.  You  will  follow  the  Grain  Bulletin  card  J 
and  our  instructions  to  pay  over,  as  you  get  them.  You  would  get  in  pretty  bac.  j 
personally  and  we  would  get  in  bad  also  if  we  attempted  to  buy  the  wheat  on 
the  basis  they  mention. 

Yours  truly,  ^  -r. 

Occident  Elevator  Co. 

Genera  l-M  anager, 

mrd.  1  _ 

Nov.  28,  1916. 

H.  J.  Thorstenson.,  Agt., 

Northwood,  N.  D. 

Dear  Sir  :  We  have  your  letter  of  the  26th  enclosing  a  list  of  prices  for  wheat, 

arranged  by  the  farmers  Elevator  Co.  ,  i  ^ 

On  the  basis  of  270  under  Minneapolis  December  for  53#  good  bright  wheat, 
we  would  be  willing  to  let  it  stand  at  that,  provided  the  cost  of  freight  was 

53#  wheat  of  good  color  will  bring  about  200  under  Minneapolis  December 
wheat  at  Minneapolis  but  we  ought  to  take  the  freight  off  and  make  it  about 
340  under  Minneapolis  December  at  your  station. 

I  would  say  that  the  prices  on  the  other  test  weights  of  wheat  would  not  be 
very  much  out  of  line  provided  you  take  the  freight  charge  off.  Better  see  the 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING. 


297 


‘i' 


Farmers  Co.  on  receipt  of  this  letter  and  find  out  whether  they  will  do  this  or 
not.  If  they  do,  we  will  be  satisfied  for  the  present  to  buy  the  stuff  on  the  basis 
given,  but  as  it  is  without  the  freight  being  taken  off,  the  price  is  a  little  too 
strong. 

Yours  truly, 

BCC-Mc  Andeews  Grain  Co. 

By 


Powers  Elevator  Co., 
Minneapolis,  Minn.,  25th  Jan.  1916. 


Martin  Sauer.  Agt.., 

Royalton,  Minn. 

Dear  Sir  :  Attached  find  letter  received  from  Belgrade  this  morning. 

There  is  no  good  reason  for  our  not  holding  to  the  2^  discount  under  No  1 
card  price  at  Royalton.  Show  this  to  J.  B.^®  and  fix  it  up  with  him — we  are 
working  on  this  same  basis  at  Rices,  and  are  doing  a.11  that  we  can  to  assist 
J.  B.*®  in  getting  somewhat  safer  margin  on  his  stuff — he  should  appreciate  it. 
Reply  on  this  sheet,  returning  enclosure. 

Yours  truly, 


Powers  Ej.evator  Co 
By  Mgr. 


WKP  M 


Gentlemen  :  I  had  quite  a  talk  with  J.  B."*®  and  we  are  now  paying  20  under 
list  for  wheat.  Now  if  Bowlus  will  get  in  line,  it  will  be  all  right.  Otherwise 
J.  B.^®  said  that  he  would  not  stay  below  Bowlus.^** 

Yours  truly, 

M.  M.  Sauer. 

Sept.  28,  1916. 

M.  G.  Blaha,  Agt., 

Hiirdsfield,  N.  D. 

Dear  Sir  :  We  have  yours  of  the  2Gth  informing  us  that  the  Farmers  Elevator 
Co.  are  now  getting  50  over  list  on  all  kinds  of  barley  and  wanting  to  know 
what  to  do. 

The  first  thing  to  do  under  these  circumstances  is  to  go  and  see  Thompson 
and  have  a  little  talk  with  him  and  ask  him  if  he  cannot  see  his  way  clear  to 
buy  barley  strictly  on  list  price  and  also  his  wheat  in  the  same  way  according 
to  the  test.  If  you  are  unable  to  convince  him  that  this  is  the  only  safe  basis 
upon  which  to  buy  the  stuff,  notify  us  and  in  the  meantime  arrange  to  meet 
his  prices  provided  by  doing  so  you  can  get  full  share  of  the  grhin.  Keep  us 
fully  advised  in  regard  to  this  matter. 

Yours  truly, 

(Signed)  Andrews  Grain  Company. 

Bcc-Mc  By 


[From  the  files  of  the  McCaull-Webster  Co.] 

Minneapolis,  Minn.,  Aug.  15,  1914. 

Mr.  H.  E.  Pasek, 

Buffalo,  Montana. 

Dear  Sir:  We  yesterday  wired  you  to  work  on  a  basis  of  270  under  Duluth 
September  for  No.  1  Turkey. 

Are  your  competitors  willing  to  work  on  the  same  basis? 

Yours  very  truly, 

,  J.  L.  McCaull, 

JLMcC/B  President. 


I  think  this  is  satisfactory  to  all,  at  least  the  farmers  and  I  compare  prices 
every  morning  and  we  seem  to  correspond  and  they  seem  to  be  anxious  to 
work  with  us,  that  is,  work  on  the  same  margin. 


Yours  truly. 


H.  E.  Pasek. 


\ 


28  J.  G.  Bargabos  &  Son,  an  independent  elevator  at  Royalton,  Minn. 
2*  A  town  in  Minnesota,  near  Royalton. 


298 


COUNTRY  GRAIN  MARKETING, 


Nov.  22,  1915. 


H.  J.  Thorstenson,  Agt., 

Northwood,  N.  D. 

Dear  Sir:  This  1°  wheat  which  you  are  shipping  now  is  not  going  to  grade. 
It  is  too  yellow,  soft,  and  contains  cockle. 

Think  it  would  be  wise  to  have  an  interview  with  the  Farmers  Co.  and  Mill 
buyers  as  well  as  the  line  company  agent,  and  see  if  you  cannot  round  them  up 
on  a  little  better  basis  on  grades  and  dockages  hereafter. 

I  suppose  the  others  are  grading  it  just  as  leniently  as  you  are  and  in  that 
case  they  must  be  losing  grade  in  the  same  way  we  are.  Therefore  losing 
money.  Perhaps  they  are  waiting  for  a  chance  to  get  the  stuff  right.  See  what 
you  can  do  and  let  me  know. 

Yours  truly. 


Andrews  Grain  Co. 


BCCMc 


By 


Occasionally,  it  seems,  line  agents  are  instructed  to  attempt  adjust¬ 
ments  of  the  competitive  conditions  between  local  stations  with 
agents  at  other  towns.^®  This  appears  to  be  very  exceptional,  how¬ 
ever,  competition  between  different  stations  being  usually  handled 
either  by  the  head  offices  or  else  by  the  traveling  superintendents. 

Securing  harmonious  action  among  local  agents. — The  friendly 
feeling  toward  one  another  frequently,  if  not  usually,  apparent 
among  the  various  line  companies  leads  to  definite  efforts  on  the 
part  of  the  head  offices  to  keep  the  agents  of  the  different  lines 
at  each  station  working  together  on  a  harmonious  basis,  “buying 
grain  right,”  or,  in  other  words,  at  card  prices,  with  accurate  grad¬ 
ing  and  dockage.  In  fact,  definite  instructions  are  frequently  is¬ 
sued  to  the  local  line  agents  unmistakabl;7  designed  to  prevent 
competitive  fights,  to  eliminate  any  ill  feeling  or  hostility  which 
might  develop  into  competitive  warfare,  or  once  such  warfare  has 
occurred,  to  put  an  immediate  or  early  stop  to  the  same. 

There  are  also  occasional  instances  where  the  lines  manifest  a 
similar  attitude  toward  their  competitors  other  than  the  line  com¬ 
panies. 

[From  the  files  of  the  Northwestern  Elevator  Co.l 


Sept.  5th,  1919. 

P.  J.  Thompson,  Agent, 

Climax. 

Dear  Sir  :  I  have  had  the  matter  up  with  the  St.  Anthony  &  Dakota  in  re¬ 
gard  to  our  paying  a  much  more  price  than  the  stuff  is  worth  at  Climax. 
Now  it  seems  to  me  that  there  is  no  use  of  either  you  or  the  St.  Anthony 
&  Dakota  Company  keeping  a  chip  on  your  shoulder  thereby  making  severaP 
companies  pay  more  for  the  stuff  than  you  should  and  the  only  thing  for^ 


»®  An  instance  of  this  is  the  following : 

The  Andrews  Grain  Co.,  a  Minneapolis  line  concern,  wrote  their  agent  at  Oriska,] 
N.  Dak.,  Charles  H.  Ferguson,  in  part  as  follows  : 

Why  don’t  you  go  over  to  this  town  of  Pillsbury  and  make  a  personal  visit  of  buyers 
there  and  find  out  what  they  are  doing  and  if  it  is  true  that  they  are  paying  more  than 
we  are  at  Oriska,  you  tell  them  that  that  is  the  case  and  that  for  that  reason  they  are 
taking  grain  out  of  our  territory  and  that  unless  they  get  back  to  list  price  where 
they  belong  that  we  will  have  to  put  prices  up  at  Oriska  to  equal  theirs  or  perhaps  in 
advance  of  theirs  and  take  the'grain  away  from  them  or  else  make  them  pay  up  where 
there  won’t  be  anything  in  it.  *  *  *  Now  you  get  in  touch  with  them  and  go  over 
there  at  our  expense  and  take  one  or  two  other  agents  along  with  you  from  Oriska 
and  see  what  you  can  accomplish  in  the  way  of  being  travelling  supt.  yourself  and 
then  let  us  know  about  it.” 

In  accordance  with  the  above  instructions,  Ferguson  went  to  Pillsbury,  accompanied 
by  the  Monarch  Elevator  Co.’s  agent.  Ferguson  first  reported  that  the  results  of  his 
visit  were  doubtful,  writing  that  he  hoped  the  cooperative  concern  at  Pillsbury  would 
‘‘  see  it  this  way  but  don’t  have  much  hopes  they  will.”  Still  later  he  reported  that 
“  It  seems  that  instead  of  doing  this  market  any  good  by  going  up  to  Pillsbury  we 
have  hurt  it.  The  farmers’  man  up  there  has  told  all  over  that  we  were  up  there  to 
get  him  to  come  to  our  prices  and  he  has  used  it  to  a  good  advantage.  The  farmers 
are  hotter  than  wool.  They  are  3  or  4  cents  over  on  wheat  and  about  5  cents  on  fiax.” 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING. 


299 


you  to  do  is  to  get  together  and  buy  the  stuff  right  and  I  want  you  to  do 
your  full  portion  to  right  this  matter.  The  fact  of  it  is  that  both  of  us  have 
got  to  do  it  in  order  to  make  expenses  this  year  at  your  station  and  I  hope 
you  will  take  this  into  consideration  and  the  necessity  of  maintaining  har¬ 
mony  at  your  station.  I  want  you  to  do  your  part  no  matter  what  the  other 
fellow  does,  but  I  believe  you  can  as  you  ought  to,  work  together  to  this  end. 

Yours  truly, 

Pkest. 


F.  E.  Bye,  Agent, 

Oilby,  N.  D. 


August  27,  1919. 


Dear  Sir:  *  *  *  We  are  greatly  encouraged  over  what  you  have  to  say 

in  regard  to  visiting  the  Monarch  agent,  and  that  you  believe  there  is  a  dis¬ 
position  on  his  part  to  come  down  to  right  prices  and  grains.  It  hardly  seems 
impossible  that  you  two  should  get  together  out  there  and  work  in  harmony, 
and  we  ard"  led  to  believe  from  this  letter,  that  something  of  this  kind  might 
possibly  come  about.  There  is  no  use  in  preaching  on  this  subject,  Fred,  as  you 
know  that  you  should  work  for  this  end  without  our  having  to  give  you  any 
advice  thereon  from  down  here.  You  can  rest  assured  that  anything  you  can 
do  to  straighten  out  the  local  situation  is  going  to  be  thoroughly  appreciated 
at  this  end  of  the  line. 

Yours  very  truly, 


Andrews  Grain  Co., 
By 

HGT  :ML 

CC  Mr.  B  G.  Cochrane. 


The  harmonious  and  cooperative  action  of  the  various  line  com¬ 
panies  is  also  well  indicated  by  the  frequent  condemnation  of  agents 
by  the  head  offices,  or  traveling  superintendents,  for  failing  to  work 
in  harmony  with  competing  line  and  other  agents  in  buying  grain. 


[From  the  files  of  the  Andrews  Grain  Co.] 


H.  M.  Olson,  Agent, 

Elliott,  N.  D. 


October  24,  1919. 


Dear  Sir  :  We  have  your  Load  Report  of  the  23rd  instant  and  note  that  the 
Farmers  were  “  out  of  luck  ”  not  having  received  a  load  that  day.  That  is  very 
hard  on  them,  of  course,  but  the  whole  town  came  pretty  near  being  out  of  luck. 

We  are  a  little  bit  surprised  that  you  should  hog  things  in  this  way,  especially 
after  the  kind  and  considerate  treatment  Mr.  Packard  has  always  extended 
you. 

While  it  is  a  little  bit  late  for  us  to  say  what  should  have  been  done  on  this 
particular  day,  we  think  it  might  be  very  nice  of  you  in  the  future,  to  at  least 
extend  Mr.  Packard  the  opportunity  on  occasions  like  this,  of  coming  over  and 
taking  a  share  of  the  load.  It  is  quite  possible  that  you  extended  this  courtesy" 
to  him  at  the  time,  but  as  you  do  not  mention  it,  we  are  jumping  at  the  con¬ 
clusion  that  you  didn’t  do  so. 

Yours  very  truly. 


Andrews  Grain  Co., 


By 


HGT  ;ML 


CC  Mr.  Bakke, 
O’Shea. 


[From  the  files  of  the  St.  Anthony  <&  Dakota  Elevator  Company.] 

J  2/21/ 16. 

Northwestern  Elev.  Co., 

Building. 

Gentlemen  :  We  have  your  favor  of  the  18th  and  are  returning  your  agent’s 
letter.  We  ju.st  have  a  letter  from  Hillsboro  in  which  he  says  he  talked  matters 


C.  T.  Packard,  manager  and  secretary  of  Farmers’  Elevator  &  Mercantile  Co. 


300 


COUNTKY  GRAIN  MARKETING. 


I 


over  with  your  man  and  that  his  price  at  the  present  time  was  970.  We  went 
after  him  pretty  hard  for  not  having  a  heart-to-heart  talk  with  your  agent  and 
establishing  a  price  at  the  time  you  wrote  us.  We  don’t  think  it  is  a  spirit 
that  will  get  us  anywhere  and  we  want  our  agents  to  understand  that  we 
expect  them  to  work  in  harmony  with  their  competitors;  that  what  is  to  their 
competitor’s  interest  is  to  ours.  Unless  we  can  put  the  two  interests  together, 
we  can’t  get  results. 

Yours  truly, 

C.  D.  JUNKIN, 

Enc.  Gen’l  Supt. 

Aug.  24,  1914. 

Geo.  L.  Heffos,  Agt., 

Omemee,  N.  Dah. 

Dear  Sir:  We  understand  that  a  few  days  age  the  buyer  for  the  Imperial 
Elevator  Co.,  at  your  station  had  a  talk  with  you  in  regard  to  buying  grain 
at  proper  grades,  etc.,  but  that  you  talked  as  though  you  did  not  intend  to  pay 
very  much  attention  to  grades  or  list  prices,  that  you  were  going  to  get  the 
grain  anyway. 

This  is  not  the  proper  way  to  talk  to  a  competitor  no  matter  what  you  intend 
to  do.  When  he  came  to  you  to  talk  this  matter  over  you  should  have  advised 
him  that  it  was  your  intention  to  buy  the  grain  right,  which  we  want  you  to 
do,  if  it  is  possible  to  do  so. 

In  regard  to  this  matter  we  want  you  to  go  to  him  now  and  tell  that  you 
are  going  to  buy  the  grain  right  and  that  there  won’t  be  any  trouble.  Of  course 
it  will  be  all  right  for  you  to  advise  him  that  you  want  your  share  of  the  grain 
but  you  are  going  to  get  your  share  anyway.  You  have  been  there  long  enough 
so  that  you  should  be  able  to  get  your  share. 

Of  course  if  the  Imperial  buyer  falls  doyvn  one  (once)  in  awhile  you  must 
not  pay  any  attention  to  that  as  you  might  fall  down  sometime  yourself,  but 
you  must  not  lead  him  to  believe  that  you  have  your  fighting  clothes  on  and 
that  you  are  going  to  get  the  grain  anyway.  That  is  no  way  to  do  business. 

Yours  truly, 

FJS  :OM  Northland  Elevator  Company. 


Minneapolis,  Minn.,  Sept.  ^915. 

Northwestern  Elevator  Co. 

City. 

Gentlemen  :  Replying  to  yours  of  the  3rd  relative  to  Osnabrock.  We  cer¬ 
tainly  will  do  our  part  to  hold  Osnabrock  to  a  satisfactory  market,  and  we  have 
instructed  our  Supermtendent  to  see  that  our  agent  minds  his  own  business  and 
if  he  is  at  all  inclined  to  hold  personal  grievances  against  the  other  buyer  to 
keep  them  to  himself  and  do  his  part  in  eliminating  some  of  the  apparent 
friction. 

Yours  truly, 

Imperial  Elevator  Company, 
(Signed)  F.  H.  Ellis,  Qen.  Supt. 

FHE-GR 

Broken  agreements. — When  an  agreement  is  broken  there  is 
frequently  an  immediate  attempt  made  to  readjust  matters  and  return 
to  the  former  arrangement. 

[Frcm  the  files  of  the  Victoria  Elevator  Co.] 

Epping  N.  D,  10-12  1915. 

Victoria  Elev.  Co., 

Minneapolis. 

Gentlemen  :  After  the  Occident  man  started  paying  hard  *  we  all  came  up  and 
so  he  came  over  yesterday  and  says  we  had  better  get  together  and  buy  it  down 
where  it  belongs.  So  this  will  be  the  second  time  for  us  to  get  together  as  we 
had  all  agreed  to  not  pay  hard  in  the  start  so  we  will  see  if  we  can  stay  down 


*  Hard  wheat  prices. 


301 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING. 


where  we  belong, 
bunches  of  them. 
Yours  resp. 


I  received  my  extra  joints  for  my  shipping  spout  and  got  two 

R.  C.  Udy. 


Apparently  the  violation  of  an  agreement  is  frequently  the  result 
of  a  misunderstanding  and  does  not  always  occur  through  aeliberate 
intention.  A  farmer  may  make  report  to  an  elevator  of  die  higher 
prices  offered,  better  grades  given,  or  less  dockage  taken  by  a  competi¬ 
tor,  when,  as  a  matter  of  fact,  such  is  not  the  case. 


[From  the  files  of  the  Northwestern  Elevator  Co.] 


Dec.  17,  1919. 

For  D.  D.  MacMilt.an, 

Cargill  Elevator  Company, 

Chamber  of  Commerce  City. 

Gentlemen:  Our  Traveling  Supt.  Mr.  J.  P.  Hull,  has  been  at  .Tolnson  and  he 
writes  me  under  date  of  December  16th : 

I  find  the  trouble  at  Johnson  comes  largely  from  the  fact  that  the  two  agents 
do  not  get  along  well.  This  taken  with  the  quality  of  wheat  coming  to  Johnson, 
for  instance  with  the  price  difference  of  5^  per  pound,  a  man  might  bring  a 
load  of  wheat  in  today  that  might  test  54  lbs  and  the  next  load  might  test 
52  lbs.,  both  coming  from  the  same  farmer.  When  you  explain  the  difference 
the  farmer  thinks  one  load  as  good  as  the  other,  so  he  takes  the  next  load 
around  to  another  house  and  claims  that  he  has  been  getting  the  top  price  and 
unless  the  buyer  stands  pat  or  is  suspicious  of  his  competitor,  he  justifies  him¬ 
self  by  paying  up.  It  is  the  case  of  the  farmer  farming  the  buyer  and  has  been 
worked  at  Johnson.  I  have  ordered  our  men  to  buy  strictly  at  the  arranged 
price. 

******* 
Yours  truly, 

Pres. 


‘  Sept.  16,  1915. 

J.  A.  Schatz, 

Agt.,  W ellesherg ,  N.  Dale. 

Dear  Sir:  We  have  a  letter  from  Jacob  Heit  your  opponent  at  Wellesberg  and 
he  complains  that  you  are  paying  over  list.  Now  we  do  not  want  to  fight  with 
these  people  as  it  costs  money  to  fight. 

In  case  some  farmer  is  carrying  tales  before  you  get  angry  take  the  matter  up 
with  these  people  personally  and  at  any  time  he  wishes  to  see  your  books  to 
prove  that  you  are  not  doing  anything  wrong,  it  will  be  alright  for  you  to  show 
them  to  him. 

******* 


Yours  very  truly, 
RGC  MBL 


Victoria  Elevator  Co. 


The  agent  hearing  such  reports  frequently  believes  that  his  competi¬ 
tor  has  broken  an  agreement,  and  as  a  consequence  feels  at  liberty  to  do 
likewise.  A  period  of  strenuous  competition  often  follows  before 
matters  can  be  adjusted. 

Section  21.  Effecting  agreements  and  understandings  through  traveling 
superintendents. 

Competitive  adjustments  by  individual  superintendents. 
Among  the  various  duties  apparently  assigned  to  the  traveling  super¬ 
intendents  or  auditors  of  line  companies  is  that  of  securing  har¬ 
monious  action  among  the  agents  at  local  stations  (especially  those 
of  the  line  companies)  with  reference  to  prices,  grades,  dockages,  etc. 


302 


COUNTEY  GRAIN  MARKETING. 


.[■  • 


A  failure  on  the  part  of  the  local  agent  upon  direction  to  adjust  satis¬ 
factorily  the  competitive  situation  is  by  no  means  taken  as  final  by 
the  line  company  or  companies  affected.  In  such  an  event,  as  well  as 
at  other  times,  the  traveling  superintendent  may  be  instructed  to  tty 
his  hand  at  arranging  matters.  . 

Sept.  1,  1919. 

Mr.  B,  G.  Cochrane, 

Detroit,  Minn. 

Dear  Bert;  We  have  your  letters  of  the  30th  relative  to  conditions  along  the 
line  North  of  Grand  Forks. 

*  *  *  s!:  s|s  *  :)! 

We  are  quite  surprised  to  see  that  you  cannot  solve  the  Drayton  situation. 
We  had  expected  you  to  go  up  there  to  look  this  matter  over  for  a  few  minutes 
and  then  put  that  market  on  a  strictly  list  basis,  and  as  stated  above,  we  are 
qu’ie  surprised  that  you  did  not  see  how  to  bring  this  about.  The  only  thing 
we  can  suggest  is  to  carry  a  little  lemon  extract  on  your  hip  as  this  will  help 
the  situation  out  as  long  as  the  extract  lasts. 

Yours  very  truly, 

Andrews  Grain  Co. 

HGT ;  ML  By- 


Oriska,  Feh.  8,  1918. 

Monarch  Elev.  Co. 

Mpls.,  Minn. 

Gentlemen  :  In  regard  to  the  Bly.**  market,  as  near  as  I  can  find  out  the 
Farmers  &  Nelson  are  paying  from  8  to  12^  above  on  Bly.®^  The  Andrews  Agt. 
is  wild  on  Bly.,®^  but  O’Shay  promised  that  they  would  come  down  as  much  as 
they  could  and  still  be  in  the  market  and  that  their  man  would  at  all  times 
give  our  man  the  price  that  he  is  authorized  to  pay,  so  that  we  can  pay  the 
same  if  we  want  to^  do  so.  There  is  no  trouble  between  the  Agts.  whatever, 
but  the  Andrews  mah  seems  to  think  that  he  can  make  any  price  that  he  wants 
to  to  get  the  stuff,  regardless  to  whom  the  grain  would  go,  us  or  the  Farmers 
or  Independent,  but  says  that  he  will  work  with  us  from  now  on. 

Yours  truly, 

N.  C.  Jensen.“ 

\ 


[From  Empire  Elevator  Co.] 

Station  Hutchinson,  Minn.,  October  28,  1916. 

Mr.  J.  R.  McMillan, 

Minneapolis,  Minn. 

Dear  Sir:  I  will  be  at  Stewart  Monday  and  will  then  make  all  of  the  Minn, 
stations  going  west,  and  get  them  all  lined  up  again  and  I  expect  to  reach  Mil- 
bank  Thursday  or  Friday  and  then  I  will  come  back  to  Correll  and  get  straight¬ 
ened  up  with  Clapp. 

Yours  truly, 

(Signed)  H.  Thompson,  Supt, 


Minneapolis,  Minn.  Sept.  21,  1915. 

Bagley  Elevator  Co., 

City. 

(Attention  of  Mr.  Ralph  Bagley) 

Gentlemen  :  Pursuant  to  our  talk  yesterday,  you  will  be  interested  to  know 
that  we  have  wired  Mr.  Moritz,  our  auditor  on  the  Gettysburg  line,  to  go  to 
Faulkton  and  put  that  market  in  condition  where  the  line  companies  will  get 
some  share  of  the  business. 


*«  A  traveling  superintendent  for  Monarch, 


“  Barley. 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING. 


■303 


situation  seems  to  be  very  peculiar,  as  we  are  getting:  it  from  our  agent 
this  morning ;  in  that,  no  matter  what  we  otfer,  we  are  getting  absolutely  noth¬ 
ing.  The  farmers’  Elevator  Co.  is  buying  strictly  at  list,  and  the  farmers  have 
all  gone  crazy  over  the  idea  of  a  Farmers’  Elevator  Co. 

We  have  asked  Mr.  Moritz  to  stay  there  until  he  can  work  out  something, 
and  we  will  keep  you  posted  from  time  to  time. 

Yours  truly, 

G.  W.  Van  Dusen  &  Co. 

C.  B.  Rogers  Mgr, 

CBR-W 


[From  the  files  of  the  Northland  Elevator  Co.] 

G.  J.  White, 

Kenmare,  N.  D. 

Dear  Sir:  We  want  you  to  go  down  to  Overly  just  as  soon  as  you  can  and 
see  if  you  can  not  get  that  market  straightened  out,  as  all  of  the  buyers  are 
one  grade  too  high  and  it  seems  that  the  farmers’  buyer  is  about  two  grades 
too  high.  There  will  be  no  money  made  at  that  station  unless  you  can  get  that 
I  market  straightened  out  pretty  soon. 

You  will  then  go  to  Mylo  and  see  if  you  can  not  do  something  there.  There 
is  no  use  fighting  for  the  grain,  the  best  way  is  to  get  your  competitors  into 
line  and  do  it  right  away. 

Yours  truly, 

1  FJS/SM 


[Pror.i  the  files  of  the  Northland  Elevator  Co.] 


Mr.  Geo.  J.  White, 

Kenmare,  N.  Dak. 


De.'.  7,  1914. 


Dear  Sir  :  Find  enclosed  herewith  a  letter  from  our  agent  at  Tolley,  N.  Dak., 
which  explains  itself. 

Me  doii  t  want  you  to  get  all  of  your  stations  overlist.  We  want  you  to  go  to 
Tolley  and  Norma  both  as  soon  as  possible  and  try  and  get  those  stations  down 
to  list.  There  isn’t  any  sense  in  such  foolishness.  The  only  way  that  we  can 
hope  to  make  any  money  or  even  pay  expenses  from  now  on  is  to  buy  at  list. 
The  same  rule  applies  to  everyone,  and  there  is  no  use  in  sending  out  those 
lists  unless  they  are  followed.  Therefore,  we  want  you  to  use  your  best  endeav¬ 
ors  in  all  cases  to  keep  markets  down  to  list.  Of  course  we  will  have  to  pay’ 
what  the  others  pay  but  there  is  no  use  in  “  winking  ”  at  this  paying  over  list, 
as  it  is  going  to  mean  a  loss  to  us  in  the  end,  therefore,  it  is  the  traveling  man’s 
place  to  use  his  best  efforts  to  keep  markets  quiet,  as  that  is  the  only  way  to 
make  any  money. 

Yours  truly, 

F  JS :  CM 
Enc  #16 


Joint  efforts  by  superintendents. — In  a  number  of  cases  it  has 
been  the  custom  for  the  superintendents  of  two  or  more  competing  line 
companies  to  be  sent  to  a  station  to  confer  with  the  agents  with  refer¬ 
ence  to  the  proper  adjustment  of  prices,  grades,  dockages,  etc. 

Minneapolis,  Minn.  Oct.  21,  1018. 

Mr.  S.  J.  Epler, 

Supt.  -Billings,  Mont.  %R.M. 

Dear  Sir  :  Have  your  letter  of  the  19th  in  regard  to  the  McCaull-Dinsmore 
Co.  and  I  don’t  believe  there  is  much  use  in  trying  to  pay  a  great  deal  of 
attention  to  what  the  people  say  down  here.  I  told  Early,  the  Manager,  some 
time  ago  that  he  wanted  to  get  his  superintendent  out  there  and  check  up  with 
you.  M^e  could  not  do  anything  in  a  long  range  way.  These  people  have  been 
inclined  to  feel  their  oats  and  so  long  as  conditions  are  as  they  will  be  for  the 
present,  I  would  be  inclined  to  let  them  find  out  where  they  are  at.  There  is 
absolutely  no  sense  in  conducting  a  long  range  correspondence  between  this 
office  and  you  on  what  McCaull-Dinsmore  may  think  their  man  is  doing,  based 


304 


COUNTRY  GRAIN  MARKETING. 


on  roports  thoy  from  him.  Tho  thing  to  do  is  to  got  their  suporintondont 
to  call  on  you  and  you  can  both  go  up  there  and  find  out  what  is  going  on. 

Yours  truly,  ^ 

Occident  Elevator  Co. 

mrd.  1.  Gen- Mgr. 


Po\^T':rs  Elevator  Co. 

Steele,  N.  D.,  10-9-16. 

Dear  Mr.  Powers  :  I  have  your  letter  about  meeting  Mr.  Woods  of  tlie 
Occident  and  making  trip  to  Dunn  Center  with  him.  I  phoned  him  yesterday  ^ 
and  found  th.qt  his  plans  would  not  permit  my  meeting  him  in  Mandan  today 
but  I  gave  him  my  plans  and  where  he  could  find  me  if  he  finds  it  possible  to 
meet  me  this  week  as  the  Buick  is  at  Stanton  I  am  going  up  there  today. 

I  have  met  Mr.  Woods  several  times  made  one  trip  to  BeulaD  with  him  some 
time  ago.  Mr.  Woods  impresses  me  as  a  fine  square  fellow  who  knows  his 
business  and  would  very  much  like  to  meet  him  and  make  that  trip  together.  . 

Yours  truly  ^  _ 

Ckas.  Boardman. 


Nov.  12th  1915. 

Mr.  C.  L.  Sawyer,  si 

Minot,  N.  Dak. 

Dear  Sir:  If  possible  we  would  like  to  have  you  go  to  Anamoose  on  Monday  j 
to  meet  Mr.  Gaskel  of  the  Woodworth  Elevator,  and  INIr.  Eaton  of  the  Osborn-,! 
McMillan  Elevator.  These  people  are  extremely  anxious  to  get  Anamoose  down  1 
to  a  better  basis.  I  think  that  their  idea  is  to  stick  absolutely  to  grade  on  all  j 
grain,  but  possibly  pay  2  cents  over  list  if  necssary.  ^ 

When  you  go  there  give  us  a  full  report  on  what  you  think  of  the  situation. 


Yours  very  truly, 


DLR.  MBL. 


Victoria  Elevator  Co. 


Nov.  12,  1915. 


M.  G.  Blaha,  Agt., 

Hurdsfield,  V.  D. 

Dear  Sir:  *  *  *  About  next  Monday  I  think  Mr.  O'Shea®^  will  be  at  youri 

station  and  perhaps  Mr.  Grobe®®  will  be  there  with  him  and  I  hope  that  between  i 
you  buyers  and  the  two  superintendents  that  you  will  be  able  to  get  the  1 
market  conditions  down  on  a  proper  basis  as  to  grades  and  dockages  and  prices,  i 
There  is  not  any  use  trying  to  force  the  matter  any  longer.  You  know  pretty  ^ 
well  now  from  the  returns  that  you  had  on  your  shipments  what  the  stuff  isj 
grading  down  here  and  we  have  got  to  hew  to  the  line  out  there.  We  cannot  S 
afford  to  take  the  grain  except  at  a  positively  safe  grade.  We  have  lost  money 
on  a  good  many  of  the  shipments  and  we  have  got  to  get  that  back. 

.  ^  ^  *  ♦  *  * 


Yours  truly, 


BCO-Mc 


By 


Andrews  Grain  Co. 


Andrews  Grain  Co., 

Hurdsfield,  N.  D.  Station,  Nov.  18,  1915. 

Andrews  Elev  Co 

MpUs,  Minn.  . 

Gentlemen  :  Mr.  O’Shea  and  Mr.  Grobe  were  here  and  we  all  got  together^ 
for  the  purpose  of  improving  the  conditions  at  this  station.  j 

It  was  agreed  to  establish  proper  grades  and  not  to  pay  over  list,  except] 
on  such  storage  that  is  outstanding  where  concession  have  been  made.  :| 

*****’’'  * 

Yours  very  truly  ^ 

(Signed)  M.  G.  Blaha. 


**  Traveling  superintendent  of  Andrews  Grain  Co. 
Traveling  superintendent  of  Occident  Elevator  Co. 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING. 


305 


.  Sept.  4,  1914. 

[  H.  Thompson, 

Oakes,  N.  Dak. 

Dear  Sir  :  We  have  been  tryinj?  all  day  today  to  reach  you  by  phone,  but  np 
to  this  time  we  have  been  unable  to  do  so. 

If  you  get  this  letter  in  time  we  want  you  to  meet  the  traveling  man  for  the 
.Hawkeye  Elevator  Co.  at  Hample,  N.  Dak.  Saturday,  Sept.  5th,  but  if  you  do  not 
get  this  in  time  to  do  so  you  will  meet  him  there  Monday,  Sept.  7th.  Get  those 
agents  together  and  get  them  right  on  grades  and  dockages,'  and  also  get  them 
:  down  to  list. 

*  ♦  ♦  *  ♦  ♦  * 
Yours  truly, 

FJS  :  CM  Osborn-McMillan  Elevator  Company. 


Apparently  there  have  also  been  cases  where  the  trips  of  two  or 
more  superintendents  have  embraced  several  stations  along  the  same 
line.  In  at  least  one  or  two  cases  the  line  relationships  have  been  so 
friendly  that  the  agent  of  one  line  has  been  practically  directed 
to  act  according  to  the  instruction  of  the  superintendent  of  another 
line. 


W.  M.  Thompson,  Agent, 

Hurdsfield,  N.  D. 


Oct.  5th,  1912. 


Dear  Sir  :  Our  superintendent,  Mr.  Kerr,  will  endeavor  to  make  a  trip  over 
the  Turtle  Lake  Branch  next  week  with  the  superintendents  for  the  Crown  Com¬ 
pany  and  the  Occident  Company  in  order  to  advise  you  and  the  others  as  to 
the  grades  that  will  be  safe  upon  which  to  buy  this  wheat  hereafter,  after  the 
rains. 

If  for  any  reason  Mr.  Kerr  is  unable  to  make  this  trip  the  others  will  un¬ 
doubtedly  be  along  and  we  wish  you  would  be  on  the  lookout  for  them  or  either 
one  of  them  and  advise  with  them  or  him  as  to  how  to  properly  grade  this 
wheat  from  this  on  and  whatever  advice  you  receive  please  consider  it  the  same 
as  though  Mr.  Kerr  had  given  it  to  you  himself.  We  feel  that  whatever  advice  is 
given  you  will  be  absolutely  correct. 

We  shall  be  pleased  to  hear  from  you  after  your  visit  with  these  men.  We 
should  like  to  have  your  report  as  to  what  you  think  the  conditions  will  be  at 
your  station  aftbr  their  visit. 

Yours  truly, 


Andrews  Grain  Co. 


B.  C.  C/EP. 


By 


[From  the  files  of  the  Northwestern  Elevator  Company.] 

The  Northwestern  Elevator  Company, 

South  Shore  ll-lO-IJ/. 

C.  A.  Magnuson,  Prest. 

Mpls.  Minn. 

Dear  Sir:  Just  as  we  were  ready  to  leave  Benson  yesterday,  Mr.  Hanson 
received  a  message  to  go  to  Barry  and  he  could  not  come  with  me,  but  he  gave 
me  a  letter  to  his  agent  to  do  what  I  told  him  to  do  in  regard  to  paying  over 
list.  I  find  that  the  Farmers  were  paying  over  but  they  were  taking  what 
dockage  was  in  it,  and  were  fair  on  grades.  I  have  put  the  line  agents  down  to 
2^  over  list  on  wheat,  proper  grades  and  dockage  and  I  am  in  hopes  that  it  will 
not  be  a  great  while  until  I  can  lop  off  another  cent.  Kazek  had  several  loads 
while  I  was  here,  and  if  he  will  buy  in  the  future  as  he  was  buying  today,  he 
never  will  run  short  on  grades  or  dockage.  He  will  get  two  cars  of  durum 
loaded  out  today. 

Yours  truly, 

(Signed)  Jas.  Hanna, 

9964°— 20 - 20 


306 


COUNTRY  GRAIN  MARKETING. 


Section  22.  Agreements,  understandings,  and  cooperation  between  line 
and  head  offices. 

Use  or  head  offices  for  adjustments. — While  in  many  cases,  as 
indicated  by  the  preceding  correspondence,  the  lines  rely  upon  the 
agents  and  traveling  superintendents  to  adjust  the  local  competitive 
situation,  these  difficulties  are  frequently  taken  up  by  the  head  office, 
especially  in  the  event  that  the  agents  or  superintendents  are  unable 
to  secure  the  desired  results. 


[From  the  files  of  the  Occident  Elevator  Company.] 


Mpls,  Minn.,  Oct.  5  1918. 

Mr.  S.  J.  Epler, 

Supt-Billings,  Mont. 

Dear  Sir:  *  *  *  McCaiill-Dinsniore  agreed  that  they  would  follow  the 

Grain  Bulletin  list  and  if  you  get  your  price  out  on  that  line  at  $1.93  and  $1.94 
we  will  be  practically  on  that. 

******* 

I  told  that  man  Early,  who  is  the  Manager,  and  also  Mr.  McOaull,  who  is  the 
owner,  that  if  they  put  a  little  more  time  in  on  getting  the  right  kind  of  men 
they  would  get  more  business  and  make  more  money  on  it.  Early  says  their 
man  at  Rapelje  is  sick  and  is  in  the  hospital  now  so  probably  the  matter  will 
adjust  itself.  The  main  thing  is  for  you  to  get  in  touch  with  their  man  out 
there  and  I  can  handle  this  end,  especially  if  Mr.  McCaull  is  on  the  job. 

*  *  *  *  ♦  *  * 


Yours,  truly, 
Mrd.  1. 


Occident  Elev.  Co., 

Oen.  Mgr. 

Sept.  23rd  1915. 


B.  C.  Hansen,  Agt., 

Hazelton,  N.  Dak. 


Dear  Sib:  In  reply  to  your  wire  about  the  Occident  paying  over.  We  told 
you  to  pay  5  cents  over  on  wheat.  Durum,  &  Rye,  and  2  cents  over  for  oats,  and 
10  cents  over  on  flax. 

If  you  can  see  any  money  in  it  in  the  way  of  excessive  dockage  etc.,  you  can 
meet  the  Occident  price  of  7  cents  over,  but  5  cents  over  is  an  even  thing  with 


Minneapolis. 

We  are  trying  to  settle  this  matter  in  town,  and  hope  to  do  so  within  the 
next  two  or  3  days. 

Yours  very  truly,  vtotorta  Ut.f.vator  Co. 


RGC.  MBL. 


Nov.  18,  1915. 

Mr.  W.  M.  Thompson, 

Hurdsfield,  N.  D. 

Dear  Sib:  *  *  *  I  do  not  understand  why  the  Occident  Elevator  agent 

takes  such  a  belligerent  attitude  in  the  matter  but  I  hope  from  this  on  the 
conditions  there  will  be  much  improved.  We  are  working  on  it  from  this  end 
and  will  make  every  endeavor  to  bring  about  a  proper  situation. 

**♦♦**♦ 

Yours  truly, 

BCC-Mc. 


Andbews  Gbain  Co., 
By 


Sept.  14th,  1914. 

Mr.  C.  L.  Sawyis, 

Minot,  N.  Dak. 

Dear  Sir:  Anamoose  is  in  the  worst  trouble  at  present.  I  wish  you  would 
go  there  if  you  possibly  can  and  straighten  that  market  out  in  some  way.  If 
you  have  any  trouble  telephone  us  here  and  we  will  take  it  up  with  Woodworth, 
or  wire  us. 

Yours  very  truly. 


RGC.  MBL. 


Victoria  Elevator  Co. 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING. 


307 


Occident  Elevator  Company, 

Mpls.,  12-1-14. 

Mr.  M.  Kirchen,  Supt., 

Kenmare,  N.  D. 

Dear  Sir:  I  have  your  letter  in  regard  to  conditions  at  Tolley  and  when  you 
find  out  just  what  the  situation  is  let  me  know.  I  presume  the  O  &  M  are 
paying  over.  If  you  cannot  get  it  adjusted  down  there  we  will  have  to  take  it 
up  here.  This  is  a  habit  of  theirs. 

Yours  truly 

Occident  Elevator  Company, 
Per  M  R  Devaney, 

Geti-Mgr 


Complaints  of  line  companies  to  one  another. — The  daily  and 
other  reports  of  the  agents  and  traveling  superintendents,  which 
usually  include  statements  of  any  competitive  action  which  has 
been  taken  by  other  elevators  form  the  basis  for  a  more  or  less  con¬ 
tinuous  stream  of  complaints  by  the  line  companies  to  one  another 
regarding  competitive  practices  at  various  stations  with  requests, 
demands,  and  suggestions  for  adjustments.  In  some  cases  the  com¬ 
plaining  company  in  its  own  letter  details  the  circumstances  accord¬ 
ing  to  its  information.  In  other  instances  the  agent’s  or  superin¬ 
tendent’s  report  is  transmitted  to  the  offending  company. 


Mr.  B.  G.  Cochrane, 

Detroit,  Minn. 


Sept.  16,  1919. 


Dear  Sir:  We  have  just  had  a  call  from  the  Equity  advising  us  that  they 
will  have  two  men  at  Cashel  to-morrow  investigating  the  situation  up  there. 

We  took  advantage  of  the  opportunity  to  make  quite  a  hard  kick  on  the  situa¬ 
tion  at  Meckinock,  claiming  that  they  and  the  Monarch  were  buying  strictly 
on  grade  and  the  card  prices,  while  Oscar  is  over-grading  and  by  that  means 
exceeding  list.  Do  not  know  if  you  are  in  a  position  to  make  a  run  up  there 
or  not,  but  if  you  can  possible  do  it,  think  you  should. 

We  haven’t  the  confidence  in  Oscar’s  buying  that  we  should  have  and  would 
like  to  have  your  report  on  this  situation.  They  mentioned  in  particular  a 
lot  of  56  lb.  wheat  which  Oscar  had  taken  at  the  1  northern  price.  They  gave 
us  the  party’s  name,  but  do  not  recall  it  now. 

Yours  very  truly, 


Andrews  Grain  Co. 


By 


HGT :  ML 


[From  the  flies  of  the  Osborne-McMillan  Elevator  Co.] 

Station — Kimball,  Minn.,  5-15-17. 

Mr.  F.  J.  Smith,  Supt., 

Minneapolis. 

Dear  Sir:  There  seems  to  be  little  consistency  in  your  program  on  flour 
market  conditions. 

We  follow  market  changes,  whatever  they  may  be,  today,  flour  in - Mpls, 

close  14th  should  be  worth  $8.60  per  cwt.  and  your  station  shows  no  change 
since  INIay  10th  and  your  quotations  are  $8.00  per  cwt. 

Now  on  the  grain  side  of  the  deal,  some  time  ago  your  office  was  demanding 
oats  sales  about  124  over  3  white  list  figuring  that  the  station  was  from  1  to 
24  over  list  on  oats.  Now  you  ship  oats  from  N.  D.  points  and  sell  at  same 
margin. 

What  is  the  reason  for  such  procedure,  if  you  have  any  arrangements  get 
at  the  bottom  of  the  difficulty  and  thresh  it  out,  or  can  both  these  agents  and 
put  in  a  couple  of  new  men  and  see  if  we  cannot  work  somewhere  nearer  in 
line. 


Osborne-McMillan  Co. 


308 


COUNTRY  GRAIN  MARKETING. 


Understand  yon  are  now  at  list  on  oats  local  and  last  time  I  was  here  we 
were  agreed  on  over  and  1^-  over  selling  out.  Your  man  does  not  seem  to 
have  advised  us  with  regard  to  coming  to  list.  Why  not? 

Yours  truly, 

^  (Signed)  F.  C.  R. 


The  Northwestekn  Elevator  Co. 

Minneapolis,  Minn.  Oct.  28,  1917. 

McCaull  Webster  Elev.  Co. 

City. 

Gentlemen  :  Will  you  please  advise  if  you  have  come  to  list  at  Albee  and 
Forestville?  Both  our  agents  advise  that  you  are  paying -considerable  over 
list  there  on  instructions  to  pay  up  for  the  stuff  and  you  have  been  paying 
$2.07  for  wheat  at  Albee  that  will  grade  1  Red  Spring.  Your  man  there  says 
he  expects  to  pay  over  list  until  he  gets  other  orders.  We  understood  the 
orders  were  to  be  sent  out. 

♦  *♦♦♦** 
Yours  truly, 

Gen.  Supt. 


Minnekota  Elevator  Company, 

February  22,  1916. 


Atlantic  Elevator  Co., 

Chamber  of  Commerce,  Minneapolis,  Minnesota. 


Gentlemen  :  On  Saturday  we  received  a  wire  from  our  Agent  at  Fonda 
advising  that  your  agent  had  authority  to  pay  over  list  on  all  grain,  and 
had  been  paying  this  price  for  some  time.  In  a  letter  received  from  our  agent 
today  he  states  that  your  agent  admitted  that  he  was  paying  3?^  over  because 
he  had  received  orders  to  do  so. 

If  you  have  not  already  written  your  agent  to  reduce  his  price  to  2(^  over 
list,  we  wish  you  would  please  wire  him,  as  our  agent  has  strict  orders  not  to 


pay  more  than  over  list  on  any  grain. 
Yours  truly, 


Minnekota  Elevator  Company 


G-T 


By  W.  H.  Gooch. 


[From  the  files  of  the  Northland  Elevator  Company.] 

Minneapolis,  Minn.,  Nov.  20,  1916. 

Mr.  P.  J.  Smith, 

Sec.  Northland  Elevator  Co., 

Chamber  of  Commerce,  City. 

Dear  Sib:  I  enclose  herewith  a  letter  fron?'  Mr.  Riebe,  with  reference  to 
conditions  at  Crosby.  It  is  quite  evident  that  your  man  is  not  disposed  to 
work  in  harmony  with  the  others.  I  received  a  letter  from  one  of  the  Great 
Northern  companies  and  they  seemed  to  think  that  if  your  man  would  try 
and  work  in  harmony  with  the  others  there  it  would  be  very  little  difficulty 
to  divide  the  stuff  on  somewhere  near  the  proper  basis,  and  they  seem  anxious 
to  get  down  also.  Kindly  return  this  letter  when  you  are  thru  with  it  and 
oblige, 

Yours  truly, 

Atlantic  Elevator  Co. 

(Signed)  By  F.  C.  Reibe,  Sec. 


[From  the  flies  of  the  Occident  Elevator  Company.] 

Andrews  Elevator  Company 

Mpls,  Nov  10-1915. 

Mr.  M.  R.  Devaney, 

Occident  El  Co  Mpls. 

Dear  Sir  :  I  enclose  a  letter  just  received  from  our  agent  at  Hurdsfield,  for 
your  attention.  I  am  not  inclined  to  accept  our  agent’s  report  as  to  your 
man  there,  in  its  entirety,  but  Mr.  Thompson  of  the  Farmers  Co  there,  has 
Intimated  to  me  in  letters  lately  that  your  man  is  inclined  to  be  out  of  line. 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING.  '  309 


If  you  can  do  anything  about  getting  the  situation  on  a  proper  basis,  we 
shall  be  very  glad  of  It. 

*  «  «  *  •  *  4> 

Youis  Uuly,  Andbews  Grain  Company 

By  B.  G.  Ceangle. 

.  Northland  Elevator  Co. 

Minneapolis,  Minn.,  July  31,  1915. 

Atlantic  Elevator  Co.,  City. 

Gentlemen  :  Our  agent  at  Armourdale,  N.  D.  advises  us  that  your  agent 
at  that  station  is  selling  barley  locally  at  7c  over  list.  Our  retail  price  for 
barley  at  all  stations  is  10c  over  “  C  ”  list. 


Yours  truly, 
FJS  :OM 


Northland  Elevator  Co. 
By  F.  J.  Smith. 


Minneapolis,  Minn.,  10-13-15. 

Bagley  Elevator  Co., 

City. 

Attention  Mr.  Ralph  Bagley. 

Gentlemen  ;  Have  another  letter  from  our  agent  at  Carlyle  about  your  man 
overgrading  at  Millard.  Hold  him  down. 

Yours  truly, 

WAP.  A  The  Pacific  Elevator  Co. 


Andrews  Grain  Company, 

Mpls,  Oct.  3-1914. 

Occident  Elev.  Co.  . 

Mpls,  Minn. 

Gentlemen  :  I  beg  to  submit  a  letter  just  received  from  our  agent  at  Hurds- 
field.  Will  you  kindly  read  what  he  says  and  return  the  same  to  us? 

Is  it  not  possible  to  bring  about  some  better  conditions  at  that  station?  We 
have  dropped  a  line  to  Van  Dusen  Co.  and  suggested  that  they  look  into  it. 
We  hope  that  something  may  be  accomplished. 

Please  note  that  our  agent's  letter  is  simply  a  report  as  to  the  conditions, 
written  in  his  best  manner,  after  receiving  request  from  us  as  to  the  condi¬ 
tions  there. 

Yours  tiuly,  Andrews  Grain  Co. 

Per  B  C  Crangle. 


Powers  Elevator  Company, 

Mpls,  11-11-U. 

Mr.  Devaney, 

%  Occidental  Elev.  Co.  Security  Bldg,,  City. 

Dear  Sir  :  In  today’s  mail  I  find  another  letter  from  Beulah  dated  the  7th 
which  reads  as  follows : 

“  Note  the  returns  on  several  cars  of  wheat  and  that  they  docked  more  than 
I  figured  on.  In  reply  will  say  that  I  am  taking  every  pound  of  dockage  I 
can  get.  I  even  let  farmers  drive  out,  and  I  notice  my  competitor  takes  them 
in.  I  herewith  mail  you  sample  of  S.  Keller  wheat  which  he  took  for,  1®  You  will 
note  there  is  smut  in  this  wheat.  I  offered  2°  for  it,  as  the  wheat  is  good  and 
would  grade  1°  if  it  were  not  for  the  smut.” 

This  is  the  sample  which  I  handed  you  today  I  don’t  criticize  your  man 
for  taking  it  for  1°  providing  he  got  a  good  dockage,  but  I  will  venture  the 
assertion  that  he  did  not  dock  it  enough  and  I  only  quote  to  show  you  what 
Stuhr  says  further  about  the  difficulties  he  is  having  in  getting  the  right 
dockage.  An  average  of  2J#  at  Beulah  is  none  too  much,  in  my  opinion. 

Yours  truly.  Powers  Elevator  Co., 

By  W.  K.  P.  Mgr. 


[From  the  St.  Anthony  &  Dakota  Elevator  Co.’s  files.] 

11/5/13 

Mr.  C  D  Junkin, 

St.  Anthony  d  Dakota  Elev.  Co.,  City.  * 

Dear  Sir:  Our  Finley  agent  writes  that  dockage  conditions  at  that  station 
are  not  satisfactory,  and  by  reason  of  others  underdocking  that  he  is  steadily 


310 


COUNTRY  GRAIN  MARKETING. 


losing  trade.  In  order  to  get  a  line  on  the  situation  we  are  asking  you  and 


the  Northwestern  Elevator  Co.  to  give  us  your  in-dockage.  We  are  also  asking  i 

Jerry  Comer,  of  the  E  L  Welsh  Co.,  who  handles  the  Farmers  business  at  j 

Finley,  to  get  us  this  information  from  the  Farmers  Elevator,  and  when  this 
data  is  forthcoming  we  will  gladly  forward  you  results  of  the  compilation.  | 

Something  interesting  and  instructive  may  develop,  and  again,  our  agent  may  I 

be  entirely  mistaken.  We  believe  it  well  to  clear  up  any  misunderstanding  | 

that  may  exist,  and  to  this  end  we  ask  your  cooperation.  | 

Yours  truly,  I 


Cargill  Elevator  Co. 
(No  signature) 


DDM-H 


[From  the  files  of  the  Occident  Elevator  Co.] 


Andrews  Elevator  Company, 

Mpls.  Sept.  22,  1913. 


Occident  El.  Co., 

Security  Bldg.,  Mpls.,  Minn. 


Gentlemen  :  We  have  just  received  a  letter  from  Regan  &  Lyness  in  which  ; 

they  state  that  their  agent  at  McClusky,  reports  your  agent,  ours,  and  the  Crown  ' 

agent,  paying  1^4  over  list  promiscuously  to  everybody,  and  that  they  in  turn  i 
have  advised  their  agent  to  meet  competition.  ‘ 

I  took  this  matter  up  with  Mr.  Lyness  at  Fessenden  by  wire  today  and  told 
him  that  our  agent  had  no  authority  to  pay  1^4  9vei*  list,  except  to  those  people 
who  have  big  lots  which  was  previously  agreed  upon,  and  we  did  not  think  our  i; 
agent  was  exceeding  instructions,  and  asked  him  if  he  could  not  get  over  there  I 
to  Fessenden  today,  and  satisfy  himself  on  the  subject. 

In  the  meantime  I  do  not  believe  that  our  agent  is  exceeding  instructions,  « 
and  hope  that  yours  Is  not. 

Yours  truly, 


Andrews  Grain  Co., 
By  B.  C.  Crangle. 


Action  taken  on  complaints. — On  receipt  of  complaints,  such  as  ' 
the  foregoing,  the  line  companies  complained  against,  investigate  or  ii 
issue  instructions  to  their  agents  and  superintendents,  and  otherwise  I! 
endeavor  to  rectify  conditions  in  such  a  manner  as  will  be  satisfactory  | 
to  the  complaining  line  company.  jl 


National  Elevator  Co.,  Dec.  5th,  1919.  | 

Mr.  C.  A.  Magnuson,  Pres.,  | 

The  Northwestern  Elevator  Co.,  Building.  ji 

Dear  Sir  He  writes  his  letter  from  Hope,  N.  Dak.  He  says  he  will  I 


be  in  your  office  next  week,  and  thinks  this  matter  can  be  explained  to  your  I 
satisfaction.  You  will  recall  that  when  I  wrote  you  the  letter,  I  did  not  write  | 
it  in  the  way  of  a  complaint.  I  wrote  it  because  I  felt  when  we  paid  ten  cents  ■' 
over  the  card  at  Neche,  we  were  paying  more  money  than  we  could  afford  to  ji 
pay,  and  all  I  hoped  to  accomplish  was  to  get  you  to  assist  me  in  trying  to  keep  | 
that  market  on  a  basis  that  would  be  just  and  equitable  to  the  producer,  and  | 
show  a  fair  return  to  ourselves.  ‘i 


Sincerely  yours. 


(Signed)  L.  D.  Marshall, 


Manager. 


Enc.  1. 


Sept.  22,  1918. 


Osborne-McMillan  Elevator  Co.,  City. 

Gentlemen  :  Returning  herewith  letter  from  your  Kensal  agent,  Mr.  Gaskill 
who  was  at  Kensal  on  the  18th,  writes  as  follows ; 

“  Schlect  tells  me  the  Farmers  have  been  10  to  12^‘  over  him  on  prices  of  the 
light  wheat  below  49#,  and  O  &  M  have  been  as  high  as  17^^  over  him  on  the 
light  wheat.  He  has  lost  considerable  wheat  that  he  would  have  taken  if  the 


S’  Osborne-McMillan  Co. 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING. 


•  311 


prices  had  been  down  where  they  should  have  been.  Since  the  light  wheat  took  a 
big  slump  last  week,  they  see  where  they  are  at  and  show  signs  of  getting  down.” 

This  report  from-  Mr.  Gaskill  corresponds  with  letters  previously  received 
from  our  Kensal  agent  in  regard  to  the  prices  paid  by  your  agent  and  the  Farm¬ 
ers’  buyer  for  wheat. 

If  your  buyer  has  been  getting  down  to  proper  prices  on  wheat,  I  think  you 
will  find  our  man  quite  willing  to  cooperate  with  him. 

Yours  truly, 

WOODWOETH  ELEVATOE  COMPANY,  ' 

BHW-E  (Signed)  By  B.  H.  Woodwoeth. 


August  30th,  1916. 

Mr.  T.  L.  Spaulding,*® 

Warren,  Minn. 

Deae  Sie  :  I  have  your  letter  in  regard  to  the  splitting  of  grades  at  Alvarado 
and  I  think  that  this  probably  came  about  on  account  of  our  agent  sending  in  a 
sample  on  which  I  advised  him  that  the  wheat  was  not  good  enough  for  3°,  but 
was  a  very  choice  4°  and  perhaps  in  this  case  he  split  the  difference.  I  do  not 
think  that  this  is  a  very  good  policy,  as  a  rule  and  I  do  not  know  as  it  is  neces¬ 
sary  at  Alvarado.  Inasmuch  as  you  did  not  give  me  your  ideas  in  the  matter  I 
cannot  say  what  would  be  the  best  plan.  However,  we  are  willing  to  cooperate  ^ 
in  any  way  that  we  can,  because  we  feel  that  we  will  need  every  dollar  we  pos-  * 
sibly  can  get  in  the  way  of  profit  this  year  to  pay  expenses,  to  say  nothing  about 
making  any  money.  If  anybody  makes  any  m-oney  out  of  operating  a  line  of  ele¬ 
vators  this  year,  he  will  certainly  be  entitled  to  all  he  makes  and  ought  to  be 
given  a  medal  of  some  kind. 

Yours  truly, 

Atlantic  Elevatoe  Co., 

FRC/c  By 


Novembee  14th,  1916. 


Mr.  F.  .T.  Smith, 

Sec.,  Northland  Elevator  Co.,  Building. 

Gentlemen  :  We  note  your  Mr.  White’s  letter  in  regard  to  conditions  at  Col- 
gan.  We  are  sorry  that  things  are  so  disturbed  there  and  will  do  our  best  to 
get  our  man  on  the  proper  basis  at  that  point.  We  are  receiving  samples  from 
him  and  he  is  buying  the  stuff  a  little  close  and  we  are  urging  him  to  get  down 
and  hope  that  we  will  be  successful  in  getting  him  down  to  the  proper  basis. 

We  thank  you  very  kindly  for  the  information. 

Yours  truly. 


Atlantic  Elevatoe  Co., 


FCR/c 


By 


[From  the  St.  Anthony  &  Dakota  Elevator  Co.  files.] 

*  Mpls  Sept  9  '15.  • 

Mr  C  D  JuNKiNS.  Mgr, 

St.  Anthony  &  Dakota  Elev.  Co.,  Minneapolis 

Deae  Sie;  We  have  your  letter  of  the  7th,  together  with  copy  of  the  letter 
from  your  agent  at  Revere  under  date  of  Sept  3d,  and  we  are  today  writing 
our  agent  that  we  shall  expect  him  at  all  times  to  work  in  perfect  harmony 
with  your  man  and  to  work  on  the  same  basis  with  your  man. 

******* 

Mr.  Porter  wants  me  to  assure  you  that  our  books,  reports  and  tickets  are 
open  to  your  inspection  any  time  you  wish  to  call  at  our  office,  and  that  we  are 
very  anxious  to  work  in  perfect  harmony  not  only  at  Revere,  but  at  this  end. 
Any  time  you  have  any  complaints  to  make,  we  assure  you  that  they  will  re¬ 
ceive  due  and  prompt  consideration. 

Yours  truly, 

Minnekota  Elevatoe  Co. 
By  W.  H.  Gooch 


^  Spaulding  Elevator  Co. 


312 


COUNTRY  GRAIN  MARKETING. 


[From  the  files  of  the  Cargill  Elevator  Co.] 


Minneapolis,  Minn.  Sept.  25,  191J^. 

Caegill  Elev.  Co.,  City. 

Gentlemen  :  Replying  to  yours  of  the  24th  in  regard  to  Easby.  Our  Super¬ 
intendent  has  orders  to  go  there,  carefully  investigate  the  whole  matter  and 
report.  When  we  get  his  report,  we  will  see  you. 

Very  truly  yours, 

L.  D.  Makshall,’®  Manager.  j 


Mutually  cooperative  attitude  of  head  offices. — The  corre-  ? 
sponclence  passing  between  the  head  offices  of  the  line  companies  con-  * 
tains  scores  of  letters  revealing  the  disposition  of  the  line  companies 
to  work  in  harmony  with  one  another  so  far  as  possible.  In  some  few 
instances  these  letters  are  clearly  indicative  of  agreements  among 
the  various  head  offices.  In  other  cases,  though  agreements  may  not 
be  involved,  the  degree  of  mutual  cooperation  evidenced  would  in¬ 
dicate  the  possibility  that  results  are  achieved  thereby  much  similar 
to  any  which  could  be  obtained  through  outright  agreements. 

Nov.  11,  1918. 

Nokthland  Elevator  Co.,  City. 

Gentlemen  ;  *  *  *  thought  best  to  write  you  about  this  as  the  prices 

that  we  agreed  upon  last  Wednesday  at  that  station  were  as  follows: 


Hard  coal _ $11.  75 

Hocking _  9.  50 

Millers  Creek _  10.  00 

Smokeless _  10.  50 


We  are  not  disposed  to  sell  coal  at  the  prices  our  agent  has  advised  us  about,  1 
and  think  we  should  Instruct  them  to  hold  the  prices  that  we  gave  them,  and  f 
have  written  our  agent  to  sell  at  the  prices  that  wq  arranged  with  you  last.  i 
We  hope  you  will  see  fit  to  instruct  your  man  in  the  same  way. 

Yours  truly, 


RPW-E 


Woodworth  Elevator  Co. 
(Signed)  By  R.  P.  Woodworth,  Sec. 


Minneapolis,  Minn.,  May  9,  1917. 

Empire  Elevator  Co. 

Columbia  Elevator 
Monarch  Elevator  Co. 

Crown  Elevator  Co.  / 

Gentlemen  :  The  above  companies  and  ourselves  will  send  instructions  to 
agents  tonight  to  buy  gi-ain  at  card  prices  only. 

Yours  truly,  , 

The  Pacific  Elevator  Company. 

WAP-S 

I  _ _ 

July  26th,  1917. 

Atlantic  Elevator  Company, 

Cliamher  of  Comm^erce,  City. 

Gentlemen  :  We  have  advanced  our  price  on  Bran  and  Middlings  at  Kimball 
Prairie,  Minnesota  as  follows : 

Bran - .$42.  00  per  ton. 

Rich  Country  Middlings - $.50.  00  per  ton. 

Mpls  “A”  Middlings - $54.  00  per  ton. 

If  this  price  is  not  satisfactory  to  you,  kindly  advise  us  and  greatly  oblige. 
Yours  truly, 

Osborne-McMillan  Elevator  Co. 
By  F.  J.  Smith  Sec'y 

PJS-J 

National  Elevator  Co. 


i 


COMPETITIVE  CONDITIONS  IN  COUNTRY  BUYING. 


813 


July  6,  1915. 

Atlantic  Eievator  Co..  BLDO. 

Gentlemen  :  Pleases  give  us  your  total  receipts  of  all  kinds  of  grain  at  the 
following  stations: 


Bronson,  Minn,  from  Jan.  31st  to  June  5tli,  1915. 


Nekoma,  N.  D. 
IMylo,  “  “ 

Kramer  “  “ 

Crosby  “  “ 


Mar.  3rd  “  May  30th,  1915. 

“  1st  “  July  1st,  1915. 
July  1,  1914  to  July  1,  1915. 
Feb.  1st  to  July  1st,  1915. 


Yours  truly, 


FJS :  OM 


Northland  Elevator  Company 
F.  J.  Smith 


October  21,  ’15. 

Mr.  L.  D.  Marshall,  Mgr. 

National  Elevator  Co.,  City. 

Dear  Sir  :  Do  you  think  it  would  be  possible  for  you  to  use  your  good  offices 
*  *  *  to  bring  about  a  better  condition  as  to  price  at  Ardock,  N.  D. 

They  aro^  still  4c  over  the  card  at  this  station,  and  they  are  grading  the  NG 
wheat,  #V.  Our  stuff  has  been  selling  4  to  6c  under  #1°  price  from  this  sta¬ 
tion  lately,  and  of  course  this  means  an  actual  loss  of  at  least  a  couple  of  cents 
per  bushel  on  everything  we  have  handled  since  the  rain,  and  we  thought  per¬ 
haps  all  interested  parties  would  now  be  willing  to  get  down  to  a  point  of 
perhaps  2c  over  the  card,  which  would  leave  a  very  sm.all  handling  margin  at 
stations. 

Inasmuch  as  we  were  unsuccessful  in  doing  anything  towards  bettering  condi¬ 
tions  there  we  have  taken  the  liberty  to  call  on  you  to  see 
Yours  truly, 

Atlantic  Elevator  Co. 

•  *  By  — 

FCR-J 


Geo.  C.  Bagley  Elevator  Co., 

Minneapolis,  Minn. 


The  Pacific  Elevator  Company 

Minneapolis,  Minn.  Nov.  5,  1915. 


Gentlemen  :  Grain  has  been  badly  over  graded  up  to  this  time  at  country 
points.  Companies  interested  on  the  M  St  L  are  instructing  agents  to-morrow 
to  grade  absolutely  right,  without  question. 

We  suggest  that  the  same  instructions  be  sent  to  Milwaukee  points. 

^  Yours  truly. 


WAP-S 


The  Pacific  Elevator  Company. 


Minneapolis.  Minn.  Oct.  21,  1915. 

Cargill  Elev.  Co.  City. 

Gentlemen:  I  am  in  receipt  of  sample  of  wheat  from  our  Agent  at  Benson 
which  you  bought  for  92^  yesterday.  I  am  not  advised  as  to  the  weight  of 
this  wheat,  but  regardless  of  weight,  I  believe  on  account  of  the  cockle"  and 
wild  peas  in  it,  it  would  not  grade  better  than  #2  and  sell  around  97J0  on 
yesterday’s  market,  leaving  about  it  profit  in  it  on  the  basis  of  the  purchase. 
Don’t  you  think  we  can  get  together  at  Benson  and  buy  on  a  little  better  margin 
than  this  ? 

Yours  truly,  M.  G.  Magnuson,'^ 

Gen'l  Supt. 

Spaulding  Elevator  Co. 
Warren,  Minn.,  Aug.  10,  1914. 

Mr.  F.  C.  Riebe,  Sec^y, 

Atlantic  Elev.  Co.,  Minneapolis,  Minn. 

Dear  Sir  :  In  the  opinion  of  the  writer,  I  believe  that  it  would  be  a  good  thing 
for  all  concerned  if,  when  you  send  out  general  buying  instructions,  that  you 
would  send  us  a  copy  of  the  same. 


Northwestern  Elevator  Co. 


314 


COUNTRY  GRAIN  MARKETING. 


I  write  this  with  the  idea  of  lining  up  my  agents  with  yours  and  if  it 
meets  with  your  approval,  will  be  glad  to  receive  the  same.  I  do  not  write  this 
with  any  intention  of  prying  into  your  concern’s  affairs  any  more  than  for 
our  mutual  good. 

Would  like  to  hear  from  you  in  regard  to  the  matter. 

Yours  truly, 


C.  L.  Spaulding. 


CLS/EMP 


Aug.  11,  1914. 


Spaulding  Elevator  Co., 

Warren,  Minn. 

Gentlemen  :  Mr.  Fred  Riebe  is  out  on  the  line,  but  the  writer  took  the  liberty 


of  opening  your  letter. 

I  will  send  you  herewith  a  copy  of  all  of  the  circulars  which  we  have 
gotten  out  so  far,  and  we  will  be  glad  to  send  you  copies  of  any  we  get  out 
in  the  future.  We  are  very  glad  to  co-operate  with  you  in  this  manner,  and 
glad  that  everybody  realizes  the  necessity  of  unusual  care  in  handling  this 
crop.  It  is  going  to  be  difficult  to  buy  it  on  proper  grade  and  it  is  going  to 
be  extremely  difficult  to  hedge  It  safely. 

Yours  truly, 

Atlantic  Elev.  Co. 

By  V.  P. 


CMC  :V 
Enel : 


[From  the  flies  of  the  Northwestern  Elevator  Company.! 


The  Northwestern  Elevator  Company 

Minneapolis,  Minn.  July  20,  lOllf. 

Dear  Sirs  :  According  to  the  usual  custom,  will  you  please  notify  your  agent 
at  Litchfield  to  come  to  my  room  at  the  Chamber  of  Commerce,  No.  51  next 
Sunday  morning,  at  10  o’clock,  for  our  usual  consultation?  I  am  notifying  all 
other  parties  interested,  including  the  Farmers  Elevator  representative  at 
Litchfield.  Will  you  please  notify  me  if  you  will  be  present,  and  also  your 
agent,  so  that  there  may  be  no  misunderstanding? 

Yours  truly, 

(Unsigned) 

J*rest. 


Cargill  El.  Co. 
Duluth  El.  Co. 
Thorpe  El.  Co. 
A.  O.  Cornwell 
Farmers  El. 


I 

! 


•r 


■ill 


V  i 


[Minneapolis  Office  Chamber  of  Commerce.]  \ 

Standard  Grain  Company,  ^ 

Duluth,  Minn.  Oct.  16th,  19 H. 

C.  M.  Case,  V.  Pres., 

Atlantic  Elevator  Co.,  Minneapolis,  Minn. 

Dear  Sir  :  Strange  things  certainly  happen  in  this  grain  business  and  here 
we  are  with  an  elevator  on  our  hands  at  Alkabo,  N.  D.,  in  direct  competition  with 
one  of  your  elevators  at  that  point.  I  never  thought  I  would  be  in  the  elevator 
business,  but  find  myself  with  a  few  houses  to  run,  and  possibly  I  may  increase 
my  line  if  I  like  the  game. 

Our  agent  at  Alkabo  seems  to  have  a  good  deal  of  trouble,  and  I  would  ap¬ 
preciate  it  greatly  if  you  would  write  me  regarding  the  situation  at  that  station. 

I  assure  you  that  as  far  as  I  am  concerned,  I  would  like  very  much  to  get 
things  lined  up  there  on  a  good  paying  basis.  As  I  understand  it  you  not  only  v. 
have  an  elevator  at  that  point,  but  virtually  control  the  independent  buyer  that 
is  there.  If  you  will  tell  me  how  things  are  fixed  at  that  station  and  how  you^ 
want  them  lined  up,  I  assure  you  that  our  man  will  fall  in  line. 

Yours  very  truly, 

Standard  Grain  Co., 

H.  S.  Newell,  Prest. 

Note  in  Pencil  (Fred:  Write  friend  Newell) 


# 


\ 


APPENDICES. 


i 

! 


Appendix  1. 

LETTER  OF  THE  PRESIDENT  TO  THE  CHAIRMAN  OF  THE  FEDERAL 
TRADE  COMMISSION  AUTHORIZING  THE  FOOD  INVESTIGATION. 

*  The  White  House, 

Washington,  7  Fetyruary,  1917. 

My  Dear  Mr.  Chairman  :  An  adequate  supply  of  food  products  is  a  matter 
of  concern  to  the  Nation  at  all  times.  It  is  of  peculiar  importance  at  present. 

;  Our  domestic  food  supply  is  normally  very  large  and  has  become  increasingly 
varied.  In  some  respects  it  has  steadily  expanded  and  has  kept  pace  with  the 
increasing  population.  Unfortunately,  this  is  not  true,  however,  of  a  number 
of  important  staple  products,  including  certain  cereals  and  particularly  meats. 
While  the  population  of  the  Nation  has  increased  26,000,000  since  1900,  the  pro¬ 
duction  of  the  two  leading  cereals,  corn  and  wheat,  while  tending  to  increase, 
i  -has  shown  only  a  slight  advance;  and  that  of  the  meat  products  in  the  same 
!  period  has  shown  an  increase  of  only  3,500,000,000  pounds — a  decrease  of  29 
I  pounds  per  capita. 

Much  can  be  done,  and  is  being  done,  to  change  this  situation  through  im- 
I  proved  methods  of  production  and  through  the  control  or  eradication  of  plant 
i  and  animal  diseases.  But  there  are  problems  also  of  distribution ;  and,  in  some 
respects,  the  problems  presented  in  this  field_are  the  more  difficult.  Only  re¬ 
cently  have  official  agencies  been  created  to  deal  systematically  with  this  side  of 
the  difficulty.  Much  work  has  been  done,  and,  considering  the  limited  nature 
of  the  powers  under  which  it  has  been  conducted,  no  little  headway  has  been 
'  m-ade,  particularly  in  obtaining  and  diffusing  useful  information.  Neverthe- 
!  less,  it  is  not  yet  clear  in  many  directions  just  what  the  nature  of  the  difficulty 
'  is  or  what  measures  should  be  adopted  to  effect  fundamental  improvements. 
Many  necessary  facts  are  not  available,  and  it  is  questionable  whether  any  single 
agency  of  the  Government  at  present  possesses  the  requisite  power  and  equip¬ 
ment  to  secure  the  information  needed  to  enable  both  public  and  private  instru¬ 
mentalities  to  render  their  fullest  service  to  the  people.  It  is  obvious  that  there 
will  be  no  sufficient  incentive  to  enlarge  production  if  there  does  not  exist  an 
unobstructed  and  economical  system  of  distribution.  Unjustifiable  fluctuations 
in  prices  are  not  merely  demoralizing;  they  inevitably  deter  adequate  pro¬ 
duction. 

It  has  been  alleged  before  committees  of  the  Congress  and  elsewhere  that  the 
course  of  trade  in  important  food  products  is  not  free,  but  is  restricted  and  con- 
1  trolled  by  artificial  and  illegal  means.  It  is  of  the  highest  public  concern  to 
ascertain  the  truth  or  falsity  of  these  allegations.  No  business  can  be  trans¬ 
acted  effectively  in  an  atmosphere  of  suspicion.  If  the  allegations  are  well 
grounded  it  is  necessary  that  the  nature  and  extent  of  the  evils  and  abuses  be 
accurately  determined,  so  that  proper  remedies,  legislative  or  administrative, 
may  be  applied.  If  they  are  not  true,  it  is  equally  essential  that  the  public  be 
informed,  so  that  unrest  and  dissatisfaction  may  be  allayed.  In  any  event,  be¬ 
cause  of  the  grave  public  interests  which  the  food  supply  affects,  the  efficient 
performance  of  the  duties  imposed  upon  agencies  of  the  Government  requires 
that  all  the  pertinent  facts  be  ascertained.  To  this  end  the  powers  of  such 
agencies  should  be  made  adequate,  if  in  any  respect  they  are  now  deficient. 

Pursuant  to  the  authority  conferred  upon  me  by  the  act  creating  the  Fed¬ 
eral  Trade  Commission,  therefore,  I  direct  the  Commission,  within  the  scope 
of  its  powers,  to  investigate  and  report  the  facts  relating  to  the  production, 
ownership,  manufacture,  storage,  and  distribution  of  foodstuffs  and  the  products 

315 


316 


1 


COUNTRY  GRAIN  MARKETING. 


or  by-products  arising  from  or  in  connection  vith  their  preparation  and  manu¬ 
facture  ;  to  ascertain  the  facts  bearing  on  alleged  violations  of  the  antitrust 
acts,  and  particularly  upon  the  question  whether  there  are  manipulations,  con¬ 
trols,  trusts,  combinations,  conspiracies,  or  restraints  of  trade  out  of  harmony 
with  the  law  or  the  public  interest. 

I  am  aware  that  the  Commission  has  additional  authority  in  this  field, 
through  the  power  conferred  upon  it  to  prevent  certain  persons,  partnerships, 
or  corporations  from  using  unfair  methods  of  competiton  in  commerce.  I  pre¬ 
sume  that  you  may  see  fit  to  exercise  that  authority,  upon  your  own  initiative, 
without  direction  from  me. 

The  Department  of  Agriculture  has  been  engaged  for  several  years  in  study¬ 
ing  problems  of  distribution.  I  have  noted  that  it  has  been  proposed  in  the 
Congress  to  add  to  the  funds  of  the  department  and  give  it  larger  powers  to 
conduct  its  investigations.  As  its  activities  will  touch  phases  of  the  problem  I 
am  calling  to  your  attention  which  may  not  be  covered  by  your  inquiry  and  may 
furnish  information  of  great  importance  for  the  purposes  contemplated,  I  shall 
direct  that  department  to  cooperate  with  you  in  this  enterprise. 

For  the  adequate  prosecution  of  the  inquiry  by  both  your  Commission  and 
the  Department  of  Agriculture,  it  is  essential  that  sufficient  funds  be  available. 
I  accordingly  request  that  you  furnish  me  at  the  earliest  possible  moment  an 
estimate  for  an  appropriation,  if  one  is  needed,  to  supplement  existing  appro¬ 
priations,  to  enable  you  successfully  to  carry  out  the  investigation. 

A  copy  of  this  letter  is  being  sent  to  the  Secretary  of  Agriculture,  with  the 
direction  that  his  department  cooperate  with  you  and  with  the  request  that  he 
furnish  an  estimate  for  the  funds  needed  by  his  department. 

Sincerely,  yours, 

(Signed)  Woodeow  Wilson. 

Hon.  William  J.  HARKia, 

Chairman  Federal  Trade  Commission, 

Washington^  D.  G.  • 


APPENDICES 


317 


Appp:ndix  2. 


COUNTRY  ELEVATOR  SCHEDULE. 

Federal  Trade  Commission, 

Washington,  D.  C. 

February,  1918. 

■  The  Federal  Trade  Commission,  under  authority  of  the  Act  of  Congress,  entitled  “An  act  to  create  a 
I  Federal  Trade  Commission,  to  Define  its  Powers  and  Duties,  and  for  other  Purposes,”  approved  Septem¬ 
ber  26, 1914,  requires  you  to  answer  the  following  questions,  said  answers  to  be  written  and  inclosed  m  the 
franked  envelope  (which  requires  no  postage)  and  mailed  to  Washington  within  one  week  of  the  receipt 
thereof. 

Read  the  entire  schedule  before  filling  out,  and  note  carefully  the  instructions  under  each  inquiry.  Re- 
t  turns  for  years  must  be  for  crop  years  except  as  otherwise  indicated.  Do  not  restrict  answers  for  lack 
of  room;  if  necessary  use  additional  paper. 

Federal  Trade  Commission. 


1.  Name  of  elevator . . 

2.  Post  Office .  3.  County .  4.  State 

6.  Railroad  or  railroads  on  which  your  elevator  is  situated . 


6,  Markets  to  which  your  grain  is  shipped. 

Number  of  cars  shipped  to — 


Crop  Year 

TERMINAL  MARKETS 

For  Each  Terminal  Market  Use  Separate  Column 
and  Indicate  the  Name  m  the  Space  at 
the  Top. 

Mills 

Feeders 

Interior 

Brokers 

Total 

1 

1912-13 

Wheat . 

Com  . 

Oats . 

Barley . 

Rye . 

1913-14 

Wheat . 

s 

Com  . 

Oats  . 

Barley . 

Rye . 

1914-15 

Wheat  _ 

Com . 

Oats . 

Barley . 

Rye _ 

1915-16 

Wheat  _ 

Com . 

. 

Oats  . 

Barley . 

Rye _ 

1916-17. 

Wheat . 

Com . 

Oats . 

Barley . 

Rye . 

• 

7.  Name  of  present  local  manager . 

8.  Manager  at  this  point  since  what  date? 


318 


COUNTKY  GRAIN  MARKETING, 


fl.  Is  elevator  operated  one  of  a  line?. . . 

If  so,  give  name  of  company  and  location  of  head  office . 

As  to  form  of  organization,  is  it  a  corporation . a  partnership . .,  or  individually  owned? . .  [Mark  opposite 

Is  it  cooperative . . ,  independent . . ,  mill-owned . . ,  or  otherwise  controlled? . •[  description 

Is  elevator  leased? .  If  so,  from  whom? . (  that  applies. 

If  cooperative,  do  you  pay  patronage  dividends? . 

On  what  basis? .  What  is  the  limit  to  dividends  on  stock? . 

If  a  corporation,  does  any  individual  or  group  own  a  controlling  interest? . 

If  so,  give  name  or  names . - . 

10.  Is  the  elevator  constructed  of  wood,  concrete,  steel,  or  other  material? . 

When  was  it  built? . . . 

11.  Rated  capacity  of  elevator  in  bushels .  Number  of  bins . 

12.  Name  aU  other  elevators  and  mills  at  your  station,  indicating  whether  operated  or  not . 

Nearest  elevators  or  mills  in  operation  at  other  stations: 


Direction 
from  yovu 
station. 

Name  of  station. 

Elevator  or 
miU? 

Approximate 
distance  from 
your  station 
in  miles. 

F.a.st  .  . 

West  _ 

North 

South  .  -  . 

13.  In  arriving  at  your  daily  buying  prices  to  what  extent  do  you  use: 

(a)  Daily  price  cards .  From  whom? . 

lb)  C.  N.  D.  reports  covering  cash  or  futures,  or  both . 

(c)  Bids  "to-arrive” . 

(d)  ‘‘On-track"  bids . 

(e)  Terminal  market  price  currents . 

(/)  Market  telephone  or  private- wire  service .  From  whom? . 

(jr)  Any  other  sources  of  information . 

Inclose  samples  of  each  kind  of  market  information  received. 

14.  State  (estimating  if  necessary)  the  number  of  bushels  of  grain  purchased  for  each  of  the  following 
five  crop  years  (July  1  to  June  30),  and  by  months  for  1913-14  and  1916-17: 


Year 

Wheat 

Corn 

Oats 

Rye 

Barley 

Other 

1912  13 

1 

191.3  14 

1914  15 

191.5-16 

1916  17 . 

Months  of  191S-14. 


Julv  1913  . 

.\ue  1913 

Spnt  1913 

Oct  1913 

Nov  191.3  . 

Dec  1913 

Jan  1914  .... 

Feb  1914 

Mar  1914  _ 

Anr  1014 

Mav  1914 

Tnnft  1914  . 

Months  of  1916-17. 

Julv  1916 

Anv  1916  _ 

Sent  1916 

Oct  ,  1916 

/ 

Nov.,  1916 

Dec  1916 

•Tan.,  1917 . 

Feb  1917 

Mar  1917 

Anr  1917 

May  1917 

Tiirio  1917 

If  it  is  impossible  to  make  returns  for  July  1-June  30  years,  use  available  basis  and  specify  beginning 
and  end  of  years  used. 


APPENDICES. 


319 


15.  State  the  number  of  carloads  of  each  kind  of  grain  shipped  to  terminal  markets  on  consignment  and 
the  number  so  shipped  on  direct  sale  for  each  of  the  following  five  crop  years: 

NUMBER  OF  CARS — Shipped  on  consignment. 

For  each  terminal  market  use  separate  column  and  indicate  the  name  in  the  space  at  the  top. 


Crop  Year, 
etc. 

Total. 

1912-13 
Wheat . 

(  orn . 

Oats . 

Barley . 

Rye . . . 

1913-14 
Wheat . 

Com . 

Oats . 

1 

Barley . 

Rve . 

1914-15 
Wheat . 

Corn . 

Oats . 

Bariev . 

1 

Rve . 

1 

1915-16. 
Wheat . 

Com . 

Oats . 

1 

Bariev . 

Rye . 

1 

1916-17. 
Wheat . 

Corn . 

1 

Oats. . 

• 

Barley . 

1 

Rye." . 

i 

Sold  direct. 


1912- 13. 
Wheat..., 

Com . . 

Oats . . 

Barley..., 

Rye...... 

1913- 14. 
Wheat... 

Com . 

Oats . 

Barley... 

Rve..... 

1914- 15. 
Wheat... 

Com . 

Oats . 

Barley... 
Rye . 

1915- 16. 
Wheat... 

Corn . 

Oats . 

Barley... 
Rve . 

1916- 17. 
Wheat... 

Corn . 

Oats . 

Barley... 
Rye . 


Freight  rates  (per  hundredweight)  to  each  market  (J an. ,  1917). 


Crop  Year, 
etc. 

Total. 

Wheat 

PQfTl 

Oats 

Rye . 

16.  What  side  lines  do  you  handle?  (List  in  order  of  Importance) 


What  facilities  have  you  for  cleaning?.. . . . 

On  what  terms  do  you  clean  and  condition  grain  for  farmers? . ; . . . 

17.  Will  your  records  show,  for  the  past  five  years,  the  daily  purchase  prices  paid  for  gram,  by  grades? - 

.  If  not  for  five  years,  for  how  long? . 


320 


COUNTRY  GRAIN  MARKETING. 


18.  Is  it  a  custom  to  hedcc  your  grain  purchases? .  If  so,  on  what  exchange? 

State  (in  bushels)  futui-es  bought  and  sold  by  years  and  by  kinds  of  grain: 


Year. 

Wheat. 

Corn. 

Oats. 

Total. 

Bought 

Sold 

Bought 

Sold 

Bought 

Sold 

Bought 

Sold 

1Q19.-1.3 

. 

f 

191.1  14 

1914  l.'i 

mi.'i-ifi  .... 

191R-17  .  . 

1 

Does  the  elevator  take  orders  for  futures  from  farmers? . 

Has  there  been  an  increase  of  such  business  in  recent  years,  and  if  so  to  what  extent? . 

"  To  what  extent  do  farmers  dealing  in  futures  carry  open  trades  in  excess  of  the  size  of  their  crops  ? . 

19.  Do  any  buyers  in  your  locality  load  directly  into  cars,  and  if  so,  to  what  extent  in  the  last  five 


Do  any  farmers  ship  directly,  and  if  so  to  what  extent  in  the  last  five  years? 
Do  you  elevate  lor  others,  and  if  so  to  what  extent  in  the  last  five  years?. . 
On  what  terms  and  under  what  circumstances? . . 


20.  Answer  the  following  questions  for  each  of  the  last  five  years. 


1913-14 

1914-15 

1915-16 

1916-17 

1917-18 

To  what  extent  has  your  business  been  affected  by 
rflr  . . . - . 

Has  delay  in  shipment  resulted  in  a  greater  margin 

nr-  Q  ]aqq  mn.rfrin  nn  prain  alrfiadv  bought? . 

In  what  years  have  you  seciued  more  at  terminal 

moi-Votc  nn  anpnnnf.  of  Car  .shortaB'e? . . . 

• 

Have  you  felt  it  necessary  to  pay  less  to  the  farmer 
Bononcfi  of  ca.r  shortavo  delav? . 

In  your  judgment  have  the  farmers  in  yoiu  neighbor¬ 
hood  received  more  or  less  for  their  grain  because  of 

r»o  r  qTi  nrtapp  ?.  .  . . . - . . 

_ a  II  1  ■  '  - - 

21.  State  amounts  and  sources  of  borrowed  funds  (exclusive  of  bond  issues)  as  per  the  following  schedule:  i! 


Date. 

Amount  owed  on 
short-term  or 
demand  loans. 

Rate  of 
interest. 

Source  ol  loans— whether  farmers, 
other  local  residents,  local  banks, 
commission  houses,  other  terminal 
grain  dealers,  city  banks,  etc.  Give 
names  of  banks  and  dealers. 

dant  19  191.1  . 

noA  1Q1.^  . 

\for  1Q14  .  . 

Tiitia  1Q14  . 

Coni-  1f1  191fi  . 

IQlfi  . 

Mar  1917 . 

♦  Insert  date  when  largest  and  smallest  amounts,  respectively,  owed  at  any  one  time  during  the  crop 
year,  and  fill  out  line  correspondingly. 

Submit  copies  of  contracts  used  in  connection  with  above  loans. 

State  maximum  amounts  owed  on  open  accounts  to  farmers  for  grain  delivered  for  each  year,  1912-13 

to  date,  and  approximate  dates . 

If  figures  are  not  available,  describe  situation  and  practices . 


I  HEREBY  CERTIFY  that  the  answers  given  in  the  above  schedule  arc  true  in  all  respects,  to  the  best  of  my 
knowledge  and  belief,  and  that  I  used  my  best  endeavors  to  fill  out  this  schedule  and  mail  it  within  the  ; 
required  time.  j| 

(Signature  of  Manager  or  person  answering. ) 

If  the  elevator  belongs  to  a  line  company,  specify  what  information  returned  is  supplied  by  or  through  | 
the  head  office,  enumerating  each  inquiry  so  answered . . 


(Signatiue.) 


APPENDICES. 


821 


Appendix  3. 

FORM  OF  CONTRACT  BETWEEN  COUNTRY  ELEVATOR  AND 
FARMER  FOR  THE  SALE  OF  GRAIN  BEFORE  DELIVERY. 

GRAIN  CONTRACT. 

I  / 

i.  Contract  No .  . ;  191 . . 

This  is  to  certify  that  I  have  this  day  contracted  and  sold  to . 

I  bushels  of . at . cents  per  bushel  ( . per  bushel), 

;:  to  be  clean,  sound,  and  dry  and  to  grade  No . to  be  delivered  into . 


!(» elevator  or  cribs  at  .  on  or  before  the 

[liday  of . ,  191. . 


i  If  damaged  or  inferior  grain  is  delivered  and  accepted  on  this  contract,  the  market 
|d  difference  at  which  such  grain  is  selling  under  the  contracted  grade  day  of  delivery 
is  shall  be  deducted  from  the  contract  price, 

I  certify  that  this  grain  is  in  my  possession  and  free  of  all  liens  and  incumbrances. 


[Appendix  3— Reverse.] 

GRAIN  DELIVERED  ON  THIS  CONTRACT. 


Date. 

■ 

Hauler. 

No.  of  car 
or  bin. 

Gross. 

Tare. 

Net, 

Grade. 

Dockage. 

• 

. 

* 

. 

- 

• 

• 

9964°— 20 - 21 


322 


COUNTRY  GRAIN  MARKETING. 


Appendix  4. 

NOTICE  TO  WEIGHMASTER. 


Notice  to  Weighmaster. 

The  grain  in  this  car  has  been  carefully  weighed,  if  found  short  when  unloaded,  in¬ 
vestigate  and  report  immediately  to 

Northwestern  Elevator  Co.,  Minneapolis,  Minn. 


Car  No. 


Initial. . . 
Contents . 


Bushels. 


Date. 


Station. 

Seals... 


Remarks. 


Pounds. 


Total  Weight. 


Form  14  Kimball-Storer  Co.  Minneapolis. 


[Appendix  4— Reverse.] 

Instructions  to  Agents. 

The  reveree  side  of  this  card  must  he  carefully  filled  out  in  duplicate  and  tacked 
to  the  outside  of  both  grain  doors  on  every  car  shipped  from  your  station.  When 
car  is  weighed  by  you,  each  draft  should  be  entered  on  this  card  and  totaled.  If 
not  weighed,  so  state  under  the  heading  ‘‘Remarks,”  giving  your  estimate  of  the 
amount  contained  in  the  car.  In  loading  bulkhead  cars,  the  weight  of  each  part 
should  be  given  separately  and  designated  as  “Break  End,”  “No  Break  End,”  or 
“Center,”  as  the  case  may  be. 

It  is  IMPERATIVE  in  filling  out  this  card,  that  the  GRADE  of  any  grain  con¬ 
tained  in  the  car  NEVER  BE  GIVEN.  Under  the  heading  “Contents”  simply 
designate  the  kind  of  grain  loaded  as  ^‘Wheat,”  “Flax,”  “Barley,”  “Durum,” 
“Rye,”  “Oats”  or  “Corn.’* 

The  Northwestern  Elevator  Co. 


APPENDICES. 


323 


&  o 


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a 

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a 

o 


n 

<v 

o 

V 

ft 


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cs 

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03  pti 


« 


§ 

a 

ft 

rCl 

CO 

o 

o 


•  •  o> 


Aver¬ 
age  cost 
per  bu. 

Gross  bushels  shipped.  | 

Esti¬ 

mated 

weight. 

Actual  weight  as 
per  list  of  drafts 
attached  hereto. 

Dockage.  | 

Per 

cent. 

Pounds] 
per  bu.  I 

4^2  g 

^  £  s 

^  ft 

• 

Grade. 

Kind  of 
grain. 

*3  ®  C 
o3  co.a 
CJ  3  03 

rt  0.  fcb 
S'"  o 
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•S 

4^  S  <D 

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Co  CO  ‘.H 


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CO  Oj 

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CO  ^ 

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a  o 
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3  M 


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fl.9 

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M 


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•S  ^ 

03  >1 
(-1  03 
600 
®  ® 


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§« 


111 


S 


60 


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a  ^a 

w  ■<< 


324 


COUNTRY  GRAIN  MARKETING. 


Forms.  [Appendix  6 — Continued.*]  | 

Report  of  Grain  Shipped,  Sold,  or  Demvered.  | 

On  this  blank  must  be  reported  all  grain  that  leaves  the  elevator,  whether  shipped,  sold,  delivered  out  on  I 
surrendered  storage  tickets  or  otherwise  disposed  of,  it  being  intended  that  this  book  must  give  a  complete  I 
record  of  all  grain  that  the  agent  is  entitled  to  receive  credit  for  in  the  same  manner  that  the  two  receipts  | 
report  books  ^ve  a  complete  record  of  all  grain  charged  to  him,  excepting,  of  course,  car  lots  that  may  be  I 
shipped  to  any  station  to  sell.  Do  not  report  sales  of  grain  on  Flour  and  Feed  reports  or  any  other  blank  f 
but  this.  At  any  time  your  grain  sales  are  too  numerous  to  go  into  the  three  lines  provided  you  will  please  | 
make  up  a  complete  list  of  them  on  a  letter  head  and  attach  same  to  the  report  when  you  send  it  in ,  listing  | 
in  the  body  of  the  report  only  the  total  bushels  and  amount  of  money  pertaining  to  each  kind  of  grain .  D  o 
not  enter  the  cash  sales  of  grain  on  the  same  report  with  a  car  shipment.  Each  report  must  cover  the  ship¬ 
ment  of  ONE  car  only. 

Whenever  you  have  any  grain  to  ship  place  your  order  in  writing  with  the  railroad  agent  for  the  proper 
capacity  of  empty  car  required  and  renew  your  order  daily  until  you  get  the  car.  If  the  railway  company 
is  imreasonably  slow  in  fiunishing  cars  or  the  agent  fails  to  give  you  your  full  share  of  the  cars  distributed 
to  the  various  elevators  at  the  station,  write  your  superintendent  and  the  Minneapolis  office  about  it,  | 
^vlng  full  particulars.  Mention  how  many  cars  you  have  ordered,  when  the  order  was  placed,  and  give  I 
enou^  information  so  that  we  can  form  an  intelligent  idea  of  the  situation  and  place  the  matter  before  the  1 
proper  official  in  the  general  office  of  the  railw^  company.  If  at  any  time  the  railway  company  furnishes  | 
a  larger  car  than  you  ordered  and  you  fail  to  load  it  up  to  capacity  required  for  such  car,  a  notation  that  I 
“  Small  car  ordered,  large  car  furnished,”  “60  M  Cap.  car  ordered,  80  M  Cap.  car  furnished,”  or  any  other  t 
notation  to  cover  the  particular  case  MUST  be  made  on  the  original  Bill  of  Lading  BEFORE  it  is  signed 
by  the  railroad  agent  or  we  will  be  required  to  pay  freight  on  the  minimum  capacity  of  the  car  loaded,  t 
and  if  at  any  time  we  are  obliged  to  pay  excess  freight  on  account  of  our  agent’s  failure  to  make  proper 
notation  on  Bill  of  Lading,  such  excess  freight  will  be  charged  to  the  agent.  If  you  do  not  know  the  capacity  , 
to  wMch  the  railway  company  requires  the  different  size  cars  loaded,  write  the  Minneapolis  office  for  cir-  i 
cular  giving  this  information.  You  should  fill  out  the  Bills  of  Lading  yourself  and  not  depend  on  railway 
agent  to  do  it  for  you,  then  there  can  never  be  any  question  as  to  who  is  at  fault  if  the  car  is  improperly  1 
billed  or  any  notations  left  off.  When  you  report  the  contents  of  a  car  at  “Actual  Weight,”  such  weight  i 
must  be  understood  to  mean  that  the  grain  was  ACTUALLY  WEIGHED  INTO  THE  CAR  WHEN 
LOADED  and  not  weights  taken  from  the  “in”  weights  of  a  number  of  wagon  loads  which  you  think  you 
put  into  a  certain  bin  and  then  in  turn  loaded  the  contents  of  the  bin  into  the  car,  as  we  have  had  too  much 
trouble  with  that  kind  of  weights  in  the  past  and  foimd  them  unreliable.  Be  sure  at  all  times  to  report 
the  numbers  of  seals  applied  to  cars,  as  that  information  is  particularly  important.  Also  fill  in  blank 
spaces  for  all  other  information  requested.  When  the  grain  loaded  is  actually  weighed  it  is  not  necessary 
to  report  measurements  of  car  or  depth  to  which  grain  is  loaded. 

Send  Original  {Pink)  and  Triplicate  (  Yellow)  Co'pies  with  Bill  of  Lading  Attached  to  Minneapolis  Office  ]  | 

on  the  Day  Shipment  is  made. 


Appendix  6.  j 

DAILY  LOAD  REPORT.  ^ 

MiNNEKOTA  ELEVATOB  CO.  \ 

LOAD  REPORT.  \ 


This  blank  must  be  filled  out  and  mailed  every  day.  .  ^ 

. 191....  I 

Station. 


• 

Loads 

received. 

Cars 

shipped. 

■Rir  ATTKTWTil'irnT*  Et.evator  Co  _  . . . 

tt  . 

«  . . . 

a  . 

1 

a  . 

Cars  Shipped  by  Trackers  and  Individual  Farmers. 


Car  No. 

Initial. 

Grain. 

Destina¬ 

tion. 

S 

To  whom  shipped. 

• 

Weather . 

Roads . 

Form  7.  .^M. 


Agent.  ^  I 


*  These  are  the  instructions  for  filling  out  the  foregoing  shipping  report. 


326 


COUNTRY  GRAIN  MARKETING, 


Appendix  8* 


FORM  OF  COMMISSION  HOUSE  CONTRACT  FOR  FINANCING 

COUNTRY  ELEVATORS. 


Mutual  Contract. 


The  signers  hereof,  in  consideration  of  the  mutual  promises  and  undertakings  herein,  hereby  mutually 
promise  and  agree  to  and  with  each  other,  as  follows: 


,  engaged  in  basiness  as  a  Grain  Commission  merchant,  hereinafter  called  the 


That  the 


owner  and  operator  ji 


“Commission  Merchant,”  will  advance  and  loan  to  the 
of  a  certain  grain  elevator,  in  the  town  of . 


and  State  of. 


hereinafter  called  the  “Elevator  Company,”  such  amoimts  of  money,— to  be  used  by  the  Elevator  Company  ■ 
solely  in  purchasing  grain  at  the  said  elevator  and  in  the  proper  and  necessary  expense  of  operating  said 
elevator,— as  may  be  required  for  the  purposes  aforesaid,  from  time  to  time  during  the  continuance  of  this  *■ 


contract,  not  obligating  itself,  however,  to  advance  an  amount  exceeding  at  any  time  the  sum  of, 
Dollars  (S . ). 


Ttot  said  Elevator  Company  shall,  during  the  continuance  of  this  contract,  and  of  any  indebtedness  to 
the  Commission  Merchant  hereunder,  consi^  and  ship  to  said  Commission  Merchant,  for  sale  by  it  upon 


commission . all  grains  purchased  by  said  Elevator  Company  and  shipped  from  its  said  ' 

elevator,  and  shall  pay  said  Commission  Merchant  commissions  on  such  sales,  in  accordance  wdth  the  rules  : 
of  the  Chamber  of  Commerce  or  Board  of  Trade  of  Minneapolis,  Duluth,  Milwaukee,  or  Chicago,  to  which  jj 
such  shipments  may  be  made.  ; 

That  said  Commission  Merchant  willreceive  all  grains  consigned  to  it  by  the  Elevator  Company,  and  will  j 
use  its  best  efforts  to  sell  the  same  at  the  best  prices  possible,  and  shall  promptly  render  confirmations  and 
account  of  sales  thereof.  : 


per  cent  per  annum,  computed  on 


That  said  loans  and  advances  shall  draw  interest  at  the  rate  of. 


daily  balances,  or  the  stated  rate  of  interest  in  notes,  if  any,  as  to  the  amount  of  such  notes.  ,|j 

That  this  agreement  mav  beterminated  at  will  by  the  said  Commission  Merchant,  and  may  be  terminated  ji 
at  will  by  the  said  Elevator  Company,  upon  the  payment  in  full  of  all  its  indebtedness  hereunder  to  said 
Commission  Merchant.  ; 

That  the  parties  hereto,  signers  hereof,  except  said  Commission  Merchant,  jointly  and  severally,— in 
consideration  of  the  agreement  of  said  Commission  Merchant  and  of  the  advances  of  money  made  by  it  to 
the  Elevator  Company,  which  advances  are  hereby  requested  by  all  of  the  parties  hereto,  signers  hereof,' 
except  said  Commission  Merchant,— promise  and  agree  to  repay  from  time  to  time  whenever  said  money 
is  not  actually  in  use  in  the  purchasing  of  grain  and  the  payment  of  operating  expenses  of  said  elevator,  the 
moneys  theretofore  advanced  to  the  Elevator  Company  by  said  Commission  Merchant,  with  accrued 

interest  thereon  and,  on  or  before . of  each  year,  to  repay  to  said  Commission  Merchant 

in  full,  the  balance  of  any  moneys  theretofore  advanced  by  said  Commission  Merchant  to  said  Elevatorj 
Company,  with  accrued  interest  thereon,  whether  said  moneys  so  advanced  and  loaned  by  said  Com¬ 
mission  Merchant  to  said  Elevator  Company  are  secured  or  unsecured,  or  whether  said  moneys  are  repre¬ 
sented  by  notes  given  therefor  or  carried  in  open  account,  and  that  if  the  said  Commission  Merchant  should 
deem  its  advances  insecure  because  of  improper  business  conduct  of  said  Elevator  Company,  or  if  said  Ele-; 
vator  Company  shall  violate  theterms  of  this  contract  or  become  insolvent,  said  Commission  Merchant  may 
demand  payment  of  any  and  all  moneys  and  balances  advanced  or  loaned  to  said  Elevator  Company,  andf 
thereupon  the  said  parties  hereto,  except  such  Commission  Merchant,  shall  promptly  pay  all  such  money^ 
and  balances  so  demanded,  together  with  interest  accrued  thereon. 

Elevator  Company  to  keep  their  elevator,  coal-sheds  and  other  buildings,  also  grain,  seeds,  flour,  feed,  ^ 

coal  and  twine  fully  insured  and  the  policies  to  read  “Loss  if  any  payable  to . .  as  their,  = 

interest  may  appear.”  .  .  ^  ^  i-  A 

IN  WITNESS  WHEREOF,  the  parties  hereto  have  signed  and  executed  this  agreement  in  duplicate 

upon  this . day  of . .  A..  D.  19 .  1 

Witnesses  to  Signature  of  ' 


By 


Pres. 


By 


Secy.  ■■  '> 

,1 


Witnesses  to  all  other  Signatures. 


By 


Pres. 


By 


Secy. 


Primary  Shii)- 

ments . 

Wk.Pri.  Receipts 

Since  Nov.  1 . 

Wk.  Pri.  Ship¬ 
ments  . 

Exports . 

St.  Louis  Re¬ 
ceipts . 

“  Rec  this 
week . . . 


337,000 
2,625,000 
177, 194,000 


3! 


3,5i 
174, 5i  Late 


General  Commercial  News 


cables  said  Russia  has  proposed  peace  to 
umania. 

1,933,000  2,  K  Western  hog  packing  to  date  2,501,000  head,  against 

none  154,000  last  year. 

144,000  bu  rye  and  60,000  bu  barley  cleared  from  the 
14,000  «aboard  today. 

Western  hogs  29,000  head,  against  30,000  last  Satur- 
217,000  2ay  and  17,000  a  year  ago. 

Western  receipts  of  oats  since  1st  of  August  reported 
Weather  news  much  more  favorabt  3,454,000  bu,  against  8,100,000  bu  year  ago. 
interests  than  for  several  days  baclj  Late  wires  from  different  points  in  eight  States  re- 
rainfall  and  low  temperature  wired  lorted  very  little  rain,  but  more  or  less  cloudy, 
in  the  principal  grain-growing  States-  Australian  crop  news  more  favorable:  seedlings  there 
Iowa,  and  Nebraska,  but  still  dry  ^d  in  Argentine  completed  under  excellent  conditions. 
Grain  markets  were  greatly  excited,  <  Wheat  shipments  from  Western  m^kets  this  week 
futiues  participating  in  the  general  frf  ere  5,719,000  bu,  compared  to  4,034,000  bu  previous 
and  prices,  after  starting  last  Mondafeek,  and  8,187,000  bu  last  year, 
lower  than  pre^dous  Saturday’s  cloS  Receipts  of  com  at  Western  markets  since  November 
excited  advance,  culminating  in  aj  1919,  show  177,194,(XX)  bu,  compared  to  148,892,000  bu 
on  Monday  to  $1.5}|  yesterday  for  fjear  before  and  238,437,000  bu  m  1918. 
and  from  151.201  to  S1.31i  for  Dccel  Forecast— Generally  fair  and  not  much  change  in 
which  very  interesting  period  largtfmperature  over  most  of  the  grain  States  tonight  and 
active  futures  were  dealt  in,  includiimday,  barring  showers  in  Illinois  and  Missom-i. 
orders,  both  city  and  country,  besic^  Western  receipts  of  corn  this  week  2,625,000  bu, 
in  the  professional  ranks— short  sellgainst  3,591,000  bu  week  before  and  1,619,000  bu  last 
on  the  advance,  while  it  frequently  hear;  shipments  1,933,000  bu,  against  1,580,000  bu  year 
bull  traders  were  left  in  the  lurch  ago. 

realizing  sales.  The  strongest  featuf  Wired  from  Regina,  Sask.— Wheat  fair  to  good 
sellers  for  the  decline  were  increasiiiround  Regina,  may  run  20  bu,  still  green,  and  needs 
drv,  hot  weather  was  causing  more  oftin;  may  average  30  bu;  around  Brandon,  may  only 
in  the  old  growing  crop,  a  decided  shui  15  bu;  400-mile  trip  reveals  varied  crop  conditions; 
arrivals  at  primary  markets,  droppfrouth  and  much  idle  land;  labor  asking  $7  per  day. 


9964® — (To  follow 


Ajj»PENDIX  9. 

ST.  LOUIS  DAijiY  MARKET  REPORTER. 


ST.  LOUIS  DAILY 


Vol.  45 


Merchant’  Exchange  Price  Current. 

Published  every  business  day  by 
O’CONNOR  MARKET  REPORTER  CO 
216  Market  St.  St.  Louis  Mo’ 


Entered  as  Second  Class  Matter 
at  the  Post  Office.  St.  Louis,  Mo. 

Subscription  R^tes  By  Mail,  Postage  Paid; 
One  Year ,  $1.50.  Three  Months,  $2.00. 


FUTURE  GRAIN  MARKETS 


options  at  St.  Louis,  as 
r^corfied  at  IS-iiiinute  intervals. 

Opening.,..  Dec.  Wheat. 

.  145MaMb 

.  l47M«Ma 

11:15 .  147M 


11:30 .  147M 

11:45 .  lieiMa 

Close .  147^  a 

High .  148M 

Low .  1447^ 


125a  24M 
124Mb 
124M  a 
124Ma 
124M  b 
125M  b 
125M  a 
125M  a 
125M 
l24Ma 
124M 
126 
124 


WHEAT— 

Primarj’-  Rec . 

Primary  Ship . 

St.  L.  &  K.  C.  rec _ 

W’ks  Primary  rec. . 

Since  July  1st . 

N.  W.  cars . 

“  this  week.... 

Winnipeg  cars . 

“  cars  this  week 

Exports . 

“  this  week.... 
W’k  Prim  Ship . 


To-dav. 

Week  ago. 

1,449,‘000 

1,527,000 

895, 000 

827, 000 

768, 000 

533,000 

10, 247, 000 

9, 248, 000 

37, 122,000 

26, 784,000 

249 

182 

1,760 

1,586 

152 

89 

791 

789 

423,000 

368,000 

delaved 

9,967,000 

5, 719,000 

4,834,000 

CORN— 

To-day. 

Week  ago. 

Primary  Receipts 

261,000 

441, 000 

Primary  Shifi- 

ments . 

337,000 

381,000 

WT.  Pri.  Receipts 

2, 625, 0)X) 

3,591,000 

Since  Nov.  1 . 

177, 194, 000 

174,569,000 

Wk.  Pri.  Ship- 

ments . 

1,933,000 

2, 108, 000 

Exports . 

none 

none 

St.  Louis  Re- 

ceipts . 

14,000 

43,000 

“  Rec  this 

week . . . 

217,000 

269, 000 

Last  year. 
149, 000 

207, 000 
1,619,000 
148, 892, 000 

1,580,000 
none 

18,000 

112,000 

Weather  news  much  more  favorable  for  the  farming 
interests  than  for  several  days  l)ack;  fair  to  generous 
rainfall  and  low  temperature  wired  from  many  y^oints 
in  the  principal  grain-growing  States — Illinois,  Indiana, 
Iowa,  and  Nebraska,  Init  still  dry  in  the  Northwest. 
Grain  markets  were  greatly  e.xcited,  day  after  day,  corn 
futures  participatingin  the  general  furor  that  prevailed, 
and  prices,  after  starting  last  Monday’s  session  slightly 
lower  than  previous  Saturday's  close,  experienced  an 
excited  advance,  culminating  in  a  bulge  from  $1.35,4 
on  Monday  to  .$1.5 If  yesterday  for  Septemljer  thus  far 
and  from  .$1.20',  to  .$1.31f  for  December  corn,  during 
which  very  interesting  period  largo  quantities  of  the 
active  futures  were  dealt  in,  including  a  big  inflow  of 
orders,  both  city  and  country,  besides  a  good  business 
in  the  professional  ranks— short  sellers  caught  sharply 
on  the  advance,  while  it  frequently  happened  that  some 
bull  traders  were  left  in  the  lurch  by  rapid  breaks  on 
realizing  sales.  The  strongest  features  working  against 
sellers  for  the  decline  V'ere  increasing  complaints  that 
dry,  hot  weather  was  causing  more  or  less  deterioration 
in'the  old  growing  crop,  a  decided  shrinkage  in  current 
arrivals  at  primary  markets,  dropping  far  behind  the 


MARKET  REPORTER 


Saturday;  August  7,  1920 


No.  136 


Ilfsh 

sasMb 

2;{8b 


WHEAT  FUTURES 

DECEMBER. 

march .  .  ooL/ 

SEPTEMBER . 

DECEMBER.. 

OATS . 

SEPTEMBER  701/ 

DECEMBER  .  ^ 


148M 

1‘36 

?3Mb 


Low 

233 

335M 

144M 

124 


Today 

235a 

237Ma 

147Ma 

134M 

73Mb 

70Mn 


Closing  Prices 


Yesterday 

238Ma 

241n 

148Mb 

127Ma 

74Mb 

71Ma 


1919 


196M 

157M 

78Ma 

SOM 


Recent  advances  well  maintained  in  today’s  light 
trading.  Offerings  scant.  Sales: 

Timothy— Old— 1  car  No.  2  at  $32,  1  car  do  at  $37; 
New— Part  car  at  .$27, 1  car  No.  2  at  $30, 1  car  do  at  $31, 
3  cars  standard  at  $33. 

Clover-mixed— 1  car  and  part  car  at  $27,  2  cars  new 
light  mixed  at  $30. 

Prairie— 1  ear  No.  2  at  $23.50. 

Alfalfa— 3  cars  standard  at  $32. 


232 

232 

233 
233  b 
233  b 
235M  b 
235M  b 
235M  b 
235M  b 
235M  b 
235  a 
235M  b 

232 


Last  year. 
1,744,000 
1,436,000 
749,000 
17,007,000 
65, 560, 000 
182 
1,720 
28 
215 
755, OOq 
5, 950,  OOq 
8, 167,  OOq 


though  still  over 

last  jear  at  this  time;  a  great  revival  in  the  casliTnisi- 
ness  and  rising  values  therefor;  a  fierce  raid  on  shorts 
in  wheat  futures,  which  ran  up  38@39c  from  lastlMon- 
aay  s  bottom  rates,  though  subsequentlv  timlbling 
h^vily  from  the  top  notch,  a  sharp  upturn  in  cash 
wheat  and  growing  inquiry  therefor,  rapidly  appre- 
wating  rye  quotations  and  serious  w'ar  news  from  abroad . 

a  big  change  in  the 
situauon— letter  weather,  less  serious  information 

Su’ii  ^.ussian-Polish  troubles,  and  a  noticeable 
lalling  off  in  bull  support  caused  a  break  of  2c  to  3-lc  at 
the  opening,  followed  by  a  still  further  softening,  and 
pen  a  limited  upturn,  but  market  very  unsettled  and 
toppy  generally.  Cash  gi’ain  made  a  materiallv  higher 
range  than  a  week  ago.  Suddenly  turned  and  liic^  mled 
second  hour,  offerings  running  light,  f 
1  he  spurt  carried  prices  up  2c  from  the  earlierjeheap- 
est  rates,  (hie  iri  great  part  to  widespread  reports  that 
rain  needed,  in  most  sections,  only  showers  heinc 
repopd;  cash  grain  generally  lower,  including  wheat; 
anoper  week-end  future  market— realizing  on 'profit- 
holding  contracts,  getting  out  of  futures  brought  6n  the 

another  sharp  spurt  near  noon, 
pough  falling  back  at  the  last,  closing  |c  under  yester- 
day  for  September  and  2f  c  on  December,  latter  showing 
2c  net  gain  over  last  Saturday  and  December  4ic  up. 


Violent  fluctuations  characterized  the  action  of  the 
St.  Louis  wheat  market  this  week;  cash  quotations 
bulged  from  $2.22  @2.25  for  No.  2  Red  winter  on  Mon¬ 
day  last  to  $2.48@2.57  yesterday,  with  No.  2  Hard 
winter  from  $2.24@2.25  up  to  $2.50.  December  wheat 
meanwhile  advancing  from  $2.09M@2.16  last  Monday 
to  $2.49  yesterday,  with  the  March  future  up  from  $2.12 
to$2.50;but  the  general  market  had  asharpset  back  late 
yesterday,  cash  wheat  losing  2c  to  6@7c  and  futures  9c 
to  10c  from  the  previous  pp  figures;  market  during  the 
week  was  excited  by  increasing  war  reports  from 
abroad,  more  poor  crop  reports,  due  to  rust  damage  in 
the  Northwest  and  drouth  over  the  Canadian  line.'Ex- 
port  business  was  quite  active  in  the  early  period  but 
appeared  to  slacken  later  on,  although  considerable 
wheat  was  reported  sold  in  different  positions,  and  sea¬ 
board  clearances  large.  Receipts  at  Western  markets 
have  increased  to  some  extent  of  late,  but  continue  to 
fallheavily  short  of  both  1919  and  1918  at  this  time,  and 
total  since  July  1st  heavily  behind. 

Rapid  price  changes  occurred  in  the  future  wheat 
market  this  morning,  opening  5c  to  6Mc  lower,  rallying 
2M@3Mc.  hut  again  softening,  along  with  lower  cash 
quotations,  closing  3M(‘  down  from  yesterday,  but  over 
20c  to  22c  over  last  Saturday. 

DECEMBER  opened  at  $2.32,  and  later  to  $2.35M  to 
$2.33  to  $2.35  asked  at  close. 

MARCH  ranged  from  $2.35M  (opening)  to  $2.38  bid 
to  $2.37M  sellers  at  close. 


OATS— 

Primary  Receipts... 
Primary  Shipment. . 

Exports . . 

St.  Louis  Receipts... 
St.  L.  Wk.  Receipt.. 
Wk.  Pri.  Receipts. . . 
Wk.  Pri.  Shipments. 
Rec.  since  Aug.  1 _ 


To-day. 
552, 000 
393, 000 
None. 
75, 000 
572, 000 
3,4.54,000 
2,347, 000 
3, 454, 000 


W eek  ago. 
695, 000 
506, 000 
None. 
60, 000 
302, 000 
4, 427, 000 
2, 866, 000 
205, 970, 000 


Last  Y  ear. 
504, 000 
854, 000 
478,000 
40,000 
405, 000 
5,306,000 
6,301,000 
8, 100.  000 


There  was  a  very  lively  market  for  both  cash  and 
future  oats,  prices  of  the  former  commodity  advancing 
3  @  3|c  and  futures  5c  to  8c  from  last  Saturday  to 
yesterday,  stimulated,  as  a  matter  of  course,  by  the 
feverish  action  of  other  grain  markets;  crop  news  good, 
but  not  given  much  attention,  Western  receipts  of 
limited  volume — away  short  of  last  year;  cash  demand 
pod  to  excellent;  increased  e.xport  business  wired 
from  the  seaboard;  stocks  very  small.  But  this  morn¬ 
ing  s  mpket  was  beariply  affected  by  the  break  in 
corn  and  wheat,  and  prices  let  down  4  4Ic  from  the 
previous  highest  level. 

There  was  a  sudden  upturn  of  Ifc  from  the  lowest 
notch  of  the  morning,  with  the  close  ic  to  lie  under 
yesterday. 

SEPTEMBER  opened  at  72|c,  and  later  to  .72|c 
/2|c  to  73Jc  to  734c  to  734c  bid  at  close. 

DECEMBER  figured  at  704c. 


to 


READY  REFERENCE 


Garlicky  at  $2.40  1 


2.45.  Garlicky  at  $2.38  @ 

I 

2.43.  Garlicky  at  $2.36  @ 


SAMPLE  WHEAT,  on  track — Red  winter  3c  to  7c 
lower.  Hard  10c  to  11c  lower.  i 

No.  1  Red  mnter,  $2.44  @  2.48. 

2.41.  Smutty  at  $2.40. 

No.  2  Red  winter,  $2.42  @ 

2.40.  Smutty  at  $2.40. 

No.  3  Red  winter,  $2.40  @ 

2.38. 

No.  4  Red  winter,  $2.38. 

No.  1  Hard  winter,  $2.45. 

No.  2  Hard  winter,  $2.40.  ! 

No.  3  Hard  winter,  $2.42. 

SAMPLE  CORN,  on  track — Ic  to  3c  lower;  fair 
demand.  i 

No.  6  corn,  $1.52. 

No.  1  yellow,  $1.60  to  $1.61.  | 

No.  2  yellow,  $1.60.  ! 

No.  3  yellow,  .$1..58.  j 

No.  1  white,  $1.60  to  $1.61. 

No.  2  white,  $1.60  to  $1.61.  ! 

sample  oats,  on  track — Ic  to 
demand. 

No.  1  white,  82c. 

No.  3  white,  784c  to  79c. 

No.  2  oats,  76c. 

No.  3  oats,  75c. 


lie 


lower;  fair 


CASH  GRAIN 


WHEAT— Received  232,371  bu,  including  107  cars 

and  2,476  sacks  local  and  82  cars  through . i . 

Red  winter  from  3c  to  7c  lower,  comparejl  with 
yesterday’s  late  sales,  but  in  better  demand,’ export 
buyers  coming  into  the  market  at  around  .$2.45  for 
No.  1  Red  and  $2.43  to  $2.44  for  No.  2  Red,  No.'  3s  and 
off’  grades  selling,  too,  and  all  offerings  taken  orjsalable 
within  the  range  of  prices  quoted.  Offerings  were 
about  75  cars  of  all  grades,  with  a  few  cars  heldlover. 

Hard  wheat  10c  to  11c  lower.  Export  buyetrs  took 
the  offerings.  Little  or  no  milling  inquiry  todiy. 

Track  sales,  new  wheat,  unless  otherwise  noted: 

No.  1  Bed  winter— 3  cars  60  @  60i-lb.  test  at  $2.48 
dest,  9  cars  60  @  61.2-lb.  test  at  .$2.45  simplest,  1  car 
60-lb.  test  at  $2.44,  1  car  at  60.1-lb.  garlicky  a|t  -$2.41, 


M.  F. 

42.00 


August . . , . 
September. 
October.. . . 
November. 
December. . 
January.... 
February . . 


2  cars  60.1  @  60..3-lb.  garlicky  at  $2.40,  1  car  60-lb. 
smutty  at  $2.40. 

,  No.  2  Red  winter— 7  cars  58.2  @  59.8-lb  test  at  $2.45 
SIX  dest,  4  cars  59  @  59.8-lb  test  at  $2.44  two  dest,  1  car 
bl.8-Ib  3%  damage  at  $2.44  dest,  1  car  5S-lb  1%  dockage 
at  $2.44,  9  cars  58@59M-lb  test  at  $2.43  three  dest,  1  car 
60-lb  2%  rye  at  $2.43, 1  car  59-lb  test  at  $2.42, 1  car  59.6-lb 
garlicky  at  $2.40,  1  car  59-lb  smutty  at  $2.40,  2  cars  58® 

59.6-lb  garlicky  at  $2.39,  1  car  58.8-lb  garlicky  at  $2.38, 

1  car  gplickly  and  smutty  at  $2.30. 

No.  3  Red  winter — 1  car  61.2-lb  14.4%  moisture  at 
$2.43,  2  cars  57®  57. 2-lb  test  at  $2.42, 3  cars  56M®57.1-lb 
one  1%  dockage  at  $2.40,  1  car  59.7-lb  garlickly  and 
dockage  at  $2.38,  1  car  57M-lb  garlicky  at 

»pz,3d. 

No.  4  Red  winter— 1  car  54.2-lb  test  at  $2.38. 

No.  1  Hard  winter— 5  cars  60@61.7-lb  test  at  $2.45 
dest. 

No.  2  Hard  winter— 1  car  58.4-lb  Iowa  1%  dockage 
at  $2.40. 

No.  3  Hard  winter— 1  car  57.4-lb  test  at  $2.42. 

No.  1  Mrted— 1  car  at  $2.43,  2  cars  at  $2.44  dest. 

CORN — Received  14,300  bu,  including  9  cars  local  * _ _ 

and  2  cars  through .  m  arch 

SAMPLES — Only  a  fair  demand'  prevailed  today  and  April 
prices  off  Ic  to  3c.  Local  industries  were  the  principal 
buyers,  less  than  half  dozen  cars  taken  to  fill  outside 
orders.  Offerings  light  and  cleaned  up. 

Sales,  in  bulk,  on  track,  this  and  East  side, 
mainly  delivered;  local  weights  unless  otherwise 
specified: 

No.  6  com— 3  cars  loaded  at  11.52. 

}  yellow-1  car  13%  moisture  1M%  damaged  at 
$1.60,  4  cars  11.8@13.2%  moisture  1M®2%  damaged  at 
$1.61  one  dest  wts. 

No.  2  yellow— 1  car  13.4%  moisture  2M%  damaged  at 
(151. dO. 

No.  3  yellow— 1  car  14%  moisture  6%  damaged  at 

$1.08. 

No.  1  white — 3  cars  13.4@13.6%  moisture  1M®2% 
damaged  at  $1.60,  1  car  12.2%  moisture  1M%  damaged 
at  $1.61  shipper’s  wts. 

No.  2  white— 1  car  14%  moisture  4%  damaged  at  $1.60, 

1  car  12.2%  moisture  3%  foreign  material  at  $1.61  dest 
wts,  5  cars  loaded  at  $1.60. 

No.  6  white— 1  car  13%  moisture  12%  damaged  at 
81. o4. 

Sample  Grade— 1  car  hot  yellow  at  $1.47. 

OATS — Received  70,000  bu,  including  26  cars  local  ..  _ 

and  9  cars  through .  A  ustralia 

SAMPLES— l®lMc  lower.  Fair  demand  from  ship- 
pmg  people  early,  but  these  buyers  soon  filled  up  and 
late  market  a  little  slow,  with  several  cars  carried  over. 

Sales,  in  bulk,  on  track,  this  and  East  side, 
mainly  delivered;  local  weights  unless  otherwise 
specified; 

No.  1  white— 1  car  at  82c. 

No.  3  white — 12  cars  at  79c  ten  dest  one  shipper’s  wts, 

1  car  at  7SMc. 

No.  2  oats — 1  car  at  76c  dest  wts. 

No.  3  oats — 1  car  at  75c  dest  wts. 

KAFIR — Received  3,600  bu,  including  3  cars  local. 


LEAD  AND  SLAB  ZINC 

$9.00  still  asked  by 


LEAD— Quote  at  $8.85  to  sell; 
some  producers. 

SLAB  ZINC— Quote  at  $7.80. 


COTTON 


ST.  LOUIS — Quotations  reduced  50  points;  quiet. 


G.  M. 

40.50 


Mid. 

38.00 


L.  M. 

29.00 


G.  O. 

22.00 


Tinges  and  Stains  5Mc  to  10c  less. 
MEMPHIS— Quiet.  Middling  38.00. 
NEW  ORLEANS— Quiet.  Midd.  36.75. 
NEW  YORK— Quiet.  Middling  39.50. 


To-day. 
34.  40 
33.  40 
32.  02-03 
31.55 
30.  76-78 
29.  56 
29.  35 
29.  22 
-  28.95 

May .  28.75 

.  28.65 

JiJy .  28.50 

Cottonseed  Oil— Per  lb:  Winter  white, 
yellow,  l8Mc;  summer  white,  18Mc;  ' 

salad,  18Mc;  cooking  white  at  18Mc; 
cocoanut  oil,  17c;  soya  bean  oil,  15Mc. 


Yester¬ 
day. 
34.50 
33.  70 
32.  0.5-10 
31.  50 
30.  72 
29.  47 
29.  30 
29.  10 
28.  85 
28.  65 
28.60 
28.  40 

19c;  do 
do  yellow,  18c; 
do  yellow  18c; 


Bradstreet’s 
omitted): 

U.  S. — Wheat — 

East . 

West . . 

Canada . . 

Total  available. . . 

Com . 

Oats . 


Available  .Supply  Changes  (000 


Last  week.  Last  year. 

1 , 082, 000  inc  8, 379, 000  inc 

982, 000  dec  48, 000  inc 

1,571,000  dec  878, 000  dec 

1, 421, 000  dec  7, 549, 000  inc 

572, 000  inc  618, 000  dec 

796, 000  dec  137, 000  inc 

Exports  of  Breadstuffs  from  surplus  countries— 
Broomhall: 


North  America . . 
India . 

July  31. 
8,140,000 

W’k  before 
8, 773,000 

1919 

10,092,000 

Argentme . 

4, 458, 000 
752, 000 

3, 805, 000 
1, 496, 000 

i,  744, 000 
2,646, 000 

Cfi  r\nn 

Australia . 

Various . 

Total . 

13, 350, 000 

ii,  074,000 

oUy  UUU 

14,561.000 

United  States. . . 
A  rgentine . 

July  31. 

34, 000 
1,070,000 

Week 

before. 

140,000 

1,644,000 

1919. 

2,449,000 
100,000 
2, 545,000 

Vkrious . 

Total . 

1,104,000 

i,  784, 000 

FLOUR,  FEED,  ETC. 

FLOUR— Unsettled  and  dull;  scattered  small  sales 
only  being  reported.  Inquiries  with  requests  for  offers 
for  export  noted,  but  low  exchange  and  irregular 
wheat  values  deterring  mills  from  making  prices.  Quo¬ 
tations  by  mills  on  Kansas  95%  of  $11.30  to  $11.50  lute 
was  reported,  also  an  offer  at  $11.00  jute.  Sales-  1  car 
low-grade  (yesterday)  at  $7.00  jute,  1  car  extra  fanev  at 
$9.50  jute,  1  car  soft  95%  at  $10.45  bulk,  350  brls  hard 
95%  (by  local  mill,  on  Southern  order)  at  $12  75  in 
9S-lb  cotton,  1  car  high  soft  patent  (Southern  orderl  at 
$13.40  cotton,  2500  brls  soft  onp.  t. 

Quote,  nominally.  Jute  basis;  Soft  patents  at 
$11.00  to  $13.10,  100%  at  $10.50  to  $10.75,  extra  fanev 
at  .$9.50  to  $10.00,  clears  at  $7.75  to  $8. .50,  low-grades  at 
$7.00  to  $7.25;  Hard  95%  at  $11.00  to  $11.50,  100%  at 
$10.50  to  $11.00,  clears  at  $8.75  to  .$9.25,  low-grades  at 
.$7.00  to  $7..50,  spring  patents  $12.00  to  $12.95,  first  clears 
$9.50  to  $10.00  and  second  clears  .$7..50  to  $8.10. 

Rye  Flour— Quoted  by  mills  in  car  lots  in  9S-lb 
cotton  sks:  White  patent  at  $10.90  per  brl,  medium  at 
$10.00,  straight  at  $9.60,  pure  dark  at  $8.70,  and  Rye 
Meal  at  $8.30 — 30c  less  in  jute;  jobbing  prices  higher"^ 

Corn  Meal— Steady.  City  mill  quotes  in  100-lb 
sacks  delivered:  Corn  Meal  at  $4.10.  Cream  Meal  at 
$4.20,  Grits  and  Hominy  at  $1.35. 

MILLSTUFFS— Wheat-feed  quiet  and  easv 
Sales:  1  trk  car  hard  Bran  yes.  p.  m.  at  $46.00,  1  trk 
car  do  today  at  $45.00,  1  trk  car  Bran  at  $46.00,\3  cars 
ordinary  grey  Shorts  (to  go  out,  fifteen  davs’  shipment) 
at  .$59.00,  1  car  hard  grey  Shorts  to  arrive  at  $60  00 
prompt  shipment:  for  1,000  tons  Bran  season  ship- 
ment,  bid  of  .$37.72  was  refused.  Track  car  No.  2 
Alfalfa  Meal  in  new  sks  sold  at  $34.00  and  5  cars  No.  1  in 
s.  h.  sks  (for  shipment  prior  to  August  25th)  sold  at 
$37.00.  White  II ominy  Feed  stronger  at  $.59.00  prompt 
shipment.  Oat-feed  quoted  at  $36.00  prompt,  $32.00 
Angus)  and  $29. .50  September  shipment. 

HAY— Received  17  cars,  of  which  11  cars  were 
Timothy,  2  Clover-mixed,  1  Clover  and  3  Alfalfa 


Last  week . . 
MTek  before 
Since  Jan.  1. 


1920.  bu. 

4, 442, 000 
4, 458, 000 
187, 676, 000 

Argentine  Com  Exports; 

,  ,  ,  1920.  bu. 

Last  week . . . 

M''eek  before . 

Since  April  1, 


2, 188, 000 
1,070,000 
54, 483, 000 


1919.  bu, 

2, 188,000 
2,244,000 
45,962,000 

1919.  bu. 
12,128,000 
2,841,000 
3, 608,000 


General  Commercial  News 

RKania*^^^^^  Russia  has  proposed  peace  to 

SMboH  t’o'diy'!  fix’ 

Westyn  hogs  20,000  head,  against  30,000  lost  Satur- 
dfiy  and  L,000  a  year  ago. 

iM  estern  receipts  of  oats  since  1st  of  \ugust  reunrlArl 
at  3,454,01)0  bu,  against  8,100,000  bu  year  aSf 
Tate  wires  from  different  points  in  eight  States  re¬ 
ported  very  little  ram,  but  more  or  less  cloudy 
Australian  crop  news  more  favorable:  seedlirigs  there 
apd  m  Argentme  completed  mider  excellent  conditions 
[Wheat  shipments  from  Western  marke1;s  this  week 
were  5,719, OOt)  bu,  compared  to  4,0;5Wbu  nmyiS 
Qeek,  and  8,187,000  bu  fast  year.  '  ^ 

estern  markets  since  November 
ij  1919,  show  1/7,194,000  bu,  compared  to  148  89*’  000  bu 
yW  before  and  238,437,000  bu  in  1918  ’  ^ 

jForecast-Generally  faff  and  not  much  change  in 
bimperature  qver  most  of  the  grain  States  tonight  and 
Simday,  baiTing  showers  in  Illinois  and  Missour 
'VVesterii  receipts  of  corn  this  week  2  625  000  bn 
against  3,591,000  bu  week  before  and  1,619  000  bu  last 
year;  shipments  1,933,000  bu,  agamst  1,580;000  bu  vear 


ago-  .  2, 

Wired 


from 


.  Regina,  Sask.-Wheat  fair  to  good 
around  Regina,  may  run  20  bu,  still  green,  and  nSds 
r^;  may  average  30  bu;  around  Brandon  ms v  nnUr 
rff  15  bu:  400-mlle  trip  reveals  varieXtop  cS,°„ns5 
djrouth  and  much  idle  land;  labor  asking  $7  per  day?  ’ 


9964® — (To  follpw  page  326.)  No.  1 


s  jv/ui  • 


Wheat,  bu. . . . 

Corn,  bu . 

Oats,  bu . 

Rj^e,  bu . 

Barley,  bu.... 
Hay,  local... . 

Hay,  thru . 

Lead,  pigs.... 

Wool,  lbs . 

Hogs,  hd . 

Zinc  &  S . 

Shipments: 

Flour,  bis . 

Wheat,  bu.... 

Corn,  bu . 

Oats,  bu . 

Rye,  bu . 

Barley,  bu. . . . 

Hay,  tons . 

Lead,  pigs. . .. 

Wool,  lbs . 

Hogs,  hd . 

Zinc  &  S . 


1,853,65711,694,325 
217,100  269,100 

572,000  - 

11, 162; 

17,600; 

1,417 


1,313 

37,690 

111,600; 

49,3811 

49,070, 

1 

77,650 
1,297, 060 
170,870, 
104,380| 
3,020 
7,440i 
1,155, 
31,230, 
248,800' 
16,841' 
194,980 


302, 000 
6,796 
14,400 
1,307 
969 
47, 420 
145, 700 
46, 767 
72,000 

70,660 

876,960 

179,470 

253.330 
1,180 
5,020 
1,345 

26,830 

205,200 

11,134 

110.330 


15, 

20 

19 


: 


00;  heavy  yellow  brass,  110.00;  heavy  copper  ana 
Iper  wire,  114.00;  zinc,  $4.50;  lead,  $6.50;  pewter, 
1,00;  tinfoil,  $38.00;  tea  lead,  $3.00;  aluminum,  20c; 
gip  iron  in  car  lots,  $14.00(tc.  15.00  per  ton. 


Veatiier — Clear;  ther.  at  noon  88. 
l.OiOcal  Forecast — Thundershowers  this  afternoon  or 
2,4)ight — Sunday  fair — not  much  change  in  tempera- 
2,  :4. 

2,7  - 


2,0 

11,5 

}1-Jday....| 
^“*5  ^terday.  j 
t  year. 


Stocks  of  Grain  in  St.  Louis. 


1.1 

10,6 

8 

5,2 


1  Wheat 

Corn 

Oats 

Rye 

185,096 

340, 169 

56, 563 

10, 683 

j  184,298 

356, 106 

56, 614 

10,  294 

12,792,296 

87, 102 

119,818 

65, 578 

?’rincipal  Grades 

.  1  Red  Wheat . 

.  2  Red  Wheat . 

.  1  Hard  Winter. .. 
,  2  Hard  Winter... 

.  2  Corn . 

2  White . 


Flour  output  of  the  following  milli  ^ 
this  week,  against  55,700  brls  bv  sam2  Yellow 
week,  as  follows:  G.  P.  Plant  Milling  C  2  Oats... 
Stanard-Tilton  Milling  Co.  (Alton,  J  2  White. 
Tex.),  7,000;  Kehlor  Flour  Mills  Co.  3  White. 
Ill.),  6,000;  Sparks  Milling  Co.  (Alton  2  Rj^e... 
Haute,  Ind.),  no  report;  Saxony  Mipr . 


To-dav 

Yesterday 

45, 983 

44, 9S3 

86, 863 

66, 785 

18, 722 

3,000  , 

16, 170 

12, 000 

15, 762 

15, 762 

33, 198 

43, 400 

38, 760 

35, 017 

18, 583 

19, 523 

1,960 

1,960 

19, 086 

20, 196 

3, 545 

3, 555 

49, 122 

52, 687 

Barley 
8,522 
8,252 
4, 627 

Last  year 
287, 169 
2, 090, 641 
19, 019 
91, 139 
60, 070 
3, 614 
5,381 
2, 620 
17, 680 
66, 640 
33,081 


9964° — (To  follow  pi 


PRODUCE  PAGE 

O’CONNOR  MARKET  REPORTER  CO. 

218  Market  Street.  St.  Louis’  Mo. 


Saturday,  August  7,  1920. 


Prices  heretvith  are  for  round  lots  in  first  hands  unless 
otherwise  stated.  Orders  charged  higher. 


EGGS,  BUTTER,  POULTRY,  ETC. 

Eggs— Market  steady. 

Firsts,  country  candled .  40 

do,  cases  returned . .  42 

^  Today  Last  week  1919 

Pkgs>cal .  2,503  3,655  3;  300 

Butter— Steady.  Quote  creamery  extras  at  53c 
staiidards  52c,  firsts  47c,  seconds  42@44c,  ladles  41c’ 
packing  stock  at  39c.  j  -iic, 

Chees^Quote  per  lb:  Northern  Twins  at  25Kc' 
Singles  at  28c:  Long  Horns  at  27c;  Daisies  at  26c-  Y 
4i/^  2  c,  prints  at  29c;  Swiss  at  50c  to  58c;  brick  at 
25t<c;  all  inferior  quality  less. 

Live  Poultry— Spring  Chickens  Ic  lower.  Cocks  Ic 

o  T-  Ducks  wanted 

and  worth  some  premium. 

E owls,  straight  rim .  oq 

Cocks .  7;, 

Cull  Cliickens .  . 

Spring  Chickens . .  33 

IVhite  Leghorn  Spiings .  28 

Turkeys,  Hens  and  Toms.  44 

Culls . ■  [ .  25 

T  oiuig  Turkeys,  5  lbs  and  oyer  5*1 

Y oung  Turkeys,  21-^  to  4  lbs . 55 

Ducks,  Young  and  Old .  22 

Muscoyy  Ducks . .  1  c 

Geese . jr 

Spring  Geese . 20 

Guineas,  per  doz . !!!!!!!!!!!!!  .$4. 00 

Young  Guineas,  IJ^lbs  and  oyer . $8.00 

Pigeons  and  Squabs — Quote  Liye  Pigeons  at  .|1.2>> 
per  dozen  and  common  liye  Squabs  at  $1.50.  Dressed 
Squabs,  75c  per  lb;  small  and  dark  at  50c  per  lb. 

Veals— Unchanged:  market  steady.  Quote  choice 
100@d40  lbs  at  12@l21c  per  lb,  165@185  lbs  at  10@llc, 
185@200jbs  at  S@9c  per  lb;  rough,  coarse,  heretics, 
etc.,  5@7c.  Sheep  2c  to  6c,  bucks  3c  to  5c,  spring 
lambs  6c  to  10c. 

Broom  Corn— Nominal.  Quote  new  choice  self¬ 
working  and  hurl  at  $250.00  to  $300.00  per  ton,  medium 
self-working  and  hurl  at  $200.00  to  $225.00;  medium  to 
choice  insides  and  coyers  and  common  self-working 
and  hurl  at  $125.00  to  $150.00.  Common  insides  and 
coyers  at  $75.00  to  $100.00;  crooked  half  price. 

Pop  Corn- Quote  shelled  w-hite  rice  at  $4.50  per 
100  lbs. 

Peanuts — Quote,  per  lb:  Tennessee  farmers’  stock 
at  7c  to  Sc;  cleaned  jumbo  at  14t^c. 

Pecans— Quote  ayerage  AVestern  or  Texas  at  14c 
per  lb. 

Hogs — Receiyed  4,000  head.  Late  market  steady 
at  $12.50@16.45. 


Leading  Receipts 
For  24  hours 

ARTICLES 

Flour,  brls . 

Wheat,  bu . 

Corn,  bu . 

Oats,  bu . 

Rye,  bu . 

Barley,  pu . 

Kafir  A  Milo  Maize  . 

Hay,  tons,  local . 

Hay,  tons,  through. 

Hams,  lbs . 

Meats,  lbs . 

Lard, lbs . 

Lead,  pigs . 

Zinc  &  Spelter,  slabs 


&  Shipments 

Receipts 
Riyer  A  Rail 


1920 
14, 370 
2.33, 371 
14,  .300 
70, 000 


3.200 

3,600 

235 

119 


270, 000 
40, 000 
4, 860 
15, 620 

St.  Louis  Produce  Receipts  and  Shipments. 

Shipments 
Rail  only. 


1919 
6,010 
261, 600 
18,  200 
40, 000 
5, 500 
1,600 


ARTICLES: 

Apples  brls . 

Apples,  boxes . 

Butter,  lbs . 

Eggs  pkgs.,  local _ 

Eggs  pkgs.  through. 

Hides,  lbs . 

Onions,  pkgs . 

Onions,  cars . 

Potatoes  sks.  A  brls. 

Potatoes  cars . 

AVool,  lbs . 


200, 000 
25, 000 
690 
17, 560 


Receipts 
Riyer  A  Rail. 


at  St.  Louis. 

Shipments 
River  A  Rail 


1920 
16,0-50 
3.53,210 
19, 520 
3,630 


1,530 


265 


5.3, 200 
613, 800 
2.33,400 
2, 240 
19, 390 


1919 
8, 280 
344,  880 
17,870 
18, 275 
1,000 


250 

74, 700 
689, 800 
11.3,600 
132, 500 
12, 590 


1920 
1,410 
410 
123, 370 
2, 503 
2, 400 
300 


1,870 


300 


1919 

780 


7, 900 
2, 224 
496 
407. 900 
20 


1,560 

1 

8, 100 


1920 
170 
20 

92, 830 

545 

122, 300 
40 


4,007 


54,500 


1919 

10 
20 
20, 440 

3,892 

1.32, 700 
480 


3,600,  John  1 .  Meyer  Milling  Co.  (Springfield,  Mo.), 
1,500  Camp  Spring  Milling  Co.  (Nashville,  Ill.),  none; 
Hezel  Milling  Co.  (East  St.  Louis,  Ill.),  2,000;  .1.  F. 
Imbs  Milling  Co  (Belleville,  Ill.),  2,000;  Bemet,  Craft ’ 
and  Kaufmann  Milling  Co.  (Mt.  Sterling,  Ill.),  7,500; 
\  aher  and  Spies  Milling  Co.  (4  mills),  11,000;  Aiinan, 
Burg  and  Co.  (city),  none.  ^  , 

FRUITS 

Apples  Market  w-eak  at  recently  reduced  prices^ 
large  and  demand  of  a  local  character  mainly, 
although  one  car  of  upper  river  apples  w-as  loaded  for 
shipnient.  Home-growui  boxed  apples  are  plentiful 
and  cheap  and  there  is  considerable  coming  in  by  rail 
in  barrels  and  baskets  w'hich  are  supplying  consump- 
VivG  needs  to  a  considerable  extent.  Most  of  the  apples 
from  upper  river  are  welthys  anii  inclucie  many  lots 
not  properly  culled  and  assorted,  while  the  larger  pro¬ 
portion  w^as  No.  2,  small  and  green  stock;  and  maiden- 
blush  are  being  marketed  too  early,  the  fruit  being 
green,  small  and  lacking  color.  Based  on  yesterday’s 
sales,  w'e  quote  No.  1  w'elthy  and  woll  riyer  well  packed 
®o  $5.60  to  $5. .50  and  No.  2  and  orchard-run  at 

$3.00  tyi  $4.00  (mo-st  sales  at  latter  range);  bu  baskets  at 
from  $1.00@1.25  for  No.  2  to  $2.00  for  No.  1;  niaiden- 

and  bu  baskets 

at  $1.00  to  $1.50.  Home-grown  boxed  apples  sold  at 
ranp  of  50c  to  $1.50  loose.  Local  rail  shipments  Ill’, 
bu  baskets  sold  at  $1.25  to  $1.50  and  a  car  Illinois  No, 

2  duchess  sold  at  $2.58  per  brl  del.  Reported  sales  of 
upper  river  apples  included  200  brls  and  150 ’bu  baskets 
at  range  given  above;  besides  jobbing  lots:  132  bris 
iveRhy  at  $5.00,  50  No.  1  do  at  $5.50,  24  do  $5.25,  65  do 
at  $5., 50  for  No.  1  and  $3.50  for  No.  2,  18  No.  1  at  $5  50 
6  at  $5.25,  14  at  $4.00,  18  No.  2  at  $3.75,  11  do  $.150,  18 
do  at  $3.50,  5  wdndfall  do  $3.12,  22  wolf  river  at  $6.00 
and  5  weRhy  $5.00,  57  bu  baskets  fancy  strawberry 
$2..50,  30  bu  baskets  w'elthy  $1.60,  2’2  do  $L35,’24  welthy 
$o.2;j,  17  do  and  wolf  river  $4.08;  16  w-elthy  $2.95,  i27’bu 
do  $1.55,  10  do  $1.40,  25  do  sweet  =81 -35;  2  brls  duchess 
$4.00,  12  maidenblush  ' 

and  5  do  $4.85, 10  and 

10  at  $5.-52,  4  wolf  river  ,  _ _ 

w^ehhy  $1.75,  8  do  $1..50,  22  brls  welthy'at  $5712,  *21"  do 
at  $5.50,  14  No.  2  do  at  $3.12,  9  do  $3’.26,  28  do  $3.40,  25 
bu  baskets  No.  1  do  .$1.80. 

Yesterday’s  river  receipts  (twm  boats)  were  1414  brls 
and  411  baskets. 

Peaches— Market  firmer  on  fancy  elbertas,  and 
demand  good.  Jobbing  sales:  Tennessee— 2  cars  bu 
baskets  elbertas  at  $1.75;  Georgia— 1  car.  bu  bbkets 
elbertas  at  $4.50,  1  car  6-basket  crates  do  at  $4  25  1 
car  6-basket  crates  at  $3.50  to  $4.00,  clean-up  of  carls 
(decay)  at  $1.50  to  $3.00.  Home-grow’n  -i-bu  chip 
baskets  sold  at  from  50e  to  $1.10. 

Pears— Quote  Alabama  sand  pears  at  $1.00@1.25  per 
hamper;  Home-grown  chip  baskets  sugar  pears  at  $1.25. 

Watermelons— Demand  active,  and  market  aTong 
Track  sales:  Missouri— 1  car  22-av  at  $375.00;  Alablima— 

1  car  23-av  at  $375.00,  1  car  24-av  at  $3-50.00,  1  eat  do  at 
$369.00,  1  car  18-av  at  $269.00,  2  cars  25-av  at  ,f!:75.00, 

1  car  25-av  at  $390.00,  1  car  do  at  $400.00, 1  car  do  (decay) 
at  $325.00;  Georgia— 1  car  26-av  at  $320.00,  1  car  do  and 
1  car  2S-av  at  $360.00.  Jobbing  sales  at  $1.50  to  $2.50 
per  100  lbs  delivered— 1  car  20@25-av  Alabama  jobbed 
at  $1.50  to  $2.00. 

Cantaloupes— Weak  and  low^er;  larger  portion  of 
the  offerings  soft  and  overripe.  Jobbing  sales:  Cali¬ 
fornia— 1  soft  car  Turlock  standards  at  $1.50,  pony 
crates  at  $1.00,  flats  at  6  c,  few  good  standard  Turlocks 
at  $4.00;  Arizona— 2  cars  standards  at  $1.50@2.50.  pony 
crates  at  $1.00(5)4.25,  flats  at  7.5c  to  $1.00;  Arkansas— 

1  car  45s  at  .$2. .50, 863  at  $2.00,  flats  at  S5c,  1  car  (irregular 
pack)  standards  at  $1.50(5;,  1.7.5,  1  car  45s  at  $1.75(5  2.25, 
36s  at  $1.50,  flats  at  80c,  1  car  standards  at  $1.50@1.75 
and  flats  at  65c,  1  car  bu  baskets  at  $1.25,  3  cars  good 
4.5s  at  $3.2.5,  .36s  at  $2.7.5,  pony  crates  at  $2.00,  flats  at 
$1.00.  Lot  Tennessee  climax  baskets  sold  at  '50c  and 
Illinois  (Poag)  bu  baskets  sold  at  $3.00. 

Oranges— Quote  California  Valencias'  $4.00  to  $7.00 
per  box  in  jobbing  way. 

Lemons— Quote  California  in  jobbing  way  at  $3.00 
to  $4.00  and  Messina  at  $3.50  to  $4.50  per  box. 


90 

2 

142, 100 


RECEIPTS  and  SHIPMENTS  at  St.  Louis. 


Receipts: 


Wheat,  bu. . . . 

Corn,  bu . 

Oats,  bu . 

R5n,  bu . 

Barley,  bu. . . . 
Hay,  local... . 

Hay,  thru . 

Lead,  pigs.... 

M  ool,  lbs . 

Hogs,  hd . 

Zinc  A  S . 

Shipments: 

Flour,  bis . 

Wheat,  bu. . . . 

Corn,  bu . 

Oats,  bu . 

Rye,  bu . 

Barley,  bu. . . . 

Hay,  tons . 

Lead,  pigs. . . . 

Wool,  lbs . 

Hogs,  hd . 

Zinc  A  S . 


Last 

Week. 

~^1,15 
1,853,657 
217, 100 
572,000. 
11,162 
17, 600 
1,417' 

1,31.3! 

37,690, 
111,600 
49,381' 
49, 070 

77, 650 
1,297, 060 
170,870 
104,380, 
3,020 
7,440, 
1, 155 
31,230 
248, 800 
16,841 
194,980 


1  Pre- 

Since 

Same 

1  A'ious 

Jan  1 

Time 

1  Week. 

1920. 

1919. 

59,  240 
1,694,325 
269, 100 
302,000 
6,  796 
14,400 
1,307 
969 
47, 420 
145, 700 
46, 767 
72, 000 


70, 660 
87f),  960 
179,470 
253,330 
1,180 
5,020 
1,3451 
26,8,30| 

205,200: 

11, 1.34 1 
110,330, 


2, 548, 900 
15,64.3,715 
20, 129,520 
19, 108, 130 
156, 130 

326. 433 

326.434 
67, 886 

1,621,780 
2,439,500 
2,3.38,296 
2, 706, 100 


2,059,635 
11,5.34,5.30 
11,582, 765 
14,524,070 
188, 950 
150,845 
81,955 
1,195,605 
10,67.3,200 
860, 408 
5,219,730 


1,675,810 
17,299,445 
13,388,133 
19,904,000 
163,492 
721, 400 
93,026 
21,967 
826,800 
13,322,600 
2, 448, 057 
2,919, 620 

2,217,505 
9,640,610 
8,414,995 
14,811,705 
87,610 
236,460 
62,99(1 
1,185,480 
14,69},  70o 
827, 63o 
5,419,71o 


Flour  output  of  the  following  mills  was  53,000  brls 
his  week,  against  55,700  brls  bv  same  mills  previous 
reek,  as  follows:  G.  P.  Plant  Milling  Co.  (city),  12,000; 
>tanard-Tilton  Milling  Co.  (Alton,  Ill.,  and  Dallas, 
Mx.),  7,000;  Kehlor  Flour  Mills  Co.  (East  St.  Louis, 
11.),  6,000;  Sparks  Milling  Co.  (Alton.  Ill.,  and  Terre 
laute,  Ind.),  no  report;  Saxony  Milling  Co.  (city,) 


VEGETABLES 

Potatoes — Higher;  receipts  lighter.  Twenty  bulk 
loads  Home-grown  on  market  this  morning  and  early 
ohios  sold  at  $4.00  to  $4.50  and  cobblers  at  $4.25  to 
$4.75  per  100  lbs;  boxed  lots  ranged  from  $2.00  to  .S2..50. 
Part  car  Virginia  cobblers  sold  at  $8.00  to  $8.50  per 
brl  del;  2  cars  sacked  Kaw  Valley  early  ohio  sold  at 
$3.75;  also  couple  lots  lower  river  early  ohio  on  levee— 18 
sks  at  $.3. .50  and  22  sks  at  $3.65. 

Onions— Firmer.  Quote  Missouri  sacked  yellow 
at  $1.85  per  100  lbs;  North  Missouri  sacked  reel  $1.80 
to  $2.25  and  white  at  $4.00  per  100  lbs.  Home-grown 
boxed  white  onions  at  $1.25  to  $1..50,  red  at  $1.2.5(2.1.35, 
and  yellow  at  $1.00  per  box  loose,  and  bulk  loads  red 
globes  at  $2.40. 

Cabbage — Quiet.  Quote  Chicago  bulk  cabbage  at 
$50.00  to  $55.00  per  ton  del.  Home-grown  boxed  cab¬ 
bage  sold  loose  at  50c  to  75c,  and  bulk  loads  nearby 
Illionis  at  $1.75  per  100  lbs. 

Celery — Slow  and  weaker.  Quote  Miclugan  high¬ 
ball  crates  at  $1.25(5), 1.50  and  square  boxes  at  $1.00. 

Lettuce — Fancy  head  lettuce  in  fair  demand.  Part 
car  New  Y ork  cases  sold  at  $2.50  to  $3.00  del  and  Chicago 
boxes  sold  at  50c  to  75c.  Home-grown  lettuce  slow  at 
25c  to  40e  per  box  loose. 

String  Beans— Firmer.  Quote  Chicago  boxes 
green  at  $1.25;  Illinois  hampers  wax  beans  at  $1.75. 
Home-grown  beans  sold  at  $2.00  to  $3.00  per  bu  box 
loose,  as  in  quality. 

Sweet  Potatoes — Lower.  Quote  Alabama  short 
hampers  porto  rico,  yellow  and  white  at  $1.75(^12.00 
for  No.  1  and  $1.00(^1.25  for  No.  2;  Tennessee  bu  ham¬ 
pers  bermuda  sold  at  $2.50.  Home-grown  bu  boxes 
bermuda  sold  at  .$3.75. 

Tomatoes — Higher  on  good  quality.  Quote  H  ome- 
grown  ripes  at  $1.00  to  $2.00  per  bu  box  loose  as  to 
quality,  and  half-ripes  at  $1.25. 

SEEDS,  DRIED  FRUIT,  BEANS 

Grass  Seeds  (per  100  lbs) — No  business;  samples  of 
new  Timothy  to  arrive  offering,  but  drew  n9  isatis- 
factory  bids. "  On  basis  of  latest  sale,  good  old  Tirriothy 
nominally  at  $9.50  to  $10.00. 

Dried  Fruits- Dull  and  weak.  Quote  Evaporated 
rings  Apples  at  10c  per  lb  and  quarters  9c  to  10c;  evap¬ 
orated  chops  44c  and  waste  at  4(2>4.4c;  Sun-dried'(]uar- 
ters  Apples  at  9@10c. 

Beans  and  Peas— Quote  white  beans  in  car  lots— 
choice  hand-picked  Michigan  at  $8.25  per  100  Ihs, 
prime  machine-picked  $8.00;  orders  ana  small  lots 
nigher;  pinto  beans  $8.00  per  100  lbs.  From  Store- 
Scotch  peas  6c  per  lb;  split  peas,  green  at  10  c  and  yel¬ 
low  at  8c  per  lb.  Per  100  lbs — Choice  lima  beans  at 
$13.00;  California  pink  beans  at  $8.00  and  large  ^vhite 
at  $7.50.  . 

Honey— Quote  Southern  extracted  and  strained 
bright  amber  in  cans  at  16c  to  17c  per  lb;  dark  J@dc 
less. 


Linseed  Oil— Quote  in  lots  of  1  to  4  brls  at  $1.90 
for  raw  and  $1.92  for  boiled. 

Cottonseed  Oil — Per  lb:  Winter  white,  19c;  do 
yellow,  18ic;  summer  white,  IS^c;  do  yellow,  18c; 
salad,  184(3;  cooking  white  at  18-Jc;  do  yellow  18c; 
cocoanut  oil,  17c;  soya  bean  oil,  15^c. 


Green  Meats— Quote,  per  lb: 


'Tenderloins. 


MARKETS  BY  TELEGRAPH. 


CHICAGO 
Wheat— Dec. . 

Mar.. 
Corn— Sept. . . 

Dec . . . . 
Oats— Sept . . . 
Dec. . . . 

Rye— Sept _ 

Dec . 

Pork— Sept. . . 

Oct.... 
Lard — Sept. . . 

Oct  ... 
Ribs— Sept. . . 

Oct .... 
KAN.  CITY. 
Wheat— Dec. . 
Mar. . 

Corn 

Sept . 

Dec . 

Oats 

Sept . 

Dec 


High 

Low 

Close 

2  35 

2  31 

2  32i-3 

2  371 

2  32 

2  351  b 

1  47 

1  43 

1  46*-  -1 

1  25 

1  23 

1  241  3f 

731 

71* 

72ff 

71 

69| 

70ii- 

1  84 

1  77-1 

1  83 

1  72 

1  66i 

1  70 

26  00 

25  30 

25  65  b 

26  50  a 

19  07 

18  80 

19  00  b 

19  42 

19  10 

19  37  a 

15  65 

15  55 

15  55 

16  05 

15  85 

15  90 

2  3U 

2  29 

2  29 

2  32| 

2  31 

2  31  a 

1  39i 

1  37 

1  38-1 

1  20| 

1  18-1 

1  191 

711 

701 

71-i 

694 

68* 

691  b 

Yes. 

2  361 
2  38  a 
1  46-^7 
1  27-  I 
73f-f 
7l|f 
1  821-^ 
1  714 

25  50 

26  75  a 

18  95 

19  25 
15  60 
15  95 


Hams,  skinned.  ..29}^a30 
Bellies 

Squarecut,  seedless 
according  to  avg.22  a29}.^ 

Amer.lgttomed.  17  al9%! 

S.  P.  Meats— Quote,  per  lb; 

Hams,  10-12  lb....  29^030 
Hams,  12-1 4  lb....  29^030 

Hams,  14-16  lb 29% ^30 

Hams,  18-20  lb. . . .  29%  030 

D.  S.  Meats— Quote,  per  lb: 

Ribs .  16  al6%jEx.  short  clear. .  16%al6% 


.18 

al9 

.21 

022 

.17 

017% 

.28 

029 

.34 

036 

.24 

025 

.60 

o65 

.15 

016 

33 

034 

17 

018% 

Bellies,  clear . 21%a29% 


344 

36i 


40| 

22| 


Bellies,  clear . 17  o20 

Bellies,  rib . 17  a20 

Ex.  short  c’ribs..  16%al6% 


Smoked  Meats 

Brkfst  bac’n.  Ight  35%a36% 
do  heavy....  34  a35 

Hams . 36%a37% 

Hams,  skinned..  36%a37% 


Regular  plates  . .  12%ol3 

Clear  plates . 12%al3 

Reg.  jowl  buts..  ll%oll% 
Fat  Backs 

Light  to  med....  14  ol5 


Picnics .  21%a22% 

Ex.  short  ribs...  18%“18% 
Ex.  clear  sides . .  18%al8% 
Rough  sides 17%al8% 


not 

in 


MINNEAPOLIS — Oats — Sept,  closed  at  68fc  bid, 
Dec.  664c  bid. 

WINNIPEG- 
78ic  bid. 


WOOL,  HIDES,  ROOTS,  ETC. 

Wool— Easy  at  unchanged  prices.  Missouri, 
Illinois,  Wisconsin,  southeast  Iowa,  northern  Arkan¬ 
sas  and  similar. 


-Oats — Oct.  closed  at  83ic  bid,  Dec. 


CASH  PRICES  AT  OTHER  MARKETS 


Light  fine,  long .  35 
Light  flne,short .  30 
Heavy  fine,  long.  30 
Heavy  “  short..  25 


a38 

035 

<135 

a30 


WHEAT 

Red 

No.  2 . 

Chicago 

Omaha. 

Kan.Citj 

240 

Minn. 

Spring 

250 

245 

260  a  270 
255  a  265 

No.  3 . 

245 

238 

Northern 

No.  1 . 

No.  2 . 

Hard 

No.  1 . 

244  a  248 

239  a  243 

245  n.  2.56 

No.  2 . 

243  a  245 

238  a  239  245 

No.  3 . 

243 

237  a  240  248  a  250 

No.  4 . 

236  a  237  255 

No.  5 . 

233  a  240  2:16  a  237 

CORN 

No.  2 . 

154* 

146  a  146 

j 

No.  3 . 

143  a  145 

1 

142  a  143 
139  a  141 
134  a  1.36 

No.  4 . 

No.  5 . 

Yellow 

No.  2 . 

154 

No.  3 . 

isii 

152 

143  a  145 
140  a  142 
137  a  140 

No.  4 . 

150 

No.  5 . 

150 

White 

No.  2 . 

155J 

152 

No.  3 . 

No.  4 . 

No.  5 . 

OATS 

White 

No.  2 . 

74J  a  82 
74^  a  79* 

73 

74 1  a  75| 
72|  a  74| 
B5f  a  71f 
194*-195* 

No.  3 . 

72 

No.  4 . 

72 

I 

rye  No.  2 . 1 

192 

185 

Choice  medium. .  31 

Untied . 30 

Coarse,  braid....  15 

Slight  burry . 23}^2^24 

Hard  burry .  16 

Southern  Arkansas,  Northern  and  Eastern  Texas, 
Eastern  Oklahoma  and  Southern  and  Southeastern 
States. 

Ligh  fine.. long...  35  c38 


Medium . 30 

Medium,  loose....  29 

Slight  burry . 22 

Hard  burry . 12 

Minnesota,  Central 


al5 

and 


Ligh  ‘‘  shorlt. . .  30  a35 
Heavy  finel’ng...  30  c35 
Heavy  “short.. ..  25  c30, 
Western  Iowa,  Dakotas, 


Kansas,  Nebraska,  and  similar 


Bright  medium . .  29 
Dark  medium....  23  a26 

Slight  burry .  21  a22 

Hard  burry . 12  al4 

Western  Texas,  Western 

Medium . 25  o28 

Light  fine . 27  a28 

Heavy  fine . 20  ffl25 

Short  stubby . 15  o20 

TUBWASHED. 

No.  1 .  40 

No.  2 . 30 

Mohair  or  Aiigora  Goat) 

Long  lustrous _ 22  a23 

Short .  18  a20 


Light  fine,  long. . 

Light  ”  short. 

Heavy  ”  long.. 

Heavy  ”  short. 
Oklahoma,  and  similar. 


30 

25 

25 

20 


a35 

a30 

a30 

a25 


Burry,  medium..  18 

Burry,  hard .  12 

Burry,  fine . 12 


Slight  burry .  25 

Hard  burry . 15 


fi20 

cl  4 
cl  7 


13 

Dry. 

Flint . 

25 

12 

Salted . 

22 

11 

Salted,  Pack . 

18 

10 

Culls . 

12 

7 

Culls,  Salted . 

10 

CHICAGO- Barley— Cash  $1.09  (^$1.13;  Timothy- 
Cash  $8.00  (g$ll. 00. 

TOLEDO— Clover— Cash  $20.00,  Oct.  $20.05,  Dec., 
$19.30,  March,  $20.00;  Alsike— Cash,  Oct.  and  Dec., 
$20.40  ask.  March,  $21.00  ask;  Timothy— Old,  $4.45, 
New,  $4.60.  Cash  $4.55,  Sept.,  $4.60.  Oct.,  $4.40  ask, 
Dec.,  $4.45  ask,  March,  $4.65. 

Western  Receipts  of  Wheat  from  last  Saturday 
to  yesterday  inclusive,  as  compiled  bv  the  St.  Louis 
Daily  Maeket  Repoetee: 


This  M^’k 

Last  w’k 

1919 

1918 

St.  Louis . 

1.854,000 

1,694,000 

1, 

972, 000 

3, 

306, 000 

Chicago . 

2, 150,  000 

1, 034, 000 

5, 

SOI,  000 

327, 000 

Toledo . 

247,  000 

147, 000 

508, 000 

306, 000 

Detroit . 

20, 000 

15,  000 

75,  000 

54,  000 

Kansas  City  . 

2, 128, 000 

2,  254, 000 

4, 

481)  000 

3, 

940, 000 

Milwaukee. . . 

48, 000 

51, 000 

82, 000 

78, 000 

Minneapolis. 

1,415,  000 

1,668,000 

1, 

8.S8,  000 

1, 

588,000 

Duluth . 

4.54,  000 

459, 000 

50,  000 

27, 000 

Omaha . 

1, 141, 000 

1,305,000 

1, 

170, 000 

1, 

157, 000 

Peoria . 

222, 000 

1.59,000 

158,  000 

306, 000 

Indianapolis . 

568 '000 

466, 000 

813,000 

.576,000 

Total.... 

10, 247, 000 

9,248,000 

17, 

007,  QOO 

17, 

667, 000 

Western  Receipts  of  wheat  from  July  1  to  date 


St.  Louis _ 

Chicago . 

Toledo . 

Detroit . 

Kansas  City. 
Milwaukee. . 
Minneapolis . 

Duluth . 

Omaha . 

Peoria . 

Indianapolis. 

Total.. 


1920-21. 

1919-20. 

6, 127, 000 

11,277,000 

4,459,000 

17, 261,000 

664,  000 

2,015,000 

120,  000 

221,000 

8,  .535,  000 

19, 039, 000 

305,000 

317,  000 

8, 097,000 

6,577,000 

2, 195,  000 

518,000 

3,816,000 

3,  .500,  000 

532, 000 

703,000 

1,274,000 

3,553,000 

37,122,000 

65,500,000 

1918-19. 
13,601,000 
15,392,000 
1,470, 00() 
183,000 
19, 743,000 
207, 000 
4, 868, 000 
39, 000 
4,441,000 
937,000 
6, 225, OOo 
64,lll,OOo 


Slight  burry .  15 

Hard  burry .  10 

Sandy,  bucks,  dead,  cotted,  etc.,  at  usual  discounts. 

Hides.— Dull.  Quote,  current  receipts  (less  1  lb. 
tare  per  hide  on  wet  salted): 

Wet  salted. 

No.l . 

No.  2 . 

Bull,  No.  1 . 

Bull,  No.  2 . 

Glue  stock . 

Uncured  hides  2c  less. 

No.  1  horse  hides,  mane  and  tail  on,  $6.00 — small 
and  No.  2,  $5.00 — glue  and  ponv  $3.00,  colts  75c.,  hog 
hides  50c— glue  and  pig  half  price) 

Feathers.— To  command  full  quotations,  stock 
must  be  dry  and  full  grown.  Quote,  per  lb.:  Prime 
wlrite  live  geese  88c,  prime  grey  do  68c.  Duck— white 
68c,  colored,  40c.  Chicken— prime  drv -picked  body 
6c,  green  3c— musty  not  wanted.  Chicken  and  Turkey 
body  mixed  4c.  Turkey— white  body  50c,  green  40c, 
colored  10c,  green  8c,  witigs,  tail  and  pointers, "8c. 

Boots— Quote  per  lb:  Golden  Seal,  $5.15,  Lady 
Slipper,  50c;  Seneca,  75c;  pinlc,  75c;  black,  14c;  May 
apple,  10c;  snake,  45c;  black  snake,  32c;  Angelica,  18c; 
Wahoo  bark  of  root,  35c;  bark  of  tree,  18c;  wafer  ash 
bark,  10c;  bloodroot  at  14c;  striped  blue-flag,  8c;  sassa¬ 
fras  bark  of  root,  ISc;  wild  ginger,  18c:  skull  cap  leaves, 
6c;  wild  ginseng,  $10.50@11.00;  transplanted,  $3.00(^ 
5.00;  cultivated,  $2.00@3.00;  star  root,  45c.  Foregoirig 
prices  are  for  clean,  dry  roots  free  of  foreign  material. 

Sheep  Pelts— Quote,  each:  Wool  pelts  $1.25.  Dry 
stock  20c  per  lb  for  light  and  15c  for  heavy.  Shear¬ 
lings  10c  to  200. 

CJoat  Skins— Quote  No.  1  common  at  60c,  No.  1 
angora  at  50(®60c,  clipped  angora  at  30c,  kids  and  glue 
at  10(@15c. 

Beeswax— Quote  prime  at  32c  per  lb.— impure  and 
inferior  less. 

Tallow— Quote  country  No.  1  in  brls  and  tubs  at 
10c  per  lb  No.  2  at  7QiSc. 


Movement  of  Grain 
(24  hours)  WHEAT. 

Rec. 

232 
465 
254 
247 
11 


(000  omitted) 


St.  Louis . 

Chicago . 

Minneapolis . . . 
Kansas  City.. . 
Milwaukee. . . . 

Duluth . 

Omaha . 

Toledo . 

Peoria . 

Indianapolis. .. 

Detroit . 

Baltimore . 

Philadelphia. . 

Boston . 

New  Orleans. . 
New  York . 


11 

77 

21 

46 

101 

1 

152 

209 


436 

266 


.T. 

CO] 

RN. 

OATS. 

Flour 

Ship. 

Rec. 

Sliii). 

Rec.lSliip. 

Shin. 

353 

14 

20 

70i  4 

16 

114 

148 

113 

270:  141 

21 

81 

10 

13 

7;  4 

52 

143 

8 

3 

12  5 

51 

19 

no 

36,  117 

38 

79 

43 

34 

34'  42 

1 

3 

2  2 

3.' 

66 

7 

65  3 1 

4 

7-1 

18 

33 

118  78 

1 

3 . 

246 

22 

9 . 

387 

4 

14 . 

3 . 

8 

i 

296 

5 

28 . 

Rubber,  Rags,  etc.— Country  rags  $2.50  per  100  lbs- 
old  rope— manila  $5.00,  common  $2.00.  Rubber— No  i 
boots  and  shoes  5c,  No.  2,  4c,  No.  3,  3c;  auto  tires  2c; 
inner  tubes  at  6c. 

Scrap  Iron  and  Metals— Quote  per  100  lbs:  Light 
brass,  $8.00;  heavy  red  brass,  $14.00;  light  copper 
$12,00;  heavy  yellow  brass,  $10.00;  heavy  copper  and 
copper  wire,  $14.00;  zinc,  $4.50;  lead,  $6.50;  pewter 
$25i00;  tinfoil,  $38.00;  tea  lead,  $3.00;  aluminum  20c’ 
scrap  iron  in  car  lots,  $14. OOfe  15.00  per  ton.  ’  ’ 

lifeather— Clear;  ther.  at  noon  88.  ^ 

Local  Forecast  Thundershowers  this  afternoon  or 
tonight— Sunday  fair— not  much  change  in  tempera- 
turp.  ^ 


Stocks  of  Grain  in  St.  Louis. 


PROVISIONS. 

Green  Hams  weak;  Lard  and  D.  S.  Ribs  about  stead  y 
Demand  dull. 

Lard — Quote,  per  lb.  in  new  tierces: 

Prime  steam...  18. 65al8. 70  |  Kettle-rendered  I8%al8% 


To-day _ 

Ye:}terday. 


f  rincipal  Grades 

Noj  1  Red  Wheat . 

No  2  Red  Wheat . 

Nojl  Hard  Winter... 
No]  2  Hard  Winter. . . 

No]  2  Corn . 

Noj  2  White . 

No  2  Yellow . 

Noj  2  Oats . 

Noj  2  White . 

Noj  3  White . 

No  2  Rye . 

Kato . 


Wheat 

Corn 

Oats 

Rye 

185, 096 

340, 

169 

56, 563 

10, 683 

184, 298 

356, 

106 

56,  614 

10,294 

2,792,296 

87, 

102 

119,818 

65,  578 

To-dav 

Yesterday 

45, 983 

44, 983 

86, 863 

66,  785 

18, 722 

3,000  , 

16, 170 

12, 000 

15, 762 

15, 762 

33, 198 

43,  400 

38, 760 

35, 017 

18, 583 

19, 523 

1,960 

1,960 

19, 086 

20, 196 

3, 545 

3, 555 

49, 122 

52, 687 

Barley 
8,  522 
8,  252 
4, 627 

Last  year 
287, 169 
2, 090, 641 
19, 019 
91, 139 
60, 070 
3,  614 
5,381 
2, 620 
17, 680 
66, 640 
33, 081 


9964°— (To  follow  page  326.)  No.  2 


APPENDIX  TABLES. 


APPENDIX  TABLES 


327 


I  For  States  included  in  these  divisions,  see  Ch.  II,  sec. 


Table  2. — Distribution  of  elevators  and  warehouses  by  types  in  specified  States  and  grand  divisions. 

Line  houses.  I  Individual  houses. 


328 


COUNTRY  GRAIN  MARKETING. 


1  For  States  included  in  these  divisions,  see  Ch.  II,  sec. 


APPENDIX  TABLES 


329 


1  For  States  included  in  these  divisions,  see  Ch.  II,  sec. 


330 


COUNTRY  GRAIN  MARKETING. 


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1  For  States  included  in  these  divisions,  see  Ch.  II,  sec. 


Table  5. — Construction  materials  of  elevators  and  warehouses  in  specified  States  and  grand  divisions. 


APPENDIX  TABLES. 


331 


All  other. 

Per 

cent 

of 

total. 

o  fi  r-ie<ie4eoeo  eococi 

<o 

05 

5,86 

4.29 

8.67 

26.09 

6.63 

rH 

.4 

Num¬ 

ber. 

i-«COC^CO'^<OC^FHUDOOfcCOOOOi-lOt-<Tt< 

88 

TP  COCO 

05 

117 

Wood  and 
other 
material. 

Per 

cent 

of 

total. 

05  00  O  ^  ^  ^  ^ 

OTjiCOf-iiOi-Hi— iOcOCO*^iO 

O  CS  CO  »-H  f-4  Tfl  (N  o 

00  OJ  05  cs 

05  O  40 

1H  c4  CO  cs 

1.70 

*  1 

rH  •  • 

CC  l>-  •  • 

•  %  *  * 

•  t 

1  * 

•  • 

05 

CO 

1.65 

Num¬ 

ber. 

^ 

O  40  O  CO 

156 

•  t 

C^rH  •  • 

■  • 

•  • 

•  • 

«  « 

•  • 

■ 

CO 

169 

Wood  and 
stone. 

Per 

cent 

of 

total. 

•  I  *  • 

•  OOOt-h  'CO  *  'OOCOC^O 

’CO  •  •  Tji  00  00  TP 

•  *  *  * 

•  •  *  • 

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.  csi  . 

•  ( 

«  • 

.30 

•  ■  (  1 

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•  «  *  * 

«  •  «  • 

•  ill 

•  «  I  * 

1 

• 

1 

1 

• 

« 

• 

05 

(N 

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ber. 

•  lO^OC^  'C^  •  •C^C0C^»-H 

•  1  •  1 

•  «  ■  • 

•  «  1  « 

•  »  •  t 

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rH  *40  • 

«  • 

■  • 

«  • 

•  • 

•  • 

28 

•  (  •  • 

t  •  •  • 

•  «  •  • 

•  t  t  1 

•  ■  •  I 

till 

■  •  •  * 

• 

• 

• 

1 

• 

28 

W  ood  and 
concrete, 

Per 

cent 

of 

total. 

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C^t:^tOfQO'i*0000>OOT}<.rt(OOt-ir-iCiOO 
Or-Hr-I  'tNcir-I  ’ci  "cii-I 

1.48 

.42 

3. 57 

1.37 

1.47 

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ber. 

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T— t  rH  1-H 

136 

rH  40  •  • 

•  • 

1  ( 

•  t 

f  i 

CO 

142 

Wood  and 
bricks. 

Per 

cent 

of 

total. 

t-OCDO  •  '  •  *0^051— • 

0»— It'-I-H  •  •  •  ‘rpT— ♦OOOOO  'lOOcO 

•  •  1  •  ^  ^  ^ 

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^  •  •  • 

•  *  •  * 

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1  •  t 

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(M 

.45 

1 

! 

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ber. 

1-HCSOOr-H  •  •  •  •CD'^C^TpCO 

•  •  t  •  • 

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«  •  •  «  • 

•  •  •  ■  t 

<  «  1  •  1 

42 

•  •  « 
rH  •  •  i 

•  II 

III 

III 

III 

•  It 

rH 

CO 

Wood  and 
metal. 

Per 

cent 

of 

total. 

or>'^cD05eoi-HC^oocot^ocOi-<oco 

TpTpCNiOt^COCOCOOOiOC5COCOiOTpfHO 

Tj'’coTP'^’'^coid(Ni-ieoobooTjioci-4t^o> 
(N  t—l  CO  1-H  (N  CO  i-H  (N  t-i  1-H  CO 

15.74 

CO  05  Tp  05 
O  1-H  CC 

40  05  00 

rH  rH  pH 

16.25 

15. 76 

Num¬ 

ber. 

C^Q'^COt^'^OOT-HC^CDrHCOT-HOC^O 

COOOiOTjirHOOOCOOOTticOCOCOOT-iCO 

1— 1  1— < 

1,448 

CO  CO 

CO 

1,519 

Steel. 

Per 

cent 

of 

total. 

(N  00  •  CO  05  »-H  o  00  T-t 

1-HCOTji  'i-Hi—ii— 

O  •  1-^  t-H  r— t  lO 

( 

4. 19 
.60 
4.03 

4.18 

.71 

2. 52. 

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ber. 

•  1-1  !>■  O  1-H  1-1 

•  1-H  ^ 

« 

• 

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t 

• 

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I  t 

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•  • 

1  • 

rH 

tH 

(M 

00 

Concrete. 

Per 

cent 

of 

total. 

i-iC^COi— l005iOT-*OOOiOC5l>Ot^OCO 
C<ICO^(N»0(MOO(MTtikOOt^t^':OTp<M(M 

o  r-t  1-H  f-H  O  rH  CO 

rH 

1. 06 

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2.86 

.46 

1.04  1 

1  1 

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ber. 

cO'«c<ccc^'^TjKiOi-Hcoc^'^OTrii-Hoc^'^ 

rH  tH 

98 

■  1 

•  iH  rH  I 

1  • 

1  • 

•  * 

•  • 

•  1 

100 

o 

o 

Per 

cent 

of 

total. 

<0<Mt^GCTpl>.OOI>OI>*t^iOt^cDiO(M 
t^OOCOi— 'iOCOi-H(MCOOOCOt^»OTpTpOT^ 

•cdQcO'^*ooc50cocococ4 

050CO0500iO0Ct^i0Ot^’^t>*cCTr't^i0 

77.53 

<M  <M  CO 

TP 

CO  O  rH  40 
l>,|>l^cO 

71, 85 

77.  28 

Num¬ 

ber. 

t^THCCOiOiOiHOOTfCSi-Ht^COCOCOC^iO 
COi— '005Tj^Tfl>^C^(Ml>*Ot^OOOC<IO 
COi— 't^OOCDCOTPCOC^C^’^THTHi— <  rH 

^  1-H 

CO 

CO 

rH 

40  05  40  to 

1  05  cs  iH 

rH 

314 

7,447 

Total  re¬ 
ported. 

i-il>.CCiOi-HC^COiOC^COCOiCOt^THt^-^ 
i-HCOT*H'rpO5f-H00t^rHTj<Tfi— ie<lCD050C^ 
tPC^005I>-0»0'«C<*^COC^C^C<tHi-Hi-Hi-« 

*s 

^  rH  tH 

9,200 

05  o  40  CO 
CO  '•c-  CO  (N 

C<l  1H 

437 

9,637 

State  or  division.^ 

ELEVATOKS. 

North  Dakota . 

Miimesota . 

Illinois . 

South  Dakota . 

Iowa . 

Kansas . 

Nebraska . 

Montana . 

Indiana . 

Ohio . 

Michigan . 

Missouri . 

Wiscnnsin.. 

Oklahoma . 

Mountain  and  Pacific  di\L'ion  . . . 

Middle  Atlantic  division . 

Southern  division . 

Total . 

WAREHOUSES. 

Mountain  and  Pacific  division  . . . 

Central  division . 

Southern  division . 

Middle  Atlantic  division . 

Total . 

Grand  total . 

d 

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APPENDIX  TABLES 


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CO  00  IM  (N  <N  < 
rH  00  CO  03  00  < 


I  CO  >0  IN  >0  40  03 
J  >0  CO  t-l  6-  CO  •4*4 


C0'4t|^O3'4*46''^44c0C0i-4i-H4-l 


00  03NC00000400400^;^ 
f^N03ON40t^C0C0i003(N 
00000>OCOCOCOCOC0003tx. 

Co'<N'io'ccrotco'crcoiN03>— 1^ 

4Hi-H40400t— !•— 40 
C30COCOO'^COCNC3*t— 44— 4t— 4 


4OO3x-4C0COC0<NN4OCO4O'^ 

(NOOi-HCO-^N-cJICOCOCJSNi-H 

t^c4cO!No6>06'*040CO'^''*4 

N  r— 4  rH 


OiHCOCDININrHINcOCDOOiO 
rHCOOOrH-*40003000000 
CO>OOCONCO'^r-403t—  OO 

S*‘cf  or4o'(^^4'oo'4-rb4^03H4CO 
NcOCOO(N(N>Or’CONQO 
C0C0C0C0C<Ii3300O'^4*4C^3c0'# 

orGrt>^c£ri-rc£ro3  o-  4o  40  40 

CO  ^  ^ 


o 

tr:> 

CO 

(N 

(M 


00' 

o 

00 


o 

o 


(N 

10 

lO 

crT 

kO 

CO 


C0t^*^^i-HC0l0O05t^ 

^C^ur:)t^GCi-Hc^c-.t^ooTii 

rC  ^''r-^C^TocT^^to'^t^C^o’ 
co-^CD^Mr-tcOiOCOiOt^Oi 

^COCCt-’^OCOOCO^i-H 

^  ioco<D<^cS'a^oo<o^co 


o 

o  o 

10  o 


s? 


PQ 


CO 


CSiiOt^COOTHC^OiCO'^OO 

C0050C^lC^t^OCO»-<»H'^CO 


00  1 


<0>O00tH.C0C040i0 


COOC<IOCOiOC^t>.C^OOO 

t^OOkO(M<NOO'^'^COl>iOCN^ 

u5oO'^CO<NcDC51>^tj5oqO 


oco 

b*» 

00  O 
oTt^ 
t>»  C5 


Wk.  -V  ^  .  H  -  ,  ^  CO  .-  4  ^ 

OstH-iOOOOtOOO'^iOiO 
COCOC^COOC^I— 

'i-Tc^irTi^co'QO^io'^^ 

'^a50t^»oo5oooc^co 

CD05iCOC^OiO»OCDC^ 


<^i>'t>-rTtru:rio'orT-^oo  lO  tH.  i>- 


o 

o 


10 

00 


C0C0l330003l03THrHC0'ct44CO 

40CO-ci4-4*4cOCOCOCOlCt>ODCO 

COCO-4*4'444040l>CO-^C>icO(N 

^  ^  fH 


oocvic^cotH*copr^cooiMO 

t^oo5i-»i>»to^<Mi>«ooa5io 

COCOiOiOOO^COOCOCQ’— itH. 

1— I  i-Ti-h  00  tn^oTp  lo  CQ  o  lo  CO 

C^iO'^(NvClr^OiOpT-HpT^ 

OOOOOOcOOcDCOCiGiOO 

1—4  CS  i-H  1-H 


o 

o 


00 

o' 

(M 

T}H 


C5C^COCO'^CDI'^»^OCO’^00 

lOcOcOi-HOitOOOC^cOOicOOi 

o6iOC^i-HOI>^C5iOiOCOt!4CO 


|,Hi-Ht^iOt^'^COOCO 


,52  00  05  06  10  ^*4  N  CO  N  10  M 


S5 


rSiOO 

ao  CO 
5$  ^ 


92  ?2 ^  92  ^ 


X.X.  ,-rr4,~^00 

COO5tO(Ni-H00C^O5CO 
C^IOOICOCOCOOOOC^I 

'\ooo  CO  r-Ti-TocTi-^oo  c> co  ^ 

CO  CO  CO  C<1  CO  Cs|  cq  i-(  ^1-H 


00 
r^ 

»* 

05  wo 
O  CO 


O'^OOlOCOOCOOOrHtH-t^iO 
l>-tN-t^COW3'^i— tt-iCOOCOO 
<oo50oooo0505i>tH.r^ 

c^c4'co''ccrc^c^c^c<r  c^*' c^Tc^'csT 

\ 


wo 


’^OOtH.OOOOC^i-fCOCOC^THCO 

*^00Q(NG0OrHC0CSw:nO05 

OC^Ot>-COW005T-*COcOW500 

C^C^<OC^COOOC^'rf'T^OO^C^ 
W^t^Ot^C5p  00  05  00C^C^*«^^ 
C^Oc0l>00O'^W005{MOC0 


wo  Ht«  < 
coco* 


>w^*^,-hOC0(Nc005C0 

>4^4^CO'^C<I<NtHtHi-H 


1-4C005WOOOOOO^COGOCOCO 
©5  P  op  Ol  CO  05  g  ^  CO  P 


00  CO  wo  CO  CO  < 


I  O  05  CO 


I 

CO 

tH 

05 


CO 


05 


CO, 


CO’ 


-Mi 


r-J3  :h4 

2433  414  54 

y-i  ^  S  ^  ^  • 

s-g  gfe  P'S  ^-4032 

4?ISsi« 


o 

o 


CO 

wo 

•s 

o 


wo 

6 

o 

lA 


,0 

o 

o 

© 

w 

fl 

o 


d 

.a 

CO 

© 

c5 

-4-» 

Tt< 

tH 

,§ 


CO 

05 


03 

d 

o 


00 

CO 

CO 


CO 


t-l  ^  3 

o3  d  ^ 
^  M  p*^  • 


05 

•4-5 

o 

Eh 


CO 


. 


05 


'f- 

3  S  s  fe 


■g  p  o  ® 


,  ,Oi  . 

t-H  hs. 

^  >»05  ^  3 

J-*  ^  d!  05 

d-^^x-r  X  r 

■  -  HbS 


03 

s 


lll^ 


Table  9. — Rate  of  capacity  turnover  of  elevators  in  specified  States  handling  specified  grains  exclusively  and  in  combination. 


340 


COUNTRY  GRAIN  MARKETING. 


State  and  average  rate  of  capacity  turnover. 

m 

North  Dakota. 

Rate. 

4.00 

4.00 

00  Ci  Oi 

CD  iO 

ciwcq 

2.54 

I  .  .oo 

•  *10  CO 

1  I  eco  CO 

3. 45 

2.57 

Eleva¬ 

tors  re¬ 
porting. 

iO 

kO 

»HOQ 

1-H  COO> 

1-^  \o 

740 

oe 

i 

1 

766 

Montana. 

Rate. 

2.88 

2.88 

coooo 

COt^fcO 

COMW 

2.84 

1  :  !  lo 

1 

2. 50 

2.85 

Eleva¬ 
tors  re¬ 
porting. 

o 

to 

o 

o 

co^o 

co*^  CO 

117 

I  i  •  * 

178 

Michigan. 

Rate. 

5.60 

6.00 

6.00 

5.78 

• 

• 

2. 71 

3.17 

2.69 

2. 94 

oco  ot^ 

^  CO  00 

00  CO 

98 ‘i 

3.60 

Eleva¬ 
tors  re¬ 
porting. 

to 

a 

c5 

00 

a> 

1  ^  CO  CO  05 

co^ 

05 

»D 

166 

Wisconsin. 

Rate. 

• 

• 

• 

• 

• 

• 

• 

t 

OIO  CO 
lO  CO 

rH  C*^ 

2.15 

CO 

OOC^I 

■rj5  CO  CO 

3.61 

or^ooo 

XD  f-I  kO  CO 

OiiDCO*^ 

4.43 

3.67 

Eleva¬ 
tors  re¬ 
porting. 

• 

1 

• 

• 

• 

• 

• 

f 

lO  CO  CO 
1-HC^  ID 

05 

CO  CO 

CO 

153 

Missouri. 

Rate. 

4.00 

4.50 

6.50 

00 

o 

2.90 

1.50 

2. 77 

1-H005  • 

COO)  CD  • 

•  •  •  • 
^  T}4  • 

4.67 

4.35 

Eleva¬ 
tors  re¬ 
porting. 

^  f-H  1-H 

CO 

CO 

CO 

OiH 

^  CD  • 
CO  • 

00 

131 

Ohio. 

Rate. 

'  2.89 

1.50 

2.83 

3.97 
3. 50 

3.84 

1 

7.32 

4.45 

5.49 

6.22 

5. 28 

4.87 

Eleva¬ 
tors  re¬ 
porting. 

CO 

cs 

COCO 

^4 

CS| 

1H  CO  o 
i-Hr»  CD 

171 

1  ^ 

1 

Illinois. 

Rate. 

CDOO 

4.13 

01 ‘i 

OS* 

3.50 

1  cO  ^ 

XD  ID  ifO 

5.77 

5.67 

Eleva¬ 
tors  re¬ 
porting. 

^ 

CO 

C005  O 

05  ID 

486 

516 

Oklahoma. 

Rate. 

6.50 

3.50 

6. 26 

6.67 

3.50 

6. 21 

05  CO  o 
1-t  CO  o 

^  ^  c<i 

1 

5.30 

5. 72 

Elevar 
tors  re¬ 
porting. 

35 

3 

00 

CO 

58 

103 

Total. 

Rate. 

•^eO'^e<ie<i 

3.92 

3.46 
2. 74 
2.64 

2.76 

5.78 
5.20 
5. 18 
5. 54 

5. 34 

3.94 

Eleva¬ 
tors  re¬ 
porting. 

CgiCkOOO 

tH 

212 

120 

271 

704 

1,095 

eocs  co*^ 

^  Is.  ID  »D 
I-H  CO 

922 

2,229 

Grains. 

Elevators  handling  1  grain 
exclusively  (by  grains): 
Wheat . 

P.r\m 

3 « 

1  g 
> 
)PC 

> 

4 

“»C 

Total . 

Elevators  handling  2,  3, 
and  4  grains  (excluding 
com): 

2  grains . 

3  grains . 

4  oTatnn  ^ 

Total . 

Elevators  handling  com 
and  1,  2,  3  and  4  other 
grahis: 

Com  and  1  other  grain. 
Com  and  2  other  grains 
Com  and  3  other  grains 
Com  and  4  other  grains 

Total . 

Grand  total . 

Table  10. — Capacity  turnover  J)y  capacity  of  house  in  seven  specified  States. 


APPENDIX  TABLES, 


341 


Table  11. — Number  and  'proportion  of  cars  of  different  kinds  of  grain  sold  on  consignment  and  direct  in  specified  States  and  grand  divisions  ^  for  the  five 

crop  years  July  1,  1912,  to  June  30,  1917. 


342 


COUNTRY  GRAIN  MARKETING. 


Rye.  Wheat.  .  Barley. 


APPENDIX  TABLES. 


343 


0> 

ui 


6 

<» 

® 

03 


T3 

« 

X> 

S3 


§ 


03 

® 


03 

+3> 

03 


S-i 

O 


f 


M- ,  ^ 


Table  12. — Proportion  of  different  types  of  elevators  handling  specified  side  lines  in  14  principal  grain-producing  States  of  the  Central  Westd 


344 


COUNTRY  GRAIN  MARKETING. 


Per  cent  of  elevators  handling  side  lines  which  handle — 

Other. 

f-H  Ci  CO 

CC  tH  CD 

C4  rH  CD  CO 
r-<  CO  T-H 

12.83 

71.18 

42. 61 

50.00 

100.00 

53.63 

37.90 

i 

e9 

o 

PQ 

o8  I  § 

rH  •  fH 

t 

• 

• 

69  T 

OOt^  1-H 

O  COd 

’  tA 

1.44 

1.54 

Mer¬ 

chan¬ 

dise. 

0. 41 

7.46 

.84 

.70 

^  ^ 

tH  ^  ^ 

CO 

2. 14 

Coun- 

prod¬ 

uce. 

1.47 

2.99 

1.27 

UO 

t^oco 

cicoi-H 

2.83 

2.23 

Ferti¬ 

lizers. 

lO  05  CO 

CO  05  05 

1.50 

tfO  CO 

C4 

3.74 

00 

00 

Live 

stock. 

4.30 

8.96 

1 

3.71 

7.00 

7. 47 

3.23 

6. 99 

6.72 

For¬ 

age. 

05  00 

1— 1  05 

CO  (N 

3.34 

3.62 

9.73 

12.90 

7.72 

6.03 

Farm 

imple¬ 

ments 

and 

tools. 

1.94 
14. 93 
.28 

2.07 

11.51 

8.89 

2.42 

9.37 

6.56 

Fenc¬ 
ing  ma¬ 
terial. 

2.06 
10. 45 
.28 

2.02 

17.79 

5.37 

.40 

9.55 

6.65 

1 

Seeds. 

12.01 

22.39 

4.76 

11.09 

14. 17 
19. 36 
12. 10 

16.92 

14. 67 

Build¬ 
ing  ma¬ 
terial. 

CO  O  CO 

05  CO  CO 

O  O  CO  CO 
CS  CO 

17.53 

17. 55 
22.67 
6.45 

19.  60 

o 

00 

00 

t™4 

Flour. 

C0  05l>»t^ 

eo  CO 

(N  CO 

(N  rH 

33.79 

41.87 
24. 04 
37. 90 

31. 57 

32.43 

Feeds. 

32.86 
55. 22 
83.75 
83. 33 

42. 25 

55. 39 
46. 29 
65.32 

51.00 

47.63 

Coal. 

iCcOt^ 
kOOl  CO 

CO  O  co 
00  00  lO 

78.16 

82.69 

63.39 

30.24 

100.00 

68.04 

71.94 

Per 
cent  of 
eleva¬ 
tors 
han¬ 
dling 
side 
lines. 

CO  00  05  0 
CO  o 

05  rH  fH  lO 

CO  05 

70.07 

COT-tOC< 

O5  00l^C^ 

J 

> 

t 

86.18 

79. 16 

Num¬ 
ber  ele¬ 
vators 
han¬ 
dling 
side 
lines. 

ooi>r^co 

05  CO  wo 

CO  CO 

2,128 

1,242 

1,901 

248 

1 

3,392 

5,520 

k 

IN  um¬ 
ber  ele¬ 
vators 
report¬ 
ing. 

j 

^  cooo-^ 

3,037 

1,357 

2,244 

332 

3 

3,936 

6,973 

Classification. 

Commercial . . . 

Cooperative . . 

Mill . 

Maltster . 

Total  line . 

Cooperative . 

Independent . 

Mill . 

Maltster . 

Total  individual . . . 

Grand  total . 

^  For  States  included,  see  Cli.  U,  sec.  5. 


Table  13. — Proportion  of  elevators  handling  specified  side  lines  in  the  U  principal  grain-producing  States  of  the  Central  West. 


346 


COUNTRY  GRAIN  MARKETING 


r 


Table  14. — Proportion  of  elevators  in  specified  States  reporting  the  use  of 

specified  classes  of  price  information. 


.11 


state. 

Number 
of  eleva¬ 
tors  re¬ 
porting. 

Daily  price  cards. 

Market  telephone  and  private 
wire  system. 

State. 

Percent¬ 
age  of  ele¬ 
vators 
using. 

State. 

Percent¬ 
age  of  ele¬ 
vators 
using. 

1,349 

North  Dakota . 

96. 16 

North  Dakota . 

74. 22  :|l| 

A1 1 T1 71 A  Qnt.ft  .  ... 

1,111 

Montana . 

95.01 

Illinois . 

59. 08  M 

TllinniQ  .  .  . 

997 

Minnesota . 

84. 16 

Iowa . 

53.53 

809 

Rnnth  Dakota . 

77.01 

Minnesota . 

51.94  9 

.  .  . 

736 

Iowa . 

54.08 

South  Dakota . 

47. 10  ■ 

'K'anQft.Q 

586 

Illinois . 

51.96 

Nebraska . . 

34.02  X 

582 

Indiana*. . 

49.23 

Kansas . 

32.08  X 

ATnnf.QTift.  .  . 

401 

Ohio . 

48.48 

Michigan . 

31.73  X 

392 

Michigan . 

42.31 

Wisconsin . 

31.37,  ■ 

328 

Missouri . . 

40.64 

Ohio . 

28.96  S 

208 

■Wi.seonsin . 

'39. 71 

Indiana . 

26.53  4 

187 

Nebraska . 

34.71 

Oklahoma . 

24.03  X 

204 

Kansas . 

33.28 

Missouri . 

22.99'X 

154 

Oklahoma _ _ 

20. 78 

Montana . 

17. 96  X 

Total . 

7,944 

Average  14  States . 

63.97 

Average  14  States . 

47.02  X 

Price  currents. 

“ On-track”  bids. 

C.  N.  D. 

State. 

Percent¬ 
age  of ele¬ 
vators 
using. 

State. 

Percent¬ 
age  of ele¬ 
vators 
using. 

State. 

Percent¬ 
age  of  ele-. 
vators 
using. 

68. 45 
61.27 
55. 71 
50.05 
50,00 
46.56 
39.29 
35.67 
26.55 
26.44 

24. 97 
20.13 

10.97 
2.74 

Indiana . 

54.85 
53.96 
53.06 
51.90 
41.98 
35. 06 
31.25 
27.15 
21.93 
18.42 
11.07 
10.78 
3.60 
3.49 

Kansas . 

37.71 

36.36 

24.97 

23.67 

19.54 
19.43 
19. 21 
19.20 
17.28 
16. 58 
16.58 
16.49 

11.54 
7.84 

Ohio . 

Oklahoma . 

Illinois . 

South  Dakota . 

Iowa . 

Illinois . 

Kansas . 

North  Dakota . 

Oklahoma . 

Iowa . 

Michigan.. . 

Ohio . 

Nebraska . 

Montana . 

Missouri . 

Minnesota . 

South  Dakota . 

Indiana . 

•MiTiriP.snt,a . . 

Missouri . 

OOU  vli  X/cllAUbw  •••••••••-- 

Wisconsin . 

Nebraska . 

North  Dakota . 

North  Dakota . 

Montana . 

Michigan . 

Wisconsin . 

Average  14  States . 

Average  14  States . 

Average  14  States . 

34.34 

27.95 

20.97 

Bids  “to-arrive.” 

Main  office. 

Other  sources. 

State. 

Percent¬ 
age  of 
elevators 
using. 

State. 

Percent¬ 
age  of 
elevators 
using. 

State. 

Percent¬ 
age  of 
elevators 
using. 

38.45 

37.71 

25.77 

25.77 

23.21 

18.60 

17.80 

11.79 

11.06 

10.29 

10.16 

9.09 

8.09 

7.98 

Oklahoma . . 

38.96 

36.25 

18.14 

14.90 

12.80 

11.99 

11.72 

10.03 

9.78 

6.75 

6.55 

5.35 

3.92 

2.74 

Michigan . 

30.29 
28.88 
27.74 
23.38 
22.19 
19.04 
18. 15 
17.26 
15.81 
14.71 
12.22 
9.45 
9.09 
5.20 

Nebraska  _ ...... 

Missouri . 

WlsnoTisin 

Ohio . 

Miohigan . . . 

Kansas . 

Kansas . . . 

Indiana . 

Indiana . 

South  Dakota . 

Montana  _ 

Illinois . 

Illinois _ _ _ 

Iowa . 

Iowa _ ... 

Nebraska . 

Minnesota . 

Wisconsin. . 

South  Dakota. ........ 

Montana . 

Missouri 

Minnesota . 

North  Dakota . 

Montana . 

North  Dakota . 

Ohio . 

Oklahoma . 

North  Dakota . 

Average  14  States . 

20. 10 

Average  14  States . 

11.03 

Average  14  States . 

15.72 

Table  15. _ Percentage  of  specified  types  of  elevators  in  14  principal  grain-producing  States^  reporting  use  of  specified  kinds  of  price 

information  service. 


APPENDIX  TABLES 


347 


/ 


^  For  States  included,  see  Appendix  Table  14. 


18. — Average  monthly  per  bushel  margins  on  No.  S  oats  in  specified  years. 


349 


APPENDIX  XABLES. 


n 


1912-1916 

Average 

net 

margins. 

»-ico<0'^«oc<iTf<-^05ioooc<i 

S8gg§gg888§S 

SI 

Number 
of  quota¬ 
tions. 

CCOOCOOd^OOO  c^oo 
^  CO  fH  cs  ^ 

1912-1917 

Average 

net 

margins. 

$0.0356 

.0335 

.0316 

.0321 

.0326 

.0306 

.0353 

.0344 

.0407 

.0346 

.0465 

.0318 

Number 
of  quota¬ 
tions. 

OiOi?00>»C»C<DCOC^COt^OO 

^t^<0<DOOt^C^OO>T-4COOO 

^  i-H  1-H 

1916-17 

Average 

net 

margins. 

o o o  1-1 1-1  ic  !t^oot^i-H 
cocooot^oo 

CO  CO  ^  CO 

OOOOOOO  lOOOO 

o 

« 

• 

Number 
of  quota¬ 
tions. 

CO  t- 05  CO  CO  00  40 
i-<  tH  CO  05  CS|  CO  iC^  fH 

^  • 

• 

• 

• 

t 

• 

• 

1915-16 

Average 

net 

margins. 

iHkOt'i-IOOCO.-lt^cOOi-liO 

r-t^U50>iO'«J''«rt-05»OCOfO 

^Tt<c^c<)eocoe5(Nco<Ne«5c*5 

oooooooooooo 

o 

Number 
of  quota¬ 
tions. 

«ooocotH?«ii-Ht^ooi^t^cor^ 

O  1-H 
^  ^ 

1914-15 

Average 

net 

margins. 

•^’^t^05Tj<0^<:0 

T-lTPiO'^O5iO00i-H 

lO^TPCOC^COCO'S' 

oooooooo 

o 

m 

40  iH 

Tf  CO 

CO 

oo 

Number 
of  quota¬ 
tions. 

iCcDCO00COt^O5r^ 

1-I050CO<D^^CO 

t-<o 

1913-14 

Average 

net 

margins. 

r^i-«coi-Hi^oo^co 
^005t^C^^Tt’CO 
C<ICOC^COCOCOCOCO 
o  o  o  o  o  o  o  o 

o 

.0440 

.0361 

Number 
of  quota¬ 
tions. 

1 

1 

C500QrfiQi-ft^O 

CO'^OCO‘Oi-4i-Hi-( 

05  00 

O 

1912-13 

Average 

net 

margins. 

•  • 

•  05  i-«  05  40 

•  •  1-H  05  CO  CO  CO 

•  •  CO  CQ  CO  CO  CO 

•  lOOOOOO 

•  lO 

• 

•  • 

•  1 

:8 

:8 

« 

t 

1 

• 

Number 
of  quota¬ 
tions. 

•  1  05  CO  CO  05 

•  •  fH  *H  fH 

•  • 

•  • 

•  f 

•  • 

1  • 

t  « 

•  t 

« 

•  rH 

t 

• 

• 

• 

• 

• 

• 

Month. 

i 

August . 

September . 

October . 

November . 

December . 

January . 

February . 

March . 

Anril . . 

May . 

June . 

1  For  States  included  in  the  grand  divisions,  see  Ch.  II,  sec. 


REPORT 


OF  THE 

FEDERAL  TRADE  COMMISSION 

ON 


VOL..  II 

TERMINAL  GRAIN  MARKETS  AND  EXCHANGES 


September  15,  1920 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICE 


cV' 


c 


■ 


FEDERAL  TRADE  COMMISSION. 

Victor  Murdock,  Chairman. 
Huston  Thompson. 

William  B.  Colver. 

Nelson  B.  Gaseill. 

John  Garland  Pollard, 

J.  P.  Yoder,  Secretary. 


ADDITIONAL  COPIES 

OF  THIS  rUBLieAHON  MAY  BE  PROCURED  FROM 
THE  SUPERINTENDENT  OF  DOCUMENTS 
GOVERNMENT  PRINTING  OFFICE 
•WASHINGTON,  D.  C 
AT 

25  CENTS  PER  COPY 


r 


CONTENTS, 


Page. 

Acknowledgment .  14 

Letter  of  submittal . ' .  4,5 

Chapter  I.  Comparative  Size  and  Importance  of  the  Markets. 

Section  1.  Factors  determining  size. . . . .  ] 7 

Futures  markets . J .  17 

Cash  markets .  17 

Section  2.  Volume  of  cash  trading .  I7. 

Section  3.  Receipts .  18 

Wheat  receipts . 10 

Corn  receipts . . .  20 

Oats  receipts .  21 

Barley  receipts .  21 

Rye  receipts .  22 

Comparative  importance  of  secondary  markets .  23 

Receipts  of  all  five  grains .  23 

Section  4.  Local  consumption . : . . .  24 

Introductor}" .  24 

,  Wheat  consumption . . .  24 

Corn  consumption . 25 

Oats  consumption .  25 

Barley  consumption .  26 

Rye  consumption .  26 

Consumption  of  all  five  gmins .  27 

Sections.  Elevator  capacity . 27 

Chapter  II.  Controlling  Factors  in  the  Development  of  Terminal 

Markets. 

Section  1.  General  survey .  29 

*  Section  2.  Location  of  grain  markets  with  reference  to  the  production  areas _  29 

Primary  markets  and  wheat  production .  29 

'  , Primary  markets  and  corn  production .  32 

“■  .  Primary  markets  and  oats  production .  33 

Primary  markets  and  barley  production .  34 

Primary  markets  and  rye  production .  36* 

Primary  markets  with  reference  to  total  grain  production .  37 

Section  3.  Influence  of  production  upon  the  development  of  markets .  37 

Section  4.  Distribution  of  country  shipments . ^ . .  40 

Sections.  Freight  rates  as  related  to  the  development  of  grain  markets .  42 

Local  rates .  42 

Through  rates .  42 

Proportional  rates .  43 

,  Omaha .  46 

Buffalo . 47 

Kansas  City .  48 

Export  differentials  and  export  rates .  49 

Northwestern  Territory .  52 

Trans-Missouri  Territory . 57 

Conclusion .  58 


3 


Section 


Section 


'  v]  _ 

CONTENTS.  '  'V 

: 

Chapter  III.  The  Chicago  Market  and  the  Board  or  Trade. 

-  Page. 

1.  Origins.. . 59 

Historically  a  forwarding  market .  61 

Transshipments . 62 

2.  History  of  the  transportation  problem .  62^ 

Water  vs.  rail  transportation .  62 

The  Erie  Canal  movement .  66 

Ex-lake  rates .  67 

Rail  and  water  differentials .  68 

3.  The  Chicago  Board  of  Trade .  70 

Charter  of  1859 . 71 

The  exchange  hall .  72 

Membership — admission  and  assessments . 72 

Memberships  made  transferable .  73 

Property  value  of  membership .  74 

Classification  of  members . 75 

Current  revenues  and  expenses .  76 

4.  Facilities  developed  by  the  exchange .  76 

The  trading  floor . . .  76 

Inspection  systems .  77 

Weighing . 78 

Department  of  grain  sampling .  78 

Transportation  department . . , .  79 

5.  Conflict  between  receivers  and  eleA^ator  buyers  on  the  board .  79 

In  general . 79 

Restrictions  on  direct  buying  imposed  b>  the  exchange .  81 

The  call  rule .  83 

The  to-arrive  rule . 85 

6.  Enforcement  of  rules .  86 

The  Nelson  case,  1896  .  87 

Commission  rules .  88 

7.  Terminal  elevators  and  the  warehouse  controversies .  90 

Factors  in  the  problem  at  Chicago .  90 

GroAvth  of  storage  capacity  and  concentration  of  control . . .  90 

Regulation  of  public  warehouses .  91 

’  Dealing  in  grain  by  public  warehousemen .  96 

The  Central  Elevator  Co.  case,  1898  .  99 

The  custodian  system . 103 

8.  The  Chicago  cash  market . 106 

9.  The  futures  market. . . 107 

Origin  of  future  trading . 107 

Opposition  to  future  trading .  109 

Comers .  110 

Trading  in  privileges — puts  and  calls — indemnities — bids  and 

offers .  113 

Case  of  Booth  v.  People . ■ . . .  116 

Indemnities .  118 

10.  The  -quotation  service  and  the  bucketshops . 121 

The  antibucketshop  crusade .  122 

Public  interest  in  exchange  quotations .  123 

Agreement  with  the  telegraph  companies .  126  .J 

Quotations  are  property  within  the  control  of  the  exchange. . . .  127  j 

11.  The  open  board  of  trade .  128  ^ 


CONTENTS.  5 

ra"o. 

Section  12.  Publicity  and  promotion  of  exchange  interests .  129 

The  “crusade  of  acquaintance”  among  country  shippers .  129 

Newspaper  publicity . 129 

Country  newspapers  and  journals . . 13] 

Chapter  IV.  Development  of  Other  Markets  and  Exchanges. 

Section  1.  Milwaukee .  133 

Origins .  133 

The  Milwaukee  Chamber  of  Commerce .  135 

Membership .  135 

Operating  revenues .  13G 

Weighing  and  inspection .  137 

Elevator  facilities . 137 

Transportation  bureau .  137 

'  Price  quotations  and  market  reports .  137 

The  cash  market .  137 

The  futures  market .  138 

Publicity  and  promotion .  139 

Section  2.  Minneapolis .  140 

Origin  of  the  Minneapolis  market .  140 

The  Minneapolis  Chamber  of  Commerce .  140 

Membership  privileges  and  requirements .  1'42 

The  trading  groups .  142 

Enforcement  of  rules .  144 

The  cash  grain  market . .  144 

The  futures  market . . .  145 

Publicity  and  promotion  of  exchange  interests . .  146 

Interlocking  interests . ' .  148 

Section  3.  Duluth .  153 

Development  of  the  Duluth-Superior  grain  market .  153 

The  milling  industry .  154 

The  Duluth  Board  of  Trade .  155 

The  Superior  Board  of  Trade .  158 

Inspection  and  weighing  controversy .  158 

Development  of  elevator  capacity .  157 

The  cash  grain  market .  157 

Durum  wheat .  157 

The  futures  market . .  158 

Section  4.  Kansas  City . .  158 

Origins .  1.58 

The  Kansas  City  Board  of  Trade .  159 

Membership — admission  and  requirements .  159 

Classification  of  members .  180 

Operating  revenue  and  expense .  181 

Elevator  facilities . . .  182 

Other  facilities . .  182 

The  cash  market .  163 

The  futures  market .  164 

Publicity  and  promotion  of  exchange  interests .  164 

Section  5.  (9maha .  165 

The  rate  adjustment  of  1904 .  165 

Organization  and  membership  of  the  exchange .  1G5 

Operating  revenues .  166 

The  cash  market .  167 

Trading  in  futures  at  Omaha .  167 


Page. 

Section  6.  St.  Louis . 

The  early  river  market . 

Development  of  milling  and  elevator  facilities .  168 

Handling  in  bulk .  168 

The  St.  Louis  Merchants’  Exchange .  170 

Membership  policy .  171 

Classification  of  members .  172 

Operating  revenue  and  expense .  172 

Elevator  and  warehouse  facilities .  173 

The  cash  market .  171 

The  futures  market .  175 

Section  7.  Peoria . . 

The  Peoria  market .  175 

The  Peoria  Board  of  Trade .  175 

Enforcement  of  rules . .  •  -  176 

Elevator  facilities .  177 

The  cash  market .  177 

Section  8.  Louisville . .  177 

The  Louisville  market .  177 

Section  9.  Cincinnati .  178 

V  The  Cincinnati  market .  178 

The  Cincinnati  Grain  and  Hay  Exchange.  . .  178 

Local  consumption .  179 

Elevator  facilities. .  170 

Credit  facilities .  170 

Cash  trading .  180 

Future  trading .  180 

Section  10.  Indianapolis . 180 

The  Indianapolis  market .  180 

The  Indianapolis  Board  of  Trade .  180 

Elevator  facilities .  181 

Cash  trading .  181 

Section  11.  Toledo .  181 

The  Toledo  market .  181 

The  Toledo  Produce  Exchange .  182 

Section  12.  Buffalo . 183 

The  Buffalo  market .  183 

Origin  of  lake  shipping .  183 

Lake  receipts  and  canal  shipments .  183 

Invention  of  the  elevator .  184 

The  Buffalo  Corn  Exchange .  185 

Memb  ership .  185 

The  terminal  elevators .  186 

Weighing  and  inspection. .  186 

The  cash  market .  187 

Section  13.  The  eastern  seaboard  markets .  187 

The  commercial  exchanges .  189 

The  cash  markets .  189 

Chapter  V.  Organization,  Rules  and  Regulations  of  the  Exchanges. 
Section  1.  Incorporation  of  grain  exchange  associations .  190 


CONTEXTS. 


7 


Section 


Section 


Section 


Section 


Section 


Section 


Section 

Section 

Section 


Page. 

2.  Exchange  government .  195 

Elective  officers .  196 

Elective  committees .  196 

Appointive  committees .  197 

Functions  of  officers  and  committees .  197 

3.  Adoption  of  rules,  by-laws,  and  regulations .  199 

General  powers .  199 

Grain  exchange  corporations .  200 

General  commercial  exchanges  and  stock  companies .  200 

Procedure .  200 

Uniformity  of  rules  and  the  Council  of  Grain  Exchanges .  202 

4.  Membership .  2D2 

Limitation  of  membership .  203 

Requirements  for  admission .  205 

Assessments  on  memberships .  206 

Firm  and  corporation  memberships .  206 

Liens  on  membership  certificates .  207 

Membership  of  a  suspended  member .  209 

Membership  of  an  expelled  member .  209 

5.  Discipline . .  210 

Subject  matter .  210 

Procedure . 212 

Trial  procedure . 213 

Suspension,  exjnilsion,  and  reinstatement . .  214 

Suspension .  215 

/  Expulsion .  215 

Blacklisting  nonmembers .  216 

6  .Arbitration .  218 

Boards  of  arbitration  and  appeal .  218 

Special  arbitration  committees .  220 

Arbitration  for  noiimembers .  220 

Cumpulsory  arbitration  for  nonmembers .  220 

Arbitration  agreements .  221 

Procedure .  221 

y  Professional  counsel . .  223 

Appeals .  223 

Fees .  224 

Enforcement  of  awards .  224 

7.  Uniform  commission  rules . 225 

Members’  rates .  228 

The  uniform  commission  rule  as  applied  to  the  consignment 

business .  229 

Rebates .  229 

Gifts,  “compensation,”  premiums,  etc . 229 

Employment  of  solicitors .  230 

Keeping  books  of  customers .  230 

Financing  country  shippers .  230 

Current  rate  of  interest .  231 

Free  wire  service .  231 

8.  The  commission  rule  as  applied  to  buying  and  shipping  on  order . . .  232 

9.  The  uniform  commission  rules  applied  to  trading  in  futures .  235 

10.  The  uniform  rule  as  applied  to  purchases  at  country  points .  235 

Application  of  the  rule .  235 


8 


CONTENTS. 


.1' 


Page. 


Section  1].  Solicitors  and  brokers . . .  238 

Employment  of  solicitors  in  primary  markets .  238 

Employment  of  brokers  under  tlie  uniform  commission  rule _  241 

Employment  of  brokers  in  secondary  and  export  markets .  243 

Export  brokers . . . ' .  243 

Section  12.  Regular  warehouses . .  244 

/  General  requirements .  244 

,  Liability  for  damaged  grain . 247 

Section  13.  "Contracts  of  sale — sundry  trading  rules . .  248 

Customs  of  the  market .  248 

‘  ‘  Regular  trading  ” .  249 

Hours  for  future  trading .  249 

Curb  trading  prohibited .  249 

Prohibition  of  personal  or  private  trades .  250 

Cash  trading  off  exchange . .  250 

Confirmation  of  trades .  251 

Futures . 251 

Cash  trades .  251 

Advances  required  on  grain  for  shipment  (call  for  margin) .  252 

Shipping  instructions . 252 

Shipments . 253  * 

“Carload” .  254 

Time  to  reject . . . 255 

—  Passing  of  title .  255 

Delay  in  transfer  or  unloading . 256 

Acceptance .  258 

■  The  time  for  payment .  258 

Section  14.  Defaults  on  contracts .  259 

In  general .  259 

Willful  violation  of  a  business  contract*. .  260 

Default  through  inability  to  meet  the  obligation. . .  260 

Failure  to  deliver  on  future  contracts . 261 

Failure  to  receive  and  pay  on  future  contracts .  263 

Failure  to  deliver  on  cash  contracts . 264 

Failure  to  receive  and  pay  on  cash  contracts .  264 

Section  15.  Terminal  market  “terms. ”w .  265 

Inspection .  265 

Sampling . .  _  266 

Weighing .  267 

Weights  at  seaboard  markets .  268 

Section  16.  Terminal  charges .  268 

Switching  charges  on  grain .  275 

^"'^ection  1'7.  Rules  for  trading  in  futures .  282 

General  summary .  282 

The  “contract  grades” .  282 

Requirements  of  margins .  283 

The  “legitimate  value” .  283 

Offsets  and  substitutions . 284 

Contracts  for  deferred  acceptance — puts  and  calls .  284 

Regular  delivery .  285 

Payment  upon  delivery . 287 

Only  “actual  trades” .  287 

Prohibitions  against  bucketshops .  288 

In  general .  288 


\ 


V' 


CONTENTS.  9 

Page. 

Section  18.  Control  of  quotations  and  market  reports .  289 

Market  quotations . 289 

Reporting  cash  sales .  289 

Future  prices .  290 

Control  of  price  dissemination .  291 

After-market  prices . 292 

Control  of  market  letters .  293 

Control  of  wire-house  acti^uties .  293 

Chapter  VI.  Inspection  and  Weighing. 

Section  1.  In  the  early  markets .  295 

Section  2.  State  inspection  and  weighing .  296 

Section  3.  Duplication  of  inspection  and  weighing  ser^dees .  297 

^Kansas  City  grading  and  weighing .  298 

Weighing  at  St.  Louis . . . 299 

Weighing  by  the  State  of  Missouri .  300 

Summary .  301 

Section  4.  Personnel  of  State  departments .  301 

Federal  license . 301 

State  inspection  personnel .  301 

Illinois  and  Chicago .  302 

Chief  grain  inspector .  303 

Deputy  inspectors .  303 

Samplers .  303 

Section  5.  Technical  methods  of  inspecting  and  grading  grain .  303 

Laboratory  inspection .  304 

Inspection  before  arrival .  304 

The  inspection  tracks . ^04- 

The  sealer . 305 

The  sampling  operation .  305 

Inspection  of  boatloads .  307 

In  the  inspection  laboratory .  308 

Section  6.  Sampling  by  prwate  agencies .  309 

Sampling  in  Minneapolis . 810 

Sampling  in  Duluth . 311 

Private  sampling  in  Chicago .  311 

Sampling  in  St.  Louis .  311 

Sampling  in  East  St.  Louis .  312 

Section  7.  Car  inspection .  312 

St.  Louis .  312 

Chicago .  313 

Section  8.^  Inspection  charges  and  revenues .  313 

Section  9.  Reinspection  and  appeals .  315 

Peoria  inspection .  318 

Section  10.  Federal  grades . 319 

Section  11.  Weighing .  319 

Track-scale  operations .  319 

Typical  operation  of  cupola  scale .  320 

Weights  to  carriers .  320 

Weighing  records .  320 

Weight  certificates  (Chicago) .  320 

Scale  inspection . , .  321 

Service  at  country  stations .  321 

Section  12.  Personnel  of  weighing  departments .  322 

Minnesota .  322 

Chicago  Hoard  of  Trade .  322 


10 


CONTENTS. 


Chapter  VII.  Quotation  Services  op  the  Exchanges. 

Page. 

In  general . 323 

Cash  quotations .  323 

Grains  quoted  in  cash  markets. . .  323 

Nominal  prices . 325 

To-arrive  prices .  325 

Future  quotations .  326 

Opening,  high,  low,  and  closing  prices .  327 

]\Iethods  of  collecting  quotations .  328 

APPENDIX. 

Definition  of  Grain  Marketing  Terms. 

Section  1.  Markets .  329 

Section  2.  Cash  traders  and  trading  terms .  330 

Section  3.  Future  traders  and  trading  terms .  331 

LIST  OF  TABLES. 

Table  1.  Methods  of  compilation  of  figures  of  grain  receipts  at  various  terminal 

markets  in  the  United  States . 18 

Table  2.  Average  annual  receipts  of  wheat  at  10  primary  markets  and  at  7 

secondary  markets  for  the  five  calendar  years  1913  to  1917 .  ].9 

Table  3.  Average  annual  receipts  of  corn  at  10  primary  markets  and  at  7  sec¬ 
ondary  markets  for  the  calendar  years  1913  to  1917 .  20 

Table  4.  Average  annual  receipts  of  oats  at  10  primary  markets  and  at  7  sec¬ 
ondary  markets  for  the  calendar  years  1913  to  1917 .  21 

Table  5.  Average  annual  receipts  of  barley  at  10  primary  markets  and  at  7 

secondary  markets  for  the  calendar  years  1913  to  1917 .  22 

Table  6.  Average  annual  receipts  of  rye  at  10  primary  markets  and  at  7  sec¬ 
ondary  markets  for  the  calendar  years  1913  to  1917 .  22  • 

Table  7.  Average  annual  receipts  of  wheat,  corn,  oats,  barley,  and  rye  com¬ 
bined  for  the  five  calendar  years  1913  to  1^17  at  the  principal  pri¬ 
mary  and  secondary  markets . , . . .  23 

Table  8.  Average  annual  receipts,  shipments,  and  local  consumption  of  wheat 

at  10  primary  markets  for  the  five  calendar  years  1913  to  1917 .  24 

Table  9.  Average  annual  receipts,  shipments,  and  local  consumption  of  corn 

at  10  primary  markets  for  the  five  calendar  years  1913  to  1917 .  25 

Table  10.  Average  annual  receipts,  shipments,  and  local  consumption  of  oats 

at  10  primary  markets  for  the  five  calendar  years  1913  to  1917. ...  25 

Table  11.  Average  annual  receipts,  shipments,  and  local  consumption  of 

barley  at  10  primary  markets  for  the  calendar  years  1913  to  1917. .  26 

Table  12.  Average  annual  receipts,  shipments,  and  local  consumption  of  rye 

at  10  primary  markets  for  the  five  calendar  years  1913  to  1917 .  26 

Table  13.  Average  annual  receipts,  shipments,  and  local  consumption  of  wheat, 
corn,  oats,  barley,  and  rye  combined  at  10  primary  markets  for 

the  five  calendar  years  1913  to  1917 .  27 

Table  14.  Rated  elevator  storage  capacity  at  terminal  grain  markets  for  1919. .  28 

Table  15.  Average  annual  production  of  spring  and  winter  wheat,  by  principal 

producing  States,  for  the  calendar  years  1913  to  1917 .  30 

Table  16.  Distribution  of  spring  and  winter  wheat  shipments  at  specified  mar¬ 
kets,  1913  to  1917 . . .  31 

Table  17.  Average  annual  production  of  corn  in  the  principal  producing 

States,  1913  to  1917 .  33 


CONTENTS. 


11 


Page. 

Table  18.  Average  annual  production  of  oats  in  the  principal  producing  States, 

1913  to  1917 .  34 

Table  19.  Average  annual  production  of  barley  in  the  principal  producing 

States,  1913  to  1917 .  35 

Table  20.  Average  annual  production  of  rye  in  the  principal  producing  States, 

1913  to  1917 .  37 

Table  21.  Percentage  analysis  of  sources  of  grain  receipts  (wheat,  corn,  oats, 
rye,  and  barley)  at  specified  markets  during  the  crop  years  1912-13 

to  1916-17 .  40,41 

Table  22.  Export  grain  rates  from  10  primary  markets  to  6  Atlantic  and  Gulf 

ports,  in  force  January  1, 1919 .  51 

Table  23.  Receipts  of  grain  at  Cincinnati,  St.  Louis,  and  Chicago  in  1858-. ...  -  GO 

Table  24.  Flour  production  in  Chicago,  1870  to  1896,  inclusive .  61 

Table  25.  Shipments  (including  transshipments)  of  all  grains  by  lake,  canal, 

and  railroad,  1860 .  63 

Table  26.  Average  freight  rates,  Chicago  to  New  York,  by  lake-and-canal,  and 
bv  all-rail,  with  ratio  of  all-rail  to  lake-and-canal  rates,  1887  to 

1916 .  69 

Table  27.  Movement  of  wheat,  corn,  and  oats  eastward  from  Chicago  by  five-year 

averages,  1887  to  1916,  with  percentage  of  lake  to  total  shipments.  69 
Table  28.  Total  movement  of  wheat,  corn,  and  oats  combined  eastward  from 
Chicago  by  five-year  averages,  1887  to  1916,  with  percentage  of  lake 

to  total  shipments .  70 

Table  29.  Relation  of  freight  rates  ratio  to  percentage  of  lake  shipments  east¬ 
ward  from  Chicago,  1887  to  1916 .  70 

Table  30.  Classification  of  members  of  Chicago  Board  of  Trade  (list  dated 

Mar.  6,  1918) .  75 

Table  31.  Classification  of  interests  represented  on  board  of  directors  of  the 
Chicago  Board  of  Trade  (on  the  basis  of  their  firm  connections) 

and  the  voting  powers  of  the  trading  groups .  76 

Table  32.  Elevator  storage  distribution  at  Chicago,  March  31,  1868 .  90 

Table  33.  Total  elevator  warehouse  capacity  at  Chicago,  relative  storage  capac¬ 
ity  of  houses  declared  regular,  of  houses  operated  on  a  ‘^private” 
basis,  and  of  houses  operated  under  the  Custodian  Rules,  1902  to 

1918,  inclusive .  102, 103 

Table  34.  Classification  of  resident  members  in  the  grain  trade,  Milwaukee 

Chamber  of  Commerce,  1917 .  135 

Table  35.  Transactions  in  bushels  cleared  through  the  Milwaukee  Clearing 

Association  for  the  three  crop  years  1915-16,  1916-17,  1917-18 .  139 

Table  36.  Receipts  and  shipments,  Minneapolis,  1876  to  1883 . . .  140 

Table  37.  Classification  of  resident  members  in  the  grain  trade,  Minneapolis 

Chamber  of  Commerce,  December  31,  1917 .  143 

Table  38.  Memberships  of  Washburn-Crosby  interests  at  Minneapolis  and 

Duluth .  149 

Table  39.  Memberships  of  Van  Dusen-Harrington  interests  at  Minneapolis  and 

Duluth .  149 

Table  40.  Memberships  of  Gregory- Jennison  Co.  interests  at  Minneapolis  and 

Duluth .  150 

Table  41.  Memberships  of  Peavey  interests  at  Minneapolis  and  Duluth .  150 

Table  42.  Memberships  of  Cargill  Commission  Co.  interests  at  Minneapolis  and 

Duluth .  150 

Table  43.  Memberships  of  Pillsbury  Flour  Mills  Co.  interests  at  Minneapolis 

and  Duluth .  151 


12 


CONTENTS, 


Page. 

Table  44.  Memberships  of  E.  S.  Woodworth  Co.  interests  at  Minneapolis  and 

Duluth . 151 

Table  45.  Memberships  of  H.  Poehler  Co.  interests  at  Minneapolis  and  Duluth.  151 
Table  46.  Memberships  of  McCaull -Webster  interests  at  Minneapolis  and 

Duluth . 151 

Table  47.  Memberships  of  McCarthy  Brothers  interests  at  Minneapolis  and 

Duluth .  152 

Table  48.  Memberships  of  Russell-Miller  Milling  Co.  interests  at  Minneapolis 

and  Duluth . . . 1.52 

Tal)le  49.  Memberships  of  Northwestern  Consolidated  Milling  Co.  interests  at 

Minneapolis  and  Duluth .  152 

Table  50.  Memberships  of  Nye-Jenks  interests  at  Minneapolis  and  Duluth...  152 

Table  51.  Receipts  and  shipments  of  grain  at  Duluth,  1870  to  1886 .  153 

Table  52.  Receipts  and  shipments  of  flaxseed  at  Minneapolis  and  Duluth,  1913 

to  1917 .  1,54 

Table  53.  Classification  of  resident  members  in  the  grain  trade,  Duluth  Board 

of  Trade,  1917 . 155 

Table  54.  Receipts  of  grain  at  Kansas  City,  1871  to  1880 .  159 

Table  55.  Classification  of  resident  members  in  the  grain  trade,  Kansas  City 

Board  of  Trade,  1917 . 160 

Table  56.  Classification  of  resident  members  in  the  grain  trade,  Omaha  Grain 

Exchange,  1917 . 165 

Table  57.  Shipments  and  receipts  of  grain  at  St.  Louis  by  rail  and  river,  1896  to 

1904 . 169 

Table  58.  Classification  of  resident  members  in  the  grain  trade,  St.  Louis 

Merchants’  Exchange,  1917 .  172 

Table  59.  Cash  and  future  call  board  transactions,  St.  Louis  Merchants’  Ex¬ 
change,  1876  to  1897 .  174 

Table  60.  Classification  of  resident  members  in  the  grain  trade,  Peoria  Board 

of  Trade,  1916 .  176 

Table  61.  Classification  of  resident  members  in  the  grain  trade,  Cincinnati 

Grain  and  Hay  Exchange,  1918 .  179 

Table  62.  Classification  of  resident  members  in  the  grain  trade,  Indianapolis 

Board  of  Trade,  1917 .  181 

Table  63.  Classification  of  resident  members  in  the  grain  trade,  Toledo  Pro¬ 
duce  Exchange,  1917 . .  182 

Table  64.  Grain  movement  by  canal  at  Buffalo,  from  1880  to  1900 .  184 

Table  65.  Classification  of  resident  members  in  the  grain  trade,  Buffalo  Corn 
Exchange  (both  certificate  holding  and  licensed  members),  in 

1917 .  186 

Table  66.  Average  grain  exports  from  the  United  States  and  from  specified 

Atlantic  ports  for  the  calendar  years  1913  to  1917  (in  bushels) _  188 

Table  67.  Proportion  of  exchange  members,  in  .^T)ecified  exchanges,  engaged 

in  the  grain  trade,  1918  . .  193 

Table  68.  Cash  commission  rates  (receiving  and  selling)  on  14  specified  ex¬ 
changes .  226,227 

Table  69.  Commission  rates  for  buying  and  shipping  on  order  at  specified 

exchanges  in  1918 .  233 

Table  70.  Minimum  future  commission  rates  for  purchase  or  sale  or  for  pur¬ 
chase  and  sale  by  grade  alone  for  8  specified  exchanges  in  1918. .  236,  237 
Table  71.  ‘‘Charges”  required  to  be  deducted  in  conformity  with  the  uniform 
commission  rule  for  direct  buying  from  outside  points;  that  is,  from 
nonmembers  and  nonresident  members — at  7  specified  exchanges . .  239 


CONTENTS. 


13 


Page. 

Table  72. 

Table  73. 

Table  74. 

Table  75. 

Table  76. 

Table  77. 

Table  78. 


Table  79.  Mixing  and  conditioning  charges  at  specified  markets,  Decemher 


1,1919 . .  274 

LIST  OF  DIAGRAMS. 

Diagram  A.  Wheat  production  in  the  principal  grain  States .  31 

Diagram  B.  Corn  production  in  the  principal  grain  States .  32 

Diagram  C.  Oats  production  in  the  principal  grain  States .  33 

Diagram  D.  Barley  production  in  the  principal  grain  States . .  35 

Diagram  E.  Rye  production  in  the  principal  grain  States .  36 

Diagram  F.  Total  grain  production  in  the  principal  grain  States . . .  38 

Diagram  G.  Comparison  of  receipts  and  production  of  five  grains  by  sections 

of  the  largest  grain  producing  areas . facing. .  40 

ILLUSTRATIONS. 

View  of  the  trading  floor,  Chicago  Board  of  Trade . facing..  60 


Views  of  the  exchange  hall,  Minneapolis  Chamber  of  Commerce". . facing..  140 


Cash  brokers’  rates  on  15  specified  exchanges .  242 

Time  periods  for  to-arrive  shipments  as  defined  in  exchange  rules. .  254 

Number  of  bushels  in  a  “  carload  ”  of  grain  for  17  specified  exchanges.  254 

Inspection  charges  at  specified  markets,  December  1,  1919 .  270 

Weighing  charges  at  specified  markets,  December  1,  1919 .  271 

Sampling  charges  at  specified  markets,  December  1,  1919 .  272 


Elevating  and  storage  charges  at  specified  markets,  December  1, 


^  . 


ACKNOWLEDGMENT. 


The  Commission  desires  to  make  acknowledgment  in  connection 
with  this  volume  of  the  report  on  the  Grain  Trade  of  the  valuable 
services  rendered  by  Mr.  W.  H.  S.  Stevens,  assistant  chief  economist 
and  examiner  in  charge  of  the  inquiry;  by  Mr.  Edmund  Brown,  jr., 
who  had  immediate  charge  of  the  preparation  of  this  volume;  and  by 
Mr.  A.  M.  Sakolski,  Avho  assisted  in  certain  phases  of  the  work. 

The  Commission  also  desires  to  acknowledge  the  assistance  of  the 
Bureau  of  Markets  of  the  Department  of  Agriculture  in  making  the 
inquiry  and  of  the  Interstate  Commerce  Commission  in  analyzing  tlie 
effect  of  freight  rates  on  the  development  of  terminal  markets. 


LETTER  OF  SUBMITTAL. 


Federal  Trade  Commission^, 
Washington,  September  15,  1920. 

To  the  Congress  of  the  United  States: 

There  is  submitted  herewith  Volume  II  of  a  report  on  the  grain 
trade. 

This  volume  is  entitled  “Terminal  Markets  and  Grain  Exchanges, 
and  is  largely  a  descriptive  and  analytical  statement.  Another  vol¬ 
ume  of  the  report  will  present  a  more  detailed  discussion  of  methods 
and  operations  found  to  exist  in  the  grain  trade  at  the  large  central 
markets. 

Hitherto  there  has  been  no  comprehensive  description  of  the  sys¬ 
tem  of  grain  marketing,  the  channels  of  grain  movement,  'the  trading 
methods  employed,  or  the  highly  organized  exchanges  where  the 
major  portion  of  trading  takes  place.  It  was  necessary,  therefore, 
to  incorporate  in  this  report  a  volume  describing  the  growth  and  rel¬ 
ative  importance  of  the  markets  and  to  outline  the  functions  exercised 
and  the  rules  prescribed  by  these  grain  exchange  associations.  This 
is  the  subject  matter  of  the  present  volume. 

The  report  covers  17  markets,  10  of  which,  known  as  “primar}’- 
markets,^’  receive  the  bulk  of  the  grain  shipped  from  local  points 
in  producing  territor}’.  The  primary  markets  include  Chicago, 
Minneapolis,  Dulutl^,  Kansas  City,  St.  Louis,  Omaha,  Mihvaukee, 
Peoria,  Indianapolis;  and  Cincinnati. 

An  effort  has  been  made  to  trace  the  development  of  the  grain 
trade  and  the  history  of  the  local  exchange  at  each  market  considered, 
with  a  view  to  setting  forth  the  main  factors  which  have  operated  to 
build  up  the  present  marketing  system.  It  is  found  that  the  freight 
rate  structure  has  had  an  important  bearing  on  the  development  of 
grain  markets  and  the  existing  system  of  grain  distribution. 

The  digest  and  analysis  of  the  rules  and  regulations  enforced  by 
the  larger  grain  exchanges,  here  presented,  is  of  essential  importance 
for  an  understanding  of  grain  marketing  in  the  United  States,  since 
the  greater  portion  of  the  grain  is  bought  and  sold  subject  to  such 
rules  and  regulations. 

There  is  also  included  a  technical  description  of  the  functions 
assumed  by  the  grain  exchanges.  These  comprise  inspection  and 


16 


LETTER  OF  SUBMITTAL. 


grading,  weighing,  quotation  services,  traffic  bureaus  and  the  like. 
The  inspection  and  weighing  services  are  by  no  means  wholly  con¬ 
trolled  by  the  exchange  associations,  but  are  subject  to  regulation  by 
State  commissions  and  the  Federal  Government  as  well.  This  gives 
rise  to  considerable  duplication  and  overlapping  of  jurisdictions  espe¬ 
cially  at  such  points  as  Kansas  City  and  St.  Louis. 

Perhaps  the  most  important  function  assumed  by  the  exchanges, 
aside  from  providing  a  regulated  market  procedure  and  trading 
halls  for  their  members,  is  that  of  collecting,  recording,  and  distrib- 
uting  quotations  and  market  information.  For  these  services  the 
trade  at  large  is  almost  wholly  dependent  upon  the  exchange  organ¬ 
izations.  The  methods  followed  by  the  larger  exchanges  in  dissem¬ 
inating  this  price  information  are  herein  set  forth  in  comparative 
form. 


Although  these  large  exchange  associations  have  operated  over 
a  long  period  as  private  corporations,  it  is  none  the  less  apparent 
that  the  powers  which  they  exercise  and  the  methods  which  they 
Tollow  are  of  vital  interest  to  the  public.  No  conclusions  or  recom¬ 
mendations  with  reference  to  the  public  regulation  of  these  exchanges 
are  made  in  this  volume.  Its  purpose  is  rather  to  present  a  com¬ 
prehensive  description  of  these  exchanges  as  they  are  now  organized 
and  operated,  and  to  leave  conclusions  and  also  specific  recommen¬ 
dations  for  subsequent  consideration. 

Kespectfully, 


Victor  Murdock,  Chairman, 
Huston  Thompson. 

VVILLIAM  B.  CoLVER. 

Nelson  B.  Gaskill. 


John  Garland  Pollard. 


0 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES.’ 


Chapter  I. 

COMPARATIVE  SIZE  AND  IMPORTANCE  OF  THE  MARKETS. 
Section  1.  Factors  determining  size. 

Tlic  ill's!  step  in  any  description  of  the  grain-marketing  system  is  to 
determine  the  order  of  importance  of  the  larger  markets  on  some  fair 
basis  of  comparison.  Obviously  there  is  no  single  uniform  standard 
for  measuring  the  size  and  importance  of  such  markets,  and  the  char¬ 
acter  of  the  trading  must  be  considered  separately  in  each  case.  Chi¬ 
cago,  for  example,  is  of  relatively  little  importance  as  a  milling  center 
while  Minneapolis  is  unapproached  in  milling  capacity  and  milling 
demand  on  the  market.  On  the  other  hand  the  volume  of  shipping 
or  forwarding  business  at  Chicago  has  made  it  a  cash  market  of  great 
importance. 

Future  markets. — Because  of  well  recognized  differences  in  trad¬ 
ing  methods,  futures  markets  can  not  be  compared  with  cash  markets, 
and  the  comparative  size  and  importance  of  the  futures  markets 
must  be  given  a  separate  and  distinct  treatment.  This  is  reserved 
for  the  volumes  on  future  trading.  It  is  well  known,  however,  that 
the  Chicago  Board  of  Trade  operates  the  largest  and  most  active  of 
the  grain  futures  markets. 

Cash  markets. — It  is  apparent  that  priority  of  importance  among 
cash  markets  must  be  determined  from  a  combination  of  several 
important  factors,  and  not  because  of  any  one  characteristic.  The 
cliief  factors  are  (1)  volume  of  cash  trading,  (2)  receipts  of  grain,  (3) 
local  consumption,  (4)  storage  and  transfer  capacity. 

Section  2.  Volume  of  cash  trading. 

The  first  thought  in  discussing  the  relative  importance  of  any  group 
of  markets  would  be  to  compare  the  cash  trading  in  volume  and 
value,  at  the  various  points.  Statistics  for  any  such  comparison  are 
totally  lacking.  The  exchanges  in  general  make  no  effort  to  record 
either  the  number  or  the  value  of  cash  trades.  The  nearest  approach 
to  such  a  record  for  the  larger  markets  exists  in  Minneapolis  where  , 
the  rules  of  the  chamber  require  members  to  report  original  sales  of 
spot  grain.2  But  even  in  this  market  it  is  admitted  that  all  of  the 
original  sales  are  not  reported,  that  no  resales  are  reported,  and  that, 
in  general,  the  rule  is  not  rigidly  enforced.  It  is  therefore  necessary 
to  reject  this  standard  of  comparison. 

1  For  definitions  of  trade  tenns  used,  see  appendix  at  the  end  of  this  volume. 

2  See  methods  of  reporting  prices  outlined  in  Chapter  VII. 

168093*’— 20 - 2 


17 


18 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


Section  3.  Receipts. 

Another  index  of  relative  size  lies  in  the  volume  of  receipts  at  the 
terminal  markets  reported  from  year  to  year  by  the  various  exchanges. 
These  receipts  figures  arc  customarily  used  by  the  exchange  members 
for  publicity  purposes  to  denote  the  importance  of  a  particular 
market;  and,  if  computed  on  a  uniform  basis  at  all  points,  would 
furnish  a  satisfactory  index  of  the  business  attracted  to  various 
terminal  centers.  The  lack  of  such  uniformity  in  the  computations, 
and  the  frequent  inclusion  of  through  shipments,  greatly  lessens  the 
comparative  value  of  the  figures.  The  table  which  follows  shows 
that  several  exchanges  (Cincinnati,  Duluth,  Kansas  City,  Milwaukee 
and  Minneapolis),  confine  their  figures  for  receipts  to  local-billed 
cars;  that  is,  cars  passing  into  the  trade  at  the  market.  On  the  other 
hand,  Chicago,  Peoria,  St.  Louis,  and  the  seaboard  markets,  include 
all  cars  passing  through  the  terminal  yards,  whether  local,  through- 
billed  or  reconsigned.  Again,  as  the  table  shows,  some  exchanges 
confine  their  figures  to  the  number  of  cars  inspected ;  that  is,  the  figures 
are  derived  from  the  records  of  the  inspection  department,  while 
others  obtain  these  reports  from  the  railroad  companies.  Duluth 
uses  elevator  reports  of  grain  unloaded.  Eeconsigned  cars  are  totally 
eliminated  only  in  Duluth  and  Kansas  City.  Obviously,  those 
markets  wliich  include  all  cars  arriving  at  the  terminal,  in  compiling 
their  grain  receipts,  will  appear  to  be  larger  and  more  important  than 
those  in  which  the  receipts  more  nearly  represent  the  grain  handled 
by  local  traders.  There  is  a  substantial  margin  of  error,  therefore,  in 
using  these  data  for  comparisons,  though  it  is  probably  not  more  than 
25  per  cent  in  any  case.^ 

Table  1. — Methods  of  compilation  of  figures  of  grain  receipts  at  various  terminal  markets 

in  the  United  S  tales, 


Market. 

Source  of  information  from 
which  exchange  figures  are 
compiled. 

Basis  of  computation. 

Includes  transit  movement 
as  follows: 

Daily  railroad  reports. . . 

All  arrivals . 

Through-billed  and  recon¬ 
signed. 

Do. 

"nnQfnn 

Railroad  and'stcamship  com¬ 
panies. 

Dn.ily  railroad  reports . 

. do . 

PViiPQcrn 

. do . 

Do. 

P/incinnn.l  i  _ 

Railroad  companies . 

Cincinnati  billed  cars  only. 

Reconsigned. 

Tinlnth . 

Terminal  elevator  reports . 

Amount  unloaded  at  el^ 

None. 

Indianapolis. . . . 

Kansas  City .... 

Inspection  department . 

Raihcad  companies . 

vator. 

Inspections  & . 

Kansas  City  billed  cars 

Reconsigned  included  it  in¬ 
spected. 

None. 

TTispeetion  department  .... 

only. 

Inspections . 

Reconsigned. 

Do. 

Milwaukee 

Daily  railroad  reports . 

Milwaukee  billed  cars  only. 

Minnea.nnli'! 

_  do . 

Minneapolisbilled  cars  only 
Inspections  only . 

Do. 

O  m  n.h  n, 

Inspection  department . 

Do. 

IVow  Vnrlr 

Railroad  and  steamship  com¬ 
panies. 

Railroads . 

All  arriv'als. . 

Through-billed  and  recon¬ 
signed. 

Do. 

Penri'fi 

. do . 

Philadelphia.... 

Inspection  department  and 

. do . 

Do. 

Rf.  T.nnis 

terminal  elevators. 

Railroad  eomnanios . 

. do . 

Do. 

Toledo  - 

Inspection  department . 

Insnections  only . 

Through-billed  and  recon¬ 
signed  if  inspected. 
Through-billed  and  recon- 

.San  Francisco . . 

Chamber  of  commerce,  statis- 

All  arrivals . 

tical  department. 

signed. 

a  As  reported  bv  the  various  exchanges. 

2  A  very  few  through-billed  cars  are  inspected  and  these  cars  are  presumably  included  in  receipts. 
8  See  p.  62. 


SIZE  A2sD  IMPORTANCE  OP  THE  MARKETS. 


19 


Tlio  transportation  department  of  the  Chicago  Board  of  Trade, 
for  example,  reports  that  ''the  only  reliable  record  that  we  have 
of  receipts  at  Chicago  that  are  handled  by  traders  at  Chicago  is 
that  covering  the  carloads  of  grain  inspected  by  the  Illinois  State 
Grain  Inspection  Department.”  Since  Chicago  inspection  is  fre¬ 
quently  used  by  outside  traders,  it  is  fair  to  assume  that  the  inspection 
ligures  represent  the  maximum  quantity  of  grain  that  could  enter 
into  the  trade  of  the  market.  On  this  basis  it  appears  that  the  aver¬ 
age  through-billed  movement  during  the  five-year  period  1913-1917 
was  24  per  cent  for  wheat,  17  per  cent  for  corn,  27  per  cent  for  oats, 
38  per  cent  for  barley,  24  per  cent  for  rye,  and  24  per  cent  for  all 
grains,  as  follows: 

[  In  bushels,  OOO’s  omitted.] 


V 

■  Grains.  ■”  •  - 

Receipts. 

ucss  Inspec¬ 
tions.* 

Difference 

through¬ 

billed. 

Per  cent  of 
through¬ 
billed  to 
receipts. 

Wheat  .  .  . . . 

6.5, 412 

.50, 007 

15, 405 

24 

lOO;  592 

83, 1S6 
99, 397 

17, 406 

17 

13G,  687 

37, 290 

27 

■1,  259 

3,219 

1,040 

24 

Barley . . 

27,993 

17,313 

10, 680 

38 

334, 943 

253,122 

81, 821 

24 

>  Cars  reduced  to  bushels:  1  car  wheat,  corn,  rye,  harley=^  1,200  bushels;  1  car  cats= 1,000  bushels. 


Wheat  receipts. — The  following  table  shows  the  average  annual 
receipts  of  wheat  at  10  primary  markets  and  at  7  secondary  markets 
for  the  5  calendar  years,  1913  to  1917: 

Table  2. — Average  annual  receipts  of  reheat  at  10  primary  markets  and  at  7  secondary 

markets  for  the  5  calendar  years  1913  to  1917 d 


[In  bushels,  OOO’s  omitted.] 


Primary  markets. 

Pub¬ 

lished. 

receipts. 

Order  of 
impor¬ 
tance. 2 

Secondary  markets. 

Pub¬ 

lished. 

receipts. 

Order  of 
impor¬ 
tance. 

120, 151 

1 

Buffalo . 

125, 109 

1 

65,412 

4 

New  York . 

81, 674 

56, 884 

2 

Baltimore . 

31,369 

3 

55, 612 

3 

Philadelphia . 

30, 862 

4 

T.oni<2 

34'  209 

5 

Boston.  .* . 

14,399 

5 

21, 275 

6 

Toledo  2 . 

6,808 

6 

8'  062 

7 

Louisville . 

4, 814 

7 

Cincinnati . 

5,95.5 

8 

Indianapohs . 

3,175 

9 

Peoria . 

3, 079 

10 

1  Receipts  compiled  from  annual  reports  of  exchanges,  excepting  Louisville,  Indianapolis,  Buffalo,  and 

Toledo,  which  do  not  publish  receipts.  Louisville  and  Indianapolis  ligures  were  obtained  by  the  Cornmis- 
sion  from  records  of  the  respective  exchanges.  Buffalo  figures  combine  Buffalo  lake  receipts  (Miller’s 
Almanac  for  1917)  with  car  inspections  at  Buffalo  as  compiled  by  the  Commission.  Toledo  figm-es  arc  from 
the  armual  Statistical  report  01  the  New  York  Produce  Exchange  for  1917.  ^  „ 

2  As  estimated  by  the  Commission  because  of  known  variations  in  the  basis  for  compuung  receipts. 

3  Toledo  is  classed  as  a  secondary  market  because  the  bulk  of  the  grain  is  purchased  from  jobbers  at  outside 
points. 

With  reference  to  the  secondary  markets  it  will  be  understood 
that  these  receipts  are  not  in  any  case  to  be  added  to  the  receipts 
of  primary  markets  as  an  estimate  of  the  total  grain  movement,  since 


20 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


tlie  receipts  at  secondary  markets  are  largely  made  up  of  wheat  which 
lias  already  been  traded  in  at  primary  terminals. 

As  the  table  indicates,  Minneapolis  is  the  leading  market  in  the 
United  States  in  point  of  wheat  receipts.  When  it  is  recalled  that 
these  figures  for  receipts  include  no  through-billed  cars,  the  position 
of  Minneapolis  is  rendered  more  striking.  The  figures  for  Duluth  are 
based  on  the  quantities  unloaded  at  elevators,  and  are  on  an  even 
more  restricted  basis  than  those  for  Minneapolis,  since  they  do  not 
even  include  reconsigned  cars.  Kansas  City  figures  are  also  on  this 
basis.  The  Chicago  receipts,  as  listed,  exceed  those  of  either  Duluth 
or  Kansas  City  by  more  than  16  per  cent;  but  as  already  stated  there  is 
a  through-billed  movement  of  about  24  per  cent  included  in  the  Chi¬ 
cago  figures,  so  that  it  seems  certain  that  both  Duluth  and  Kansas 
City  actually  receive  more  wheat  than  passes  into  the  cash  trading  at 
Cliicago.  Hence  Chicago  is  assigned  to  the  fourth  place. 

The  table  shows  that  each  of  six  primary  markets  and  four  second¬ 
ary  markets  receives  on  the  average  more  than  20,000,000  bushels 
of  wheat  annually. 

Corn  receipts.— The  table  below  shows  the  average  annual  re¬ 
ceipts  of  corn  at  10  primary  markets  and  7  secondary  markets  for  the 
calendar  years  1913  to  1917. 

Table  3. — Avemge  annual  receipts  of  corn  at  10  primary  markets  and  at  7  secondary 

markets  for  the  calendar  years  1913  to  1917 } 


[  In  bushels,  OOO’s  omitted.] 


Primary  markets. 

Pub¬ 

lished. 

receipts. 

Order  of 
impor¬ 
tance.* 

Secondary  markets. 

Pub¬ 

lished. 

receipts. 

Order  of 
impor¬ 
tance.* 

Chicago . 

100. 592 

1 

Buffalo . 

Omaha . 

27'  3.52 

2 

Baltimore.  . 

17  c;An 

I 

Peoria . 

23',  843 

4 

New  York _ 

12 

A 

o 

Kansas  City . 

20, 422 

3 

Louisville . 

St.  Louis. . 

19, 784 

6 

Philadelphia 

Indianapolis . 

18,'  586 

5 

Toledo . 

3  KIA 

O 

Milwaukee . 

13, 666 

7 

Boston . 

1, 705 

0 

7 

Minneaoolis . 

9',  366 

8 

i 

Cincinnati . 

8,  504 

9 

Duluth  3 . 

862 

10 

}  Pigures  compiled  from  the  atmual  reports  of  the  exchanges  for  the  years  1913  to  1917,  excepting  Lom’s- 
ville,  Indianapolis,  Buffalo^  and  Toledo,  which  do  not  publish  figiu-es  of  receipts.  Louisvilie  and  Indian-  " 
apohs  figures  compiled  by  the  Commission  Irom  the  records  of  the  respective  exchanges.  Buffalo  figures 
were  made  up  by  combining  Buffalo  lake  receipts  (Millers’  Almanac  for  1917)  with  car  inspections  at  Bifffalo 
as  compiled  by  the  Commission.  Toledo  figiu-es  from  the  annual  statistical  report  of  the  New  York  Produce 
Exchange  for  1917. 

2  As  estimated  by  the  Commission  because  of  known  variations  in  the  basis  for  computing  ‘^receipts  ” 

3  No  corn  receipts  reported  for  1916.  Average  figured  on  a  5-j'ear  basis.  ^  , 


In  analyzing  the  corn  movement  it  is  apparent  that  the  markets 
at  Peoria,  Indianaoplis,  and  Milwaukee  come  into  greater  rela¬ 
tive  importance.  Each  of  seven  primary  markets  receives  over  - 
10,000,000  bushels  of  corn  annually.  It  will  be  noted  that  Chieagb 
is  the  leading  cash  corn  market  just  as  Minneapolis  has  a  clear  pri¬ 
ority  with  respect  to  cash  wheat.  The  receipts  of  corn  at  Minneapo- 


SIZE  AND  IMPORTANCE  OF  THE  MARKETS. 


21 


lis  and  Dulutli  are  comparatively  insignificant  owing  to  their  location 
north  of  the  corn  belt.  Kansas  City  is  assigned  to  third  place  in  order 
of  receipts  since  the  figures  for  receipts  at  Kansas  City  are  compiled 
on  a  more  restricted  basis  than  those  at  anybther  large  corn  market 
and  this  market  should  have  more  weight  with  reference  to  Peoria 
and  St.  Louis  than  would  appear  from  the  published  tables.  Indi¬ 
anapolis  must  be  considered  more  important  than  St.  Louis  for  similar 
reasons. 

Oats  receipts. — The  table  below  shows  the  average  annual  re¬ 
ceipts  of  oats  at  10  primary  markets  and  at  7  secondary  markets  for 
the  calendar  years  1913  to  1917. 

Table  4. — Average  annual  receipts  of  oats  at  10  primary  markets  and  at  7  secondary 

markets  for  the  calendar  years  1913  to  1917  d 

(In  bushels,  OOO’s  omitted.) 


Primary  markets. 

Pub¬ 

lished. 

receipts. 

% 

Order  of 
impor¬ 
tance.* 

Secondary  markets. 

Pub- 

lishd. 

receipts. 

Order  of* 
impor¬ 
tance. 

* 

Chicago . 

136, 687 

1 

Buffalo. 

32  043 

1 

Minneapolis . 

30, 446 

2 

New  York . 

31647 

2 

Milwaukee . 

28'  153 

3 

Baltimore. 

24’  376 

St.  Louis . 

23;  758 

4 

Philadelphia.. 

14’  303 

4 

Omaha . 

15, 845 

5 

Boston.. . 

7’  138 

5 

Peoria . 

12'.  779 

7 

I.ouisville . 

6, 677 

0 

Indianapolis . 

10, 913 

f) 

Toledo . 

4  522 

7 

Kansas  City . 

9,  712 

8 

Cincinnati . 

7, 014 

9 

Duluth . : . 

5,  C24 

10 

1  Figures  compiled  from  the  annual  reports  of  the  exchanges  for  the  years  1913  to  1917,  excepting  Louis¬ 
ville,  Indianapohs,  Buffalo,  and  Toledo,  wliich  do  not  publish  receipts.  Louisville  and  Indianapolis 
figures  compiled  by  the  Commission  from  the  reoords  of  the  respective  exchanges.  Buffalo  figures  were 
made  up  by  combining  Buffalo  lake  receipts  (Millers’  Almanac  for  1917)  with  car  inspections  at  Buffalo  as 
compiled  by  the  Commission.  Toledo  figures  are  from  the  annual  statistical  report  of  the  New  York 
Produce  Exchange  for  1917. 

»  As  estimated  by  the  Commission  because  of  known  variations  in  basis  for  computing  ‘'receipts.” 


In  the  movement  of  oats  Chicago  has  greater  prominence  than  in 
the  case  of  any  other  grain.  Taking  into  consideration  all  differences 
in  methods  of  computing  the  figures  Chicago  would  nevertheless 
remain  far  in  the  lead  as  an  oats  center.  There  arc  seven  primary 
oats  markets  which  receive  in  excess  of  10,000,000  bushels  a  year. 
The  variations  in  basis  of  computation  do  not  seriously  affect  the 
rank  of  the  markets  in  oats  receipts  except  for  Peoria  and  Indian¬ 
apolis.  It  is  fair  to  assume  that  the  volume  of  through-billed  cars 
included  in  the  figures  for  Peoria  amounts  to  something  more  than  17 
per  cent  of  the  stated  receipts,  so  that  Peoria  should  rank  lower  than 
Indianapolis  in  oats  receipts.  With  this  modification  the  published 
figures  indicate  the  order  of  the  primary  markets. 

Barley  receipts. — The  table  below  shows  the  average  annual 
receipts  of  barley  at  10  primary  markets  and  at  7  secondary  mar¬ 
kets  for  the  calendar  vears  1913  to  1917. 

«/ 


22 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES 


Table  5. — Average  annual  receipts  of  barley  at  10  primary  marhets  and  at  7  secondary 

marhets  for  the  calendar  years  1913  to  1917  d 


[In  bushels,  OOO’s  omitted.] 


Primary  markets. 

Pub¬ 

lished. 

receii^s. 

Order  of 
impor¬ 
tance. 

Secondary  markets. 

Pub¬ 

lished. 

receipts. 

Order  of 
impor¬ 
tance. 

Minneapolis . 

33,171 

1 

Buffalo . 

14  454 

1 

Chicago. . 

27' 993 

2 

New  York . 

8*920 

2 

Tililwaukee . 

18' 840 

3 

Baltimore  2 . 

3' 209 

3 

Duluth . 

11  424 

4 

Philadelphia  . 

'C2] 

4 

Peoria . 

3' 001 

5 

Boston . 

5 

St.  Louis . 

1,883 

0 

Louisville . 

(*) 

Kansas  City . 

1,'084 

7 

Toledo . 

4G 

G 

Cincirmati.“ . . . 

885 

8 

Omaha . 

872 

9 

Indianapolis . 

e) 

1  Compiled  from  the  annual  reports  of  the  exchanges  for  years  1913  to  1917,  excepting  Louisville,  Indian¬ 
apolis,  Buffalo,  and  Toledo,  which  do  not  publish  receipts.  The  Buffalo  figures  were  made  up  by  com¬ 
bining  lake  receipts  at  Buffalo  (Millers’  Almanac  for  1917)  with  car  inspections  at  Buffalo  as  compiled  by 
the  Commission.  Toledo  figures  are  from  the  annual  statistical  report  of  the  New  York  Produce  Exchange 
for  1917. 

2  Receipts  at  BalUmorc  include  malt. 

*  No  figures. 

-  *  There  are  only  four  primary  markets  each  of  which  receive  an 
annual  average  of  more  than  10,000,000  bushels  of  barley.  This 
may  be  accounted  for  by  the  comj)arativcly  restricted  area  of  pro¬ 
duction  of  this  grain.  The  receipts  at  Minneapolis  are  considerably 
in  excess  of  those  of  any  other  terminal.  Because  of  the  variations 
in  computing  the  figures,  Chicago  should  be  considered  of  less  im¬ 
portance  than  the  figures  would  indicate,  although  clearly  holding 
second  place  in  the  order  of  markets.  Since  nearly  14,000,000 
bushels  of  the  barley  received  at  Milwaukee  was  consumed  in  that 
market  during  1913  to  1917,  it  is  probably  correct  to  place  Mil¬ 
waukee  ahead  of  Duluth,  although  there  is  but  slight  difference  in 
the  volume  of  trading. 

Rye  RECEIPTS.— The  table  below  shows  the  average  annual 
receipts  of  rye  at  10  primary  markets  and  at  7  secondary  markets 
for  the  calendar  years  1913  to  1917 : 

Table  (S.— Average  annual  receipts  of  rye  at  10  primary  markets  and  at  7  secondary 

markets  for  the  calendar  years  1913  to  1917.^ 


[In  bushels,  OOO's  omitted.] 


Primary  markets. 

Pub¬ 

lished 

receipts. 

Order  of 
.  impor¬ 
tance.* 

Secondary  markets. 

Pub¬ 

lished 

receipts. 

Order  of 
impor¬ 
tance. 

Minneapolis . 

6  882 

1 

Baltimore . 

7  924 

1 

Chicago . 

4,259 

2 

Buffalo . . . 

2  337 

0 

Milwaukee . . . . 

3*308 

3 

N ew  Y ork . 

l'844 

3 

Duluth . 

3'  299 

4 

Philadelphia . 

Tai 

4 

Omaha . 

'805 

5 

Louisville . 

371 

r, 

Cincinnati . 

649 

6 

Boston . . . 

327 

f, 

St.  Louis . . 

518 

7 

Toledo . 

113 

Peoria . 

468 

8 

Kansas  City . 

375 

9 

Indianapolis . 

145 

10 

% 

1  Figures  compiled  from  the  annual  reports  of  the  exchanges  for  the  years  1913  to  1917,  excepting  Louis¬ 
ville,  Indianapolis,  Buffalo,  and  Toledo,  which  do  not  publish  receipts.  Louisville  figures  were  compiled 
by  the  Commission  from  the  records  of  the  exchange.  Buffalo  figures  were  made  up  by  combining  Buffalo 
lake  receipts  (Millers’  Almanac  for  1917)  with  car  inspections  at  Buffalo  as  compiled  by  the  Commission. 
Toledo  figures  arc  from  the  Annual  Statistical  Report  of  the  New  York  Produce  Exchange  for  1917. 

2  Assumed,  but  not  definitely  established  in  several  cases. 


SIZE  AND  IMPORTANCE  OF  TFIE  MARKETS. 


23 


As  in  the  ease  of  barley,  the  receipts  of  rye  in  other  than  four 
principal  markets  are  relatively  insignificant.  Since  the  four  leading 
l)arley  markets  are  also  the  four  leading  markets  for  rye  in  the  same 
order,  the  c|ualifications  already  referred  to  would  apply  to  both 
tables.  However,  the  distribution  is  so  equally  divided  that  it  is 
impossible  to  say  that  more  rye  is  actually  received  at  Chicago  than 
at  either  Milwaukee  or  Duluth.  A  uniform  basis  for  compiling 
figures  might  show  any  one  of  these  three  markets  second  onh’  to 
Minneapolis. 

Comparative  importance  of  the  secondary  markets. — The 
tabulated  figures  show  that  Buffalo  takes  the  lead  over  all  secondarj- 
markets  in  the  receipts  of  each  grain  except  rye,  and  that  Buffalo, 
New  York,  and  Baltimore  are  among  the  four  principal  secondary 
markets  with  respect  to  every  kind  of  grain.  The  receipts  at  Boston 
are  insignificant  except  for  wheat  and  oats.  The  figures  used  for 
Buffalo  include  arrivals  of  grain  by  lake  plus  cars  inspected  only. 
It  is  probable,  therefore,  that  the  Buffalo  figures  arc  somcwdiat  too 
low  in  comparison  with  the  seaboard  markets,  which  report  receipts 
on  a  broader  basis.  Similarly  the  importance  of  Toledo  and 
Louisville  may  be  underrated  in  comparison  with  the  Atlantic  ports 
for  the  reason  that  the  receipts  at  the  two  interior  markets  are  com¬ 
puted  on  the  basis  of  inspection  only,  and  do  not  include  reconsigned 
cars  or  through-billed  cars  not  inspected.  Yet  the  business  of  sea¬ 
board  markets  is  so  largely  of  a  transfer  or  transit  character  that 
such  comparisons  are  unsatisfactory  in  any  case. 

Beceipts  of  all  five  grains. — The  table  below  shows  the 
average  annual  receipts  of  wheat,  corn,  oats,  barley,  and  rye  com¬ 
bined  for  the  five  calendar  years  1913  to  1917  at  the  principal 
primary  and  secondary  markets. 


Table  7. — Average  annual  re'ceipts  of  wheat,  corn,  oats,  barley,  and  rye  combined  for  the 
five  calendar  years  1913  to  1917  at  the  principal  primary  and  secondary  markets. 


[In  bushels,  000 ’s  omitted.] 


Primary  markets. 

Published 

receipts. 

Per  cent. 

Phirnpo  . 

334,943 

32.9 

. 

200,016 

19.7 

nit.V _ ... 

87,205 

80,152 

8.5 

fit  T.miis . 

7.9 

Duluth . 

78,093 

7.7 

Atilwankpc . . 

72,031 

7.1 

Omahn. _ 

66,149 

6.5 

Pporia . . . 

43, 170 

4.2 

Indianapolis . 

32,674 

3.2 

fMnpinna.ti _ _ 

23,007 

2.3 

Total . 

1,017, 440 

100.0 

Order  of 
impor¬ 
tance.! 

Secondary  markets. 

Pub^ 

lished 

receipts. 

Per  cent. 

1 

Buffalo . 

198,695 

37.7 

2 

New  York . 

136,945 

26.0 

3 

Baltimore . 

84, 438 

16.0 

5 

Philadelphia . 

50,332 

9.5 

4 

Boston . 

24, 119 

4.6 

6 

Louisville . 

17,169 

3.3 

7 

Toledo . 

1.5,305 

2.9 

8 

9 

Total . 

527,003 

100.0 

10 

Order  of 
impor¬ 
tance. 


1 


i 


1  -Vs  estimated  by  the  Commission  because  of  known  variations  in  basis  for  computing  “recaipts.” 

The  figures  of  average  yearly  receipts  of  all  five  grains  at  these  17 
markets  are  valuable  as  an  indication  of  the  comparative  volume  of 
trading  at  each  center,  although  subject  to  the  qualifications  already 


I 


1  Ci  cn  4^  CO  tc 


24 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


noted.  Tile  only  doubt  as  to  the  relative  importance  of  the  markets 
as  indicated  by  the  tabulated  figures  occurs  in  comparing  St.  Louis, 
Duluth,  and  Milwaukee.  Since  Duluth  figures  represent  grain 
actually  unloaded,  while  those  for  St.  Louis  include  a  substantial 
thi-ough-billed  movement,  there  is  little  question  but  that  Duluth 
should  receive  fourth  place.  It  is  impossible  to  state  definitely  that 
more  grain  is  marketed  at  St.  Louis  than  at  Milwaukee,  although 
such  an  order  of  rank  is  given  in  the  absence  of  contrary  evidence.  , 

Several  markets  not  covered  by  these  tables,  such  as  Sioux  City, 
Des  Moines,  and  St.  Joseph,  do,  nevertheless,  claim  a  place  as  primary 
markets.  Considering  the  volume  of  receipts,  Buffalo  (classed  as  a 
secondary  market)  would  rank  with  the  primary  terminal  of  Min¬ 
neapolis,  while  some  of  the  Atlantic  and  Gulf  ports  export  more 
grain  than  is  handled  at  such  primary  markets  as  Peoria,  Cincin¬ 
nati,  and  Indianapolis.  As  already  stated,  however,  the  term 
primary  market  refers  not  to  volume  but  to  source  of  receipts. 

Section  4.  Local  consumption. 

Introductory. — Another  criterion  of  the  importance  of  markets 
lies  in  a  consideration  of  local  consumptive  demand,  which  is  gauged 
by  the  difference  between  receipts  and  shipments  of  grain..  It 
might  be  presumed  that  both  receipts  and  shipments  are  computed 
on  the  same  or  similar  bases  in  a  given  market,  and  that  the  published 
figures  are,  therefore,  sufficiently  accurate  for  such  a  comparison. 
Yet  even  here  there  are  certain  inconsistencies  in  collecting  the 
figures  as  between  incoming  and  outgoing  grain  which  mar  com¬ 
parisons.  In  a  few  instances,  for  example,  reconsigned  cars  are 
included  in  the  published  data  for  shipments,  but  not  in  receipts. 
Yet  in  general,  especially  for  all  five  grains  combined,  these  figures 
furnish  indices  whereby  the  markets  can  be  ranked  in  order  of  local 
consumption. 

Wheat  consumption. — The  table  below  shows  the  average  annual 
local  consumption  of  wheat  at  10  primary  markets  for  the  five  calendar 
years  1913  to  1917. 


Table  8. — Avemgc  annual  receipts,  shipments,  and  local  consumption  of  ivhcat  at  10 
primary  marletsfor  the  Jive  calendar  years  19 IS  to  1917. 

[In  bushels,  OOO’s  omitted.] 


Receipts. 

Ship¬ 

ments. 

Local 

consump¬ 

tion. 

Per  cent 
of  local 
consump¬ 
tion  to 
receipts. 

Minneapolis . 

120,151 
55,612 
65,412 
34, 209 
21, 275 
8,062 
56,884 
3,390 
5,955 
3,079 

38,521 

43,986 

58,127 

27,090 

17,889 

4,933 

54,090 

1,255 

4,356 

2,974 

81,630 

11,626 

7,285 

7,119 

3,386 

3,129 

2,794 

2,135 

1,599 

105 

67.94 

20. 91 
11.14 
20. 81 

15.92 
38. 81 

4.91 

62.98 

26.85 

3.41 

KansasCity . 

Chicago . . . 

St.  Louis . 

Omaha . 

Milwaukee .  . 

Duluth . 

Indianapolis  > . 

Cincinnati . 

Peoria . 

Total . 

374,029 

253,221 

120,808 

32. 30 

*  2-year  average,  1916-17. 


SIZE  AND  IMPORTANCE  OF  THE  MARKETS. 


25 


It.  is  apparent  from  the  table  that  Minneapolis  is  by  far  the  greatest 
consumptive  market  for  wheat  in  the  United  States.  Kansas  City 
is  second  among  primary  markets  as  regards  quantity  of  receipts 
consumed^  although  the  proportion  is  relatively  small.  The  other 
large  concentration  points  ship  out  the  greater  proportion  of  the 
grain  handled. 

Corn  consumption. — The  table,  below  shows  the  average  annual 
local  consumption  of  corn  at  10  primary  markets  for  the  five  calen¬ 
dar  years  1913  to  1917. 


Table  9. — Average  annual  receipts,  shipments,  and  local  consumption  of  corn  at  10 
primary  maricetsfor  the  five  calendar  years  1913  to  1917. 


Chicago . 

Peoria . . 

Indianapolis’ 

St.  Louis . 

Cincinnati . . . 
Kansas  City.. 
Milwaukee . . . 
Minneapolis.. 

Omaha . 

Duluth..... . . 

Total.. 


[In  bushels,  OOO’s  omitted.) 


Receipts. 

Ship¬ 

ments. 

Local 

consump¬ 

tion. 

Per  cent 
of  local 
consump. 
tion  to 
receipts. 

100,592 

70,474 

30,118 

29.94 

23,843 

10,080 

13,763 

58.14 

23, 144 

12, 702 

10, 442 

45.12 

19, 774 

11,023 

8,751 

=  44.26 

8,504 

4,450 

4,054 

47.67 

20,422 

14,728 

5,694 

'  27.88 

1.3,666 

10, 167 

3,499 

25.60 

9,366 

7,482 

1,884 

20.12 

27,352 

25,559 

1, 793 

6.56 

862 

779 

83 

9.63 

247,525 

167,444 

80, 081 

32.35 

’  2-year  average,  1916-1917. 


This  table  indicates  that  corn  consuuiption  at  primary  markets 
is  chiefly  centered  at  Chicago,  Peoria,  Indianapolis,  and  St.  Louis. 
These  cities  not  only  furnish  markets  for  the  grain,  but  also  have 
exerted  the  attractive  force  of  an  active  milling  and  manufacturing 
demand. 

Oats  consibiption. — The  table  below  shows  the  average  annual 
local  consumption  of  oats  at  10  primary  markets  for  the  five  calen¬ 
dar  years  1913  to  1917. 


Table  10. — Average  annual  receipts,  shipments,  and  local  consumption  of  oats  at  10 
primary  markets  for  the  five  calendar  years  1913  to  1917. 


Chicago . 

St.  Louis . 

Indianapolis  ’ 
Milwaukee... 
Kansas  City.. 
Cincinnati.... 

Peoria . 

Muineapolis.. 

Duluth . 

Omaha . 

Total . . 


(In  bushels,  OOO’s  omitted.) 


Receipts. 

Ship¬ 

ments. 

Local 

consump¬ 

tion. 

Per  cent 
of  local 
consump¬ 
tion  to 
receipts. 

136,687 
23,758 
16, 267 
28, 155 
9,712 
7,014 
12,779 
30, 446 
5,624 
15,846 

113, 130 
18, 147 
11,405 
25,563 
7,539 
5,410 
12,570 
30,562 
5,683 
15,857 

23,557 
5,611 
4,862 
2,592 
2, 173 
1,604 
209 

2  116 

2  59 

2  11 

17.23 

23.62 

29.89 

9.21 

22.37 

22.87 

1.64 

286, 288 

245, 866 

40,422 

14.12 

1  2-year  average,  1916-1917. 

*  “Shipments”  exceed  “receipts”  due  to  inconsistencies  in  collecting  figures  published  or  to  decreases  in 
stocks  carried  over. 


26 


TERMINxiL  GRAIjS^  MARKETS  AKD  EXCHAXGES. 


The  table  indicates  that  Chicago  is  the  only  large  consumer  of 
oats  among  the  markets  considered,  although  the  consumption  at  that 
point  is  only  about  17  per  cent  of  receipts.  A  large  proportion  of 
this  is,  of  course,  used  for  local  feeding  purposes. 

Barley  consumptiojST. — Thb  table  below  shows  the  average  an- 
nual  local  consumption  of  barley  at  10  primary  markets  for  the 
calendar  years  1913  to  1917. 

Table  11. — Ava'age  annual  receipts,  shipments,  and  local  consumption  of  harley  at  10 

primary  marJeets  for  the  calendar  years  1913  to  1917. 


[In  bushels,  OOO’s  omitted.] 


♦  • 

Receipts. 

Ship¬ 

ments. 

Local 

consump¬ 

tion. 

Per  cent 
of  local 
consump. 
tion  to 
receipts. 

Chicago . 

28, 033 
18, 840 
33, 171 
1,883 
3,001 
905 
11,424 
872 
1,084 

8, 370 
5, 136 
30, 154 
193 
1,422 
72 
10, 878 
448 
928 

19,663 
13, 704 
3,017 
1,690 
1,579 
833 
544 
424 
156 

70.14 

72.74 
9.10 

89.75 
.52.62 
92.0-t 

4.76 
48.62 
14. .30 

Mihvaukee . . ... 

Minneapolis . 

St.  Louis . 

Peoria . 

Cincinnati . 

Duluth . 

Omaha . 

Kansas  Citv . 

Indianapolis! . 

Total . 

99, 213 

57, 601 

41,610 

41.94 

J  No  barley  receipts  at  Indianapolis. 


As  shown  by  the  table,  Chicago  is  the  largest  consumer  of  barley 
although  a  slightly  greater  percentage  of  receipts  is  consumed  by 
Milwaukee. 

Rye  consumption. — -The  table  below  shows  the  average  annual 
local  consumption  of  rye  at  10  primary  markets  for  the  five  calendar 
years  1913  to  1917.  ^ 


Table  12. — Average  annual  receipts,  shipments,  and  local  consumption  of  rye  at  10 
primary  markets  for  the  five  calendar  years  1913  to  1917. 

[In  bushels,  OOO’s  omitted.] 


Minneapolis . . 

Chicago . 

Milwaukee . . . 
Cincinnati . . . 
Indianapolis  ^ 

St.  Loms _ 

Omaha ...... 

Peona . 

Kansas  City . 
Duiuth . 

Total . . 


Receipts. 

Ship¬ 

ments. 

Local 

Percent 
of  local 

consump- 

consump- 

tion. 

tion  to 
receipts. 

6,882 

4,590 

4, 259 

3,203 

3,308 

2, 635 
318 

649 

218 

7 

518 

386 

805 

687 

468 

376 

375 

303 

3,299 

3,273 

2,292 

33. 30 

1,056 

24.  79 

673 

20. 31 

331 

51. 00 

211 

96.  79 

132 

25.48 

118 

14.66 

92 

19.66 

72 

19.20 

26 

.79 

20, 781 


15, 778 


5,003 


24.07 


1 2-year  average,  1916-17. 

As  the  table  indicates,  the  Minneapolis  mills  attract  more  rye  than 
is  consumed  at  any  other  primary  market.  Indian apohs  has  led  in 
the  percentage  of  rye  receipts  consumed  owing  to  the  demand  of 


> 


T- 


SIZE  AND  IMPORTANCE  OF  THE  MARKETS.  27 

I 

' 

local  mills  and  distilleries,  although  the  quantity  consumed  is  coih 
siderably  less  than  that  at  Chicago,  Milwaukee,  or  Cincinnati. 

Consumption  of  all  five  grains. — The  table  below  shows  tho 
average  annual  local  consumption  of  the  five  grains  combined  at  10 
primary  markets  for  the  five  calendar  years  1913  to  1917. 

Table  13. — Average  annual  receipts,  shipments,  and  local  consumption  of  ivhcat,  corn, 
oats,  barley,  and  rye  combined  at  10  primary  markets  for  the  five  calendar  years  1913  to 
1917. 

[In  bushels,  OOO’s  omitted.] 


Receipts. 

Ship¬ 

ments. 

Local 

consump¬ 

tion. 

Per  cent 
of  local 

consump¬ 
tion  to 
receipts. 

Minneapolis . 

200,016 

111,309 
253, 304 

88, 707 

44  35 

Chicago . 

334' 9S3 

8i;  679 

24,38 
32. 76 

Milwaukee . * . 

72;031 

48,'  434 

23; 597 

Ri  T.nnfs . . . . . 

so;  142 

56, 839 
67  484 

23'  303 

29. 08 
22.61 
41.03 

T<rnnsa.«?  Citv . . . 

87, 205 

19*  721 

Indianapolis  ^ . 

43,019 

25, 369 

17, 650 

Peoria . - . 

43^170 

27;  422 

15, 748 

36.48 

Cincinnati . 

23; 027 

14;  606 

8;421 

36. 57 

Omaha . 

66;  150 

60.440 
74, 703 

5;  710 

8. 63 

Duluth . 

78;  093 

3;  390 

4.34 

Total  . 

1,027,836 

739, 910 

287, 926 

28. 01 

1  2-year  average,  1916-17. 


A  consideration  of  local  consumption  on  the  basis  of  all  grains 
emphasizes  the  shipping  and  transfer  business  which  exists  at  Duluth 
and  Omaha.  While  Minneapolis  is  the  greatest  consumer  both  in 
quantity  and  percentage  of  receipts  Duluth  is  the  smallest  in  both 
these  respects.  Chicago  consumption  is  a  considerable  factor,  espe¬ 
cially  in  corn  and  oats,  and  is  relatively  larger  than  the  figures  indi¬ 
cate,  since  about  24  per  cent  of  the  receipts’’  should  be  eliminated 
as  through  traffic.  The  same  c|ualification  applies  to  St.  Louis  and 
Peoria.  Kansas  City,  Omaha,  and  Duluth  are  the  only  largo  mar¬ 
kets  which  are  substantially  below  the  average  in  ratio  of  con¬ 
sumption  to  receipts. 

Section  6.  Elevator  capacity. 

Terminal  elevator  capacity  is  frequently  referred  to  by  the  trade 
as  an  indication  of  the  size  and  importance  of  certain  grain  markets. 
Obviously  a  market  equipped  with  a  large  number  of  elevator  ware¬ 
houses  can  handle  more  grain  for  merchandising,  storage,  or  transfer 
purposes  than  a  market  not  so  equipped.  Comparisons  are  difficult 
on  this  basis,  however,  because  of  the  failure  to  distinguish  between 
the  functions  performed  by  the  various  elevators  so  listed.  At 
certain  rate-breaking  points,  for  example,  large  elevators  are  utilized  ' 
for  transfer  purposes  and  should  be  regarded  only  as  transportation 
facilities.  Such  is  largely  the  case  at  Buffalo  and  at  seaboard  ' 
points.  Certain  elevators  are  licensed  and  regulated  by  State 
authorities  and  are  listed  as  public  warehouses;  but  for  the  most 
part  it  is  difficult  to  distinguish  the  storage  available  for  public  . 


28 


TERMIJ^^AL  GRAIN  MARKETS  AND  EXCHANGES. 


account  from  that  utilized  by  private  merchandising  concerns. 
Furthermore,  in  markets  conducting  a  trade  in  futures,  certain  ele¬ 
vators  are  declared  “regular”  for  the  delivery  of  warehouse  receipts 
on  future  contracts.  In  certain  markets  these  regular  elevators 
must  be  public  licensed  warehouses,  while  in  others,  notably  Duluth 
and  Kansas  City,  private  elevators  may  be  declared  “regular”  for 
purposes  of  delivery  on  future  contracts.  This  diversity  of  ele¬ 
vator  functions  (see  also  Vol.  Ill)  makes  it  impossible  to  set  down 
comparative  figures  of  terminal  elevator  capacity  without  qualifying 
and  defining  the  character  of  the  houses  found  in  each  market. 

For  the  table  below  it  has  been  necessary  to  use  published  figures 
of  rated  storage  capacity.'* 

These  figures  include  “public  warehouses,”  “private  terminal  ele¬ 
vators,”  and  mill  and  manufacturing  storage  capacity.  No  attempt 
has  been  made  to  separate  the  storage  owned  by  these  manufacturing 
concerns.  It  must  be  understood,  however,  that  except  in  Minneapolis; 
the  millers  do  not  control  a  large  proportion  of  the  storage.® 

The  comparative  storage  capacity  as  defined  above  is  shown  in 
the  following  table : 

/ 

Table  \A.— Rated  elevator  storage  capacity  at  terminal  grain  markets  for  1919.^ 


IMniary  markets. 


Chicago . 

Minneapolis 

Duluth . 

Kansas  City 
Milwaukee.. 

Omaha . 

St.  Louis. . . 
Peoria  . 


Number 
of  eleva¬ 
tors. 


67 

65 

27 

37 

29 

20 

45 

2 


Aggregate 
capacity  (in 
bushels). 


55,805, 

54,900, 

35,075, 

23,885, 

16,310, 

10,600, 

9,850, 

1,250, 


000 

000 

000 

000 

000 

000 

000 

000 


Secondary  markets. 


Buffalo . 

New  York. . . 

Toledo . 

Baltimores.. . 
Philadelphia. 
Cinciimati.... 
Louisville. . . . 
Indianapolis. 
Boston . 


Number 
of  eleva¬ 
tors. 


23 

11 

14 

6 

5 

17 

7 

14 

3 


Aggregate 
capacity  (iu 
bushels). 


28,250,000 

7,330,000 

5,660,000 

5,650,000 

4,550,000 

2,955,000 

2,945,000 

2,655,000 

2,500,000 


1  Aggregate  capa^ty  includes  milling  and  manufacturing  storage  except  at  Peoria.  Boston  New  Y 
Philadelphia,  and  Baltimore.  ,  ^  j. 

•  1916  report  of  the  board  of  trade. 

®  The  storage  capacity  in  the  port  of  Baltimore  has  recently  been  increased  to  9,950,000  bushels. 


ork, 


This  table  of  storage  capacity  indicates  that  Chicago  and  Minne¬ 
apolis  are  practically  equal  in  elevator  equipment;  with  Duluth 
and  Kansas  City  in  third  and  fourth  places,  respectively,  among 
primary  markets.  The  importance  of  Buffalo  as  a  point  of  trans¬ 
shipment  appears  in  its  relatively  large  elevator  capacity  which  is, 
for  example,  greater  than  that  at  Kansas  City.  The  smaller  storage 
capacity  at  the  other  secondary  terminals  is  due  to  the  fact  that  these 
markets  are  generally  restricted  to  a  transfer  or  export  business. 
Concentration  of  surplus  stocks  of  grain  takes  place  mainly  at  Chicago, 
Minneapolis,  Duluth,  Kansas  City,  Milwaukee,  Omaha,  St.  Louis' 
and  Buffalo.  *  .  / 

<  Corrected  figures  of  individual  elevator  capacity  as  of  July  1,  1920,  for  all  important  grain  markets  of 
the  United  States  are  shown  in  Vol.  Ill  of  this  report. 

About  20  per  cent  of  the  capacity  listed  for  Minneapolis  is  owned  by  flour  mills. 


Chapter  II. 


CONTROLLING  FACTORS  IN  THE  DEVELOPMENT  OF  TERMINAL 

MARKETS. 

Section  1.  General  survey. 

In  tlie  development  of  grain  markets  there  have  been  three  chief 
factoi's:  (1)  Proximity  to  the  productive  areas,  (2)  transportation 
facilities  and  rates  (including  terminal  facilities),  and  (3)  con¬ 
sumptive  demand,  especially  that  of  millers  and  converters.  There 
are  other  minor  factors,  more  or  less  related  to  these.  The  existing 
public  storage  capacity,  for  example,  whether  it  be  considered  a 
part  of  the  transportation  scheme  or  not,  is  influential  in  directing 
grain  toward  a  market.  Also  the  banking  and  credit  facilities  of  a 
market  exercise  an  attractive  influence  in  themselves  when  bighly 
organized,  although  they  may  have  been  built  up  primarily  because 
of  the  traffic. 

Obviously  mere  geographical  nearness  to  producing  areas  is  not 
the  only  determining  factor.  Why,  for  instance,  has  the  market  at 
Kansas  City  so  far  surpassed  that  at  St.  Joseph,  Mo.  ?  It  is  ap¬ 
parent  from  the  outset  that  transportation  facilities  and  favorable 
freight  rates  are  a  leading  influence  in  the  development  of  grain 
markets.  Accessibility  to  the  productive  areas  is,  however,  a  prime 
advantage  and  will  be  first  discussed  with  the  aid  of  map  Diagrams 
A  to  F  in  the  next  section. 

Section  2.  Location  of  grain  markets  with  reference  to  the  productive 

areas. 

Primary  markets  and  wheat  production. — The  areas  of  wheat 
production  and  the  location  of  the  10  primary  markets,  described 
above,  in  relation  thereto  are  shown  in  Diagram  A  (p.  31).  The  dia¬ 
gram  shows  the  density  of  wheat  production  per  square  mile  by  States 
for  the  period  1913-1917.  It  is  quite  apparent  that  the  six  largest 
primary  wdieat  markets  are  located  within  or  immediately  adjacent 
to  the  areas^of  largest  wheat  production.  These  markets  are  also 
important  terminals  of  grain  carrying  trunk  Jine  railroads.  Chi¬ 
cago,  Duluth,  and  Milwaukee  occupy  water  shipping  positions  on 
the  Great  Lakes;  while  Kansas  City  and  St.  Louis  have  potential 
facilities  for  shipping  by  river.  Each  of  the  10  markets  forms  a  • 
concentration  point  for  the  initial  movement  of  wheat  and  other 
grains,  hence  the  designation  primary  terminal. 


29 


30  TEPvMIIs^AL  GRAIN  MARKETS  AN-D  EXCHANGES. 

Thj3  importance  of  these  concentration  points  is  further  demon¬ 
strated  by  a  classification  by  States  of  the  spring  and  winter  wheat 
])rodiiction  which  appears  in  the  following  table: 

Table  15. — Average  annual  'production  of  spring  and  'winter  wheat  by  principal  producing 

States  for  the  calendar  years  1913  to  1917  d 

[In  thousands  of  bushels.] 


State. 

Average 

produc¬ 

tion. 

Per  cent 
of  total 
produc¬ 
tion. 

Cumula¬ 
tive  per¬ 
centages. 

SPRING  WHEAT. 

North  Dakota . 

81,548 
52,930 
39,454 
18,954 
11,641 
6,625 
5,213 
4,808 
4,806 
4, 156 
2,166 
1,990 

I  800 

34.2 

22.2 
16.5 

7.9 

4.9 
2.8 
2.2 

0  0 

Minnesota . 

56.4 

79  (i 

South  Dakota . 

Washington . 

i  Z.  if 
Q 

Montana . 

oO.  / 

California . 

OO.  i) 

OA  7 

09  7 

Nebraska . . . 

2.0 

1  7 

i7Z.  { 
O  i  7 

Oregon . 

AA  A 

Wisconsin . 

.9 

.8 

.8 

.4 

A 

WO.  X 
07  9 

Vw  .  6 
AO  1 

Wyoming . 

Wo.  1 
AO  A 

Nevada . ; . 

950 

914 

Wo.  W 

AA  O 

Ncav  Mexico . 

VUm  »> 

00  7 

WINTER  WHEAT. 

Kansas . 

102,377 
.53, 176 
37, 593 
36,629 
34,644 
33  4=i0 

18.5 

0  J. 

1  o  - 

Nebraska . 

lo.  D 

Illinois . 

A  ^ 

Z/ .  V.f 

Indiana . i...: . 

A  A 

«5X.  i 

A  2 

41.  o 

Oklahoma . 

A  n 

4  / .  u 

Missouri . 

32,228 

24 

OO. 

Bennsvlvania . . 

d  d 

oy.  4 

Washington _ . 

,  23,524 
1.5,996 
15, 770 
14,610 
12, 786 
12,253 
10 

d  9 

Oo.  o 

9  0 

OO.  U 

Michigan . 

9  0 

«u,  y 

Virginia . 

9  A 

t  o.  o 

76.4 

Oregon . 

O  Q 

Arizona . 

9  9 

t  o.  / 

Maryland . 

1  Q 

Kentucky . 

9,862 
8,901 
8,592 
•S  am 

1.8 

1  A 

North  Carolina . 

o4.  o 

Idaho . 

1  A 

oO.  Z 

New  York . 

1  K 

o/ .  o 

1 

oW.  o 

X.  0 

VU.  o 

1  Compiled  from  Yearbooks  of  Department  of  Agriculture,  each  year’s 
issue.  The  Yearbooks  do  not  give  corrected  figures. 

figures  taken  from  the  ^mar  of 

Tlie  table  shows  that  the  production  of  winter  wheat  extends 
through  a  broad  belt  including  Nebraska  on  the  north  and  extending 
into  Texas  in  the  southwest.  The  most  productive  area  centers 
in  Kansas  reaching  north  into  Nebraska,  south  into  Oklahoma,  and 
eastward  through  Missouri,  Illinois,  Indiana,  and  Ohio.  Wlieat  is  not 
grown  successfully  in  the  southeast  where  the  warm,  humid  spring 
weather  permits  fungous  diseases  to  injure  the  crop,  and  where  the 
mild  winters  frequently  give  the  plant  a  premature  start  only  to  be 
damaged  or  destroyed  by  late  frosts.^ 

Spring  wheat,  on  the  other  hand,  is  highly  locahzed  in  the  North¬ 
west,  from  Minnesota  to  Washhigton,  with  North  Dakota  the  leading 
producer.  The  Rocky  Mountain  plateau  cuts  athwart  this  region 

1  Finch  and  Baker,  Geography  of  World's  Agriculture  (1917),  pp.  14, 15, 18. 


V 


DEVELOPMENT  OF  TERMINiU:.  MAPvKETS. 


31 


so  that  the  Washington  area  (the  Palouse  and  Big  Bend  districts) 
must  ])e  considered  a  secondary  zone  of  production. 

It  is  apparent,  then,  that  Duluth  and  Minneaj^olis  are  in  position 
to  command  the  shipments  of  spring  wheat  while  Kansas  City, 
Chicago,  and  St.  Louis  have  ready  access  to  the  winter-wheat  areas. 
Omaha  and  Milwaukee  are  in  position  to  derive  a  certain  proportion 
from  each  crop.  Kansas  City  is  undoubtedly  the  leading  winter 
wheat  market,  although  the  exchange  publishes  no  figures  distin- 

■  Diagram  g, 

WHEAT  PRODUCTION  (BU.PER  SQ.  Ml.)  IN  THE 
PRINCIPAL.  GRAIN  STATES 


SSQ] 

IIOO 

AND  OVER 

300 

TO 

1093 

CuXiZXj 

o 

o 

TO 

839 

500 

TO 

B33 

300 

TO 

433 

L_M 

lOO 

TO 

299 

CZl 

0 

TO 

39 

(flVSPPGe FOR  YCRRS  J3l3  - 19/7) 


'M/LWRUKi 


/I 


^HRNSRSCI^^ 


guishhig  between  the  two  varieties.  The  effect  of  the  localization  of 
spring  wheat  appears  in  the  following  table,  which  shows  the  distri¬ 
bution  of  spring  and  winter  wheat  shipments  between  Minneapolis, 
Duluth,  Chicago,  and  St.  Louis  for  the'five-year  period  1913  to  1917 
(no  data  being  available  for  Kansas  City  or  Omaha) : 

Table  1G. — Distribution  of  spring  and  winter  wheat  shipments  at  specified  marhets 

1913  to  1917.^ 


% 

Average 

total 

receipts. 

Spring 

wheat 

receipts. 

Per  cent 
of  spring 
wheat. 

Winter 

wheat 

receipts. 

Per  cent 
of  winter 
wheat. 

Unclassi¬ 

fied 

wheat. 

Per  cent 
of  un- . 
classified 
wheat. 

Minneapolis  (cars) . 

104,995 

78,706 

75.91 

13,395 

12.76 

11,894 

11.33 

Duluth  (1,000  bushels) . 

66,973 

41,685 

45,368 

67.74 

3,695 

30,567 

5.52 

17,909 

26.74 

Chicago  (cars) . . . 

4,338 

10.41 

73.33 

6,780 

16. 26 

St.  Louis  (cars) . 

21,819 

'682 

3.12 

18,511 

84. 84 

2,626 

12.04 

1  No  statistics  available  for  Kansas  City  or  Omaha.  Receipts  at  Kansas  City  are  practically  all  winter 
wheat. 


32 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


Primary  markets  and  corn  production. — The  United  ^States 
corn  crop  is  the  largest  cereal  crop  produced  in  any  country.  While 
production  extends  generally  throughout  the  United  States,  the 
gi'eat  bulk  of  the  crop  is  consumed  on  the  farm  in  feeding  ^  so  that 
shipments  are  made  largely  from  the  fields  of  greatest  production. 


Diagram  B. 

CORN  PRODUCTION  (  BUSHELS  PER  SQ.MI.)  IN  THE 
PRINCIPAL  GRAIN  STATES 


Diagram  B  shows  that  the  area  of  heaviest  production  extends 
from  the  Mississippi  Basin  in  western  Iowa  and  eastern  Nebraska 
across  Illinois  and  Indiana  and  into  Ohio.^ 

As  both  the  table  and  Diagram  B  indicate,  the  markets  in  or 
near  the  States  of  Iowa,  Illinois,  Nebraska,  Indiana,  Missouri,  and 
Ohio  are  most  accessible  to  surplus  corn  production.  The  rank  of 
these  corn  markets  has  been  shown  at  page  20. 

The  following  table  gives  the  classification  by  States  of  the  average 
annual  production  of  corn  for  the  period  1913-1917: 


*  Estimated  at  from  71  to  80  per  cent. 

3  The  temperature  requirements  of  difierent  varieties  of  com  vary  widely.  Some  southern  varieties 
need  an  average  frostless  season  of  180  days  and  mean  summer  temperature  of  80°.  Practically  no  corn 
is  grown  where  the  mean  summer  temperature  is  less  than  66°,  or  where  the  average  night  temperature 
during  the  three  summer  months  falls  below  55°.  Consequently  the  production  of  corn  along  the  northern 
border  of  the  United  States  and  at  the  higher  elevations  in  the  West  is  negligible.  (Finch  and  Baker, 
p.  29.) 


DEVELOPMENT  OF  TERMINAL  MARKETS.  33 


Table  17. — Average  annual  production  of  corn  in  the  principal  producing  States, 

1913  to  1917.^ 


[In  thousands  of  bushels.] 


States. 


Iowa . 

Illinois . 

Nebraska . 

Indiana . 

Missouri . 

Ohio . 

Texas . 

Kansas . 

Kentucky . 

Tennessee . 

Minnesota . 

South  Dakota.. 

Mississippi . 

Oeorgia . 

Alabama . 

Oklahoma . 

Pennsylvania. . 

Virginia . 

North  Carolina 
Wisconsin . 


Average 

annual 

pro¬ 

duction. 


360, 750 
335,097 
188, 596 
181, 752 
172, 665 
141, 203 
132, 375 
100, 277 
97, 825 
86, 275 
85, 700 
84,159 
64, 075 
63, 595 
60, 432 
60, 165 
59, 203 
56, 499 
56,366 
56, 110 


Per  cent 
of  annual 
average  pro¬ 
duction  in 
United 
States. 

Cumula¬ 

tive 

percent¬ 

age. 

13.0 

13.0 

12.1 

25.1 

6.8 

31.9 

6.6 

38.5 

6.2 

44.7 

5.1 

49.8 

4.8 

54.6 

3.6 

58.2 

3.5 

61.7 

3.1 

64.8 

3.1 

67.9 

3.0 

70.9 

2.3 

73.2 

2.2 

75.4 

2.2 

77.6 

2.2 

79.8 

2.1 

81.9 

2.0 

83.9 

2.0 

85.9 

2.0 

87.9 

J  C'Ompiled  from  Yearbooks  of  the  Department  of  Agriculture,  1914  to  1917,  each  year’s  figures  being 
taken  from  the  Yearbook  of  the  following  year  to  obtain  corrected  figures,  except  1917,  which  is  from  the 
1917  Yearbook. 


Primary  markets  and  oats  production. — Oats,  like  corn,  is 
grown  chiefly  for  feeding  purposes.  The  geographical  distribution 
of  the  oats  crop,  as  Diagram  C  shows,  is  similar  in  a  general  way  to 

Diagram  C. 

OATS  PRODUCTION  (  BUSHEUS  PER  SQ.  Ml.)  IN  THE 
PRINCIPAL  GRAIN  STATES 


/  ( 

> 

/ 

I 


3000  AND  over 
2450  TO  2939 
1300  TO  2443 
^/A  1350  TO  1839 
BOO  TO  1349 
EH)  250  TO  799 
CD  O  TO  249 

(fi\/ERPlJEFVfi  YEPRS  /9/3  -  I9i7) 


I  I  .  .  •'HMg 

A'"" 

I  •  ^  T 

I  I  rMV  .  A  I  / 

j  1. 


OKLA. 


368693°— 20 - 3 


34 


TERMIi«rx\L  GRAIN  AIARKETS  AND  EXCHANGES 


that  of  corn,  except  that  the  former  cereal  is  grown  much  more 
extensively  in  the  Northwest. 

The  more  northwesterly  trend  of  the  oats  belt  and  the  relatively 
heavy  i^rodiiction  in  Minnesota  and  the  Dakotas  enables  Minneapolis 
and  Milwaukee  to  obtain  a  volume  of  receipts  which  places  them  in 
second  and  third  rank,  respectively,  as  oats  markets.  (See  Table  4, 
p.  21.)  Oats  also  follows  corn  production  in  the  Central  West  l>c- 
causc  of  its  use  in  crop  rotation  with  the  latter  cereal.^ 

The  figures  of  average  oats  production,  by  States  for  the  period 
1913  to  1917,  are  shown  in  the  following  table: 

Table  IS. — Average  annual  produciioii  of  oats  in  the  principal  producing  States,  1913 

to  1917  d 


[In  bushels  OOO’s  omitted.] 


Slate. 

Average 

annual 

produc¬ 

tion. 

Per  cent 
of  annual 
average 
produc¬ 
tion. 

Cumula¬ 
tive  per¬ 
centage. 

Iowa . . 

193, 3G2 
1G8, 409 

14.5 

14.5 

Illinois . . . 

12.7 

27.2 

Minnesota . . . 

108,900 

8-1,638 

78,989 

62,621 

59,973 

56,125 

8.2 

35.4 

Wisconsin . 

6.4 

41.8 

Nebraska . 

5.9 

47.7 

North  Dakota . . . 

4.7 

52.4 

Ohio . 

4.5 

56.9 

South  Dakota . 

4.2 

61.1 

Indiana . 

55^46 

4.1 

05,2 

Michigan . 

51, 855 

3.9 

69. 1 

48' 052 

3.6 

72  7 
75.9 
78.7 

New  T'ork . 

42,625 
37,610 
37, 488 

3.2 

Texas . 

2.8 

Pennsylvania _ . . 

2.8 

81.5 

Missouri . 

35^20 

2.6 

84.1 

Oklahoma . 

2.')' 238 

1.9 

86.0 

87.7 

Montana . 

22'  036 

1.7 

Oregon . 

14'  087 

1.1 

88.8 

Idaho . 

13'  849 

1.0 

89.8 

AVashington . 

1:3' 500 

1.0 

90.8 

’  Compiled  from  Yearbooks  of  the  Department  of  Agricnlture,  1914  to  1917:  each  year  from  the  Yearbook 
of  the  following  year  to  obtain  corrected  figures,  except  1917,  which  is  from  the  Yearbook  of  the  same  5''car. 


From  the  table  it  appears  that  Iowa  and  Illinois,  the  leading  corn 
States,  are  also  first  in  the  production  of  oats.  These  vStates  arc 
directly  tributary  to  Cliicago  and  Milwaukee,  the  first  and  third 
markets  in  oats  receipts.  Minneapolis,  the  second  largest  oats  pri¬ 
mary  market,  is  tribuary  to  the  Dakotas,  Iowa,  and  the  Minnesota 
oats  beltv 

Primary  markets  and  barley  production.- — Diagram  D  (fol¬ 
lowing)  shows  the  trend  of  barley  production  into  the  Northwest.^ 


<  Sec  Finch  and  Baker,  Cl  cography  of  the  World’s  Agriculture,  p.  35.  In  the  great  oats-producing  region 
of  the  central  United  States  this  crop  is  particularly  important  not  only  because  the  grain  is  desired  for 
feeding  work  animals,  but  also  because  it  offers  a  spring  grain  needed  in  the  crop  rotation  with  corn,«priug 
wheat  not  being  adapted  to  this  region.  As  oats  arc  sown  in  the  spring,  before  corn-planting  time,  the 
crop  docs  not  require  the  early  removal  of  the  corn,  as  is  the  case  with  fall-sown  wheat,  and  as  oats  do  not 
mature  until  after  the  corn  is  laid  by  in  early  July,  there  is  very  little  competition  with  this  more  profitable 
crop  for  labor  at  critical  times  of  the  year. 

5  Most  of  the  barley  in  the  United  States  is  grown  in  Minnesota  and  the  Dakotas;  California  also  raises  a 
large  amormt,  eastern  Washington  and  the  famous  barley  district  of  eastern  AVisconsin  constituting  tho 
other  important  centers.  A  considerable  acreage  of  barley  is  also  found  in  Ivunsas,  Iowa,  eastern  Michigan, 
and  central  New  York.  The  barley  used  for  brewing  is  grown  almost  entirely  to  the  west  and  northwest 
of  the  Great  Lakes.  Barley  is  not  grown  to  any  extent  as  yet  in  the  South.  (Finch  and  Baker,  p.  40.) 


DEVFXOPMEXT  OF  TEIlMIXx\L  MARKETS. 


85 


Diagram  D. 

BARLEY  PRODUCTION  (BUSHELS  PER  SQ.MI.)  IN  THE 
PRINCIPAL  GRAIN  STATES 


S-  •• 
t.-; 
V.- 
s- 

/•, 

V 


'v. 


/ 
/ 


rrm 

fine 

3 BO  AND  Over 

2  90 

TO  353 

FFFIffl 

220 

TO  283 

150 

TO  2  19 

ao 

TO  143 

CED 

lO 

TO  79 

1 _ 1 

o 

TO  9 

(fiVBRffOe  FOR  YEFRS 19/3  -f9/7j 

^  N  -S 


MO-  [ 


A 

■■■ 

INp-  ■' •  .  OHip  .•  .'i 

/psa/f//’,-:.  I  .'a-'-' 

■  ■  ■  y.-.,‘nciNNfni 


\  ' •  \-\'\-\syKfiNsrsciTr  •‘.•V  -'1  ^ 


sT.LOuis[:^'yy^ _ 

V.V 


r — 1  ■  - If 


I—- 


k. 


OKLA, 


- ’'-I, 


As  a  result  of  the  high  concentration  of  barley  production  in  this 
area,  Minneapohs,  Chicago,  Milwaukee,  and  Duluth  are  in  position  to 
handle  the  bulk  of  the  movement.  (See  Table  5.)  The  average  an¬ 
nual  production  for  the  years  1913  to  1917  by  States  are  shown  in 

the  following  table: 


T\ble  19  — Average  annual  'production  of  barley  in  the  principal  producing  States,  lOlo 

to  1917  d 


[In  bushels  000 ’3  omitted.] 


State. 


California . 

Minnesota . 

North  Dakota.. 
South  Dakota . . 

Wisconsin . 

Iowa . 

Idaho . 

Washington _ 

Kansas.. . 

Oregon . 

Colorado . 

Nebraska . 

Midiigan . 

New  York . 

Montana . 

All  other  States 


Annual 

average 

crop. 

Per  cent 
of  total 
average 
crop. 

Cumula¬ 
tive  per¬ 
centage. 

37, 424 

18.7 

18.7 

34,319 

17.2 

35.9 

29;C25 

14.8 

50.7 

21,113 

10.6 

61.3 

19, 468 

9.7 

71.0 

9,901 

5.0 

76.0 

7,049 

3.5 

79.5 

6,679 

3.3 

82.8 

5,699 

2.8 

85.6 

4,642 

2.3 

87.9 

4,512 

2.3 

90.2 

3,279 

1.6 

91.8 

2,  -570 

1.3 

93,1 

2,369 

1.2- 

94.3 

2, 145 

l.l 

95.4 

9,217 

4.G 

1 

100.0 

1  Compiled  from  Yearbooks  oflhe  Department  of  AgriculUire,  1914  to  1917,  each  yearfrom  the  Yearbook 
of  the  following  year  to  obtain  corrected  figures,  except  191/  ,  v.  liicli  is  from  the 


1 1917  Yearbook. 


/'■ ;  i  i 


36 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


It  will  be  noted  that  with  the  exception  of  California  the  principal 
barley  producing  States  are  also  among  the  principal  spring- wheat 
States,  (See  p.  30.)  Accordingly,  the  spring  wheat  primary  markets 
are  also  important  barley  markets.  Milwaukee-  and  Chicago,  however, 
the  second  and  third  barley  markets,  have  held  their  position  primarily 
because  of  the  demands  of  malting  concerns  in  those  localities. 

Primary  markets  and  rye  production. — Diagram  E  show’s  a 
concentration  of  rye  production  in  the  North  Central  States.®  Penn- 

l^iagr^m  E. 


RYE  PRODUCTION  (buSHELS  PER  SQ.  Ml.)  IN  THE 
PRINCIPAL  GRAIN  STATES 


sylvania  and  New  York  are  relatively  large  producers  of  this  cereal 
(Table  20,  p.  37),  but  are  not  showm  on  the  map  for  the  reason  that  rye 
is  a  small  crop  and  no  great  concentration  markets  exist  by  reason  of 
the  crop  in  these  States. 

Minneapohs,  Chicago,  Milwaukee,  and  Duluth  are  immediately 
accessible  to  the  areas  of  rye  production  and  handle  the  great  bulk 
of  the  countiy  shipments. 

The  relative  importance  of  the  principal  producing  States  is  shown 
in  the  following  table: 

®  Very  little  rye  is  grown  for  grain  south  of  the  mean  summer  temperatme  line  of  75°,  and  the  principal 
centers  of  production  are  located  where  the  mean  summer  temperature  is  about  70°.  The  States  Laving  an 
average  jrield  of  over  16  bushels  per  acre  are  all  located  in  the  North.  (Finch  and  Baker,  p.  27.) 


I 


DEVELOPMENT  OF  TERMINAL  MARKETS.  37 


Table  20. — Average  annual  production  of  rye  in  the  principal  producing  States,  1913 

to  1917  d 

lln  bushels,  OOO’s  omitted.) 


Stale. 

Average 

annual 

crop. 

Per  cent 
of  total 
average 
crop, 
United 
States. 

Cumula¬ 
tive  per¬ 
centage. 

"W'i  sofm  sin  _ _ ..... ... .... 

7,133 

14.8 

14.8 

Minn  Asnt  a  _ _ _ _ _ 

5,881 

12.2 

27.0 

Miehi'i'n.n  . . . . . . .... 

5,421 

11.3 

38.3 

Fpnnsylvan.ift  _ _ _ ..... _ _ _ 

4,742 

9.8 

48.1 

X firth  Dakota  . . . . . . . . . . 

4,22.5 

8.8 

56.9 

X  phraska  _ _ _ .... _ .... _ ... 

2,724 

2,707 

5.7 

62.6 

Smith  Dakota  _  . . . 

5.6 

68.2 

X pw  Y ork  r  _ ...... ... _ .... 

3,532 

5.3 

73.5 

Indiana  . . . . . . . - . - 

2, 234 

4.6 

78.1 

1,535 

3.2 

81.3 

"K ow  .Tpfsav  . . . . 

1,.316 

2.7 

82.0 

1,032 

2.1 

86.1 

Vircrinift  . . . . 

915 

1.9 

88.0 

ICansa<?  _ _ _ _ _ _ _ _ _ 

847 

1.8 

87.8 

Illinois  . . . . 

783 

1.6 

91.4 

>  Compiled  from  the  reports  of  the  Department  of  Agriculture  for  the  years  191.3  to  1917,  each  year ’s  figmes 
from  the  Yearbook  of  the  following  year  to  obtain  correcte^l  figures,  except  1917,  which  is  from  the  1917 
Yearbook.  , 


Rye  is  used  largely  for  milling  purposes,  so  that  the  location  of  the 
markets  would  not  only  be  influenced  by  the  producing  area,  but 
also  by  the  presence  of  the  mills.  According  to  a  report  of  the 
Census  Bureau  ’  Minneapolis  flour  and  grist  mills  ground  2,054,894 
bushels  of  rye  in  1914  and  Chicago  and  Milwaukee  704,621  and 
269,367  bushels,  respectively.  These  three  cities  consumed  about 
one-fourth  of  the  rye  milled  during  that  year. 

Primary  markets  with  reference  to  total  grain  produc¬ 
tion. — Diagram  F  (p.  38)  is  somewhat  misleading  as  an  indication 
of  the  marketing  scheme,  because  it  includes  the  total  corn  crop, 
only  a  small  part  of  which  enters  into  the  marketing  movement. 

This  would  modify  the  density  indicated  for  all  grains  in  Nebraska, 
Iowa,  and  the  prairie  States. 

It  is  clear  from  the  foregoing  that  the  great  established  primary 
grain  markets  are  located,  for  the  most  part,  in  close  proximity  to 
the  areas  of  dense  production.  That  is,  geographical  location  with 
reference  to  production  is  essential  to  the  development  of  a  primai’y 
market.  To  illustrate  further,  it  should  be  recalled  that  the  west¬ 
ern  primary  market  for  Canada  is  located  at  Winnipeg  on  the  east¬ 
ern  edge  of  production  and  not  at  the  lake  shipping  points,  Fort 
William  and  Port  Arthur.  In  order  to  handle  a  large  volume  of 
country  shipments  to  the  satisfaction  of  producers,  a  location  rela- 
'  tively  close  to  the  productive  areas  seems  to  be  essential. 

Section  3.  Influence  of  production  upon  the  development  of  markets. 

In  order  fairly  to  estimate  the  positive  influence  of  production 
upon  the  development  of  adjacent  markets,  it  is  necessary  to  compare 

J  Prepared  for  the  Federal  Trade  Commission. 


88 


TEPvMUTAL  GEAIir  MAKKETS  AISTD  EXCHANGES. 

the  production  of  specific  sections  over  a  period  of  years  with  re¬ 
ceipts  at  the  markets  to  which  these  sections  are  tri])iitaiy.  Although 
certain  errors  due  to  different  methods  in  compiling  receipts  (see  p. 
18)  enter  into  any  such  computations,  these  are  not  large  enough  to 
modify  seriously  the  conclusions.  In  the  main,  the  failure  of  receipts 
at  established  markets  to  parallel  production  in  the  tributarv'  areas 
indicates  that  some  other  influence  has  operated  to  deflect  the  moye- 
iuent  of  grain  from  the  most  direct  channels. 


Diagram  F. 

TOTAL  GRAIN  PRODUCTION  (CWT.  PER  SQ.  Ml.]  IN  THC 
PRINCIPAL  GRAIN  STATES 


In  preparing  the  diagram  of  correlations  (opposite  p.  40)  the  grain- 
producing  region  was  divided  into  four  sections  and  the  markets 
selected  which  were  most  accessible  to  each  area,  as  follows: 


Markets. 

MinnoaTX)li.s _  . 

I.  Noethwest. 

Duluth _ _ _ _ _ _ 

Omaha . 

- 

II.  Southwest. 

Kansas  Citv . 

St.  Louis . 

III.  Middle  West. 


Producing  are^. 
Minnesota. 
North  Dakota. 
'  South  Dakota. 
Montana. 

Nebraska. 

Kansas. 

^Missouri. 


Chicago . . . 
Peoria .... 
IMilwaiikee 


Iowa, 

Illinois. 

Wisconsin. 


^ ':?"7  -  •• 

DEVELOPMENX  OE  TERMIlSTAIi  MARKETS.  39 


^^arkcls.  IV*  EasT  Centiial,  Producing  area. 

]  )cl  roi  t . . - . . . . . Michigan . 

Indianapolis . Indiana. 

( 'incinnati' 

Toledo  • . Ohio. 

Cleveland 


Figures  for  aA'crago  procliictioii  and  aA^crage  market  receipts  were 
then  computed  to  establisli  the  position  of  the  curves  at  1885,  1895; 
1905,  and  1915,  and  the  graphs  were  drawn  from  the  logarithms  of 
these  figures.  logarithms  for  coriuiiacL-oats  ^)roduction  were 

reduced  by  0.80  for  convenience  in  presentation.  It  was  assumed 
that  the  four  points  thus  obtained  for  both  production  and  receipts 
would  giAm  a  comparison  sufficiently  accurate  to  demonstrate  the 
force  of  proximity  to  producing  areas  in  building  up  the  markets.® 


*  The  tables  of  logarithms  for  figures  of  production  and  receipts  are  as  follows: 

LOGAIUTHMS  OF  AVERAGE  PRODUCTION  OF  FIVE  GRAINS  IN  SPECIFIED  AREAS 

BY  10-YEAR  INTERVALS. 


Corn. 

Wheat. 

Oats. 

Barley. 

Rye. 

Northwest: 

1884-1886 . 

3. 56279 

4.83249 

4.74187 

4.01824 

2.77.597 

1894-1896 . 

3.658:30 

5.06773 

4.970.55 

4.. 32410 

3.11992 

1904-1906 . 

4.01148 

5.24746 

5.20455 

4.800.59 

3.43201 

1913-1917 . 

Southwest: 

4.25999 

5.30448 

5.39749 

4.93908 

4.1.5445 

1884-1886 . 

5.65312 

4.79497 

4.89851 

3.66521 

.3.67311 

1894-1896 . 

5. 68820 

4.802.57 

4.91940 

3.02.366 

3.24403 

1904-1906 . 

5.79717 

5. 17851 

5. 00615 

3.86982 

3.. 53377 

1913-1917 . . 

5. 66421 

5.28310 

5.20994 

3.97030 

3.59218 

Middle  West: 

1884-1886 . 

5. 70034 

4 . 85562 

5.3.5216 

4.14258 

3.84979 

1893-1897 . 

5.69859 

4.68060 

5.44646 

4.33143 

3.86623 

1903-1907 . . . 

5. 86851 

4.71112 

5.5:3532 

4.50109 

3.84:392 

1913-1917 . . . 

5.87619 

4.74341 

5. 64981 

4.47586 

3.95173 

East  Central; 

1883-1887 . 

5.38820 

4.98.590 

4.89164 

3.38970 

3.02653 

1893-1897 . 

5.38956 

4.89988 

4.94942 

3.35353 

3.46761 

1903-1907 . 

5. 52350 

4.88168 

5.11169 

3.33284 

3.64187 

1913-1917 . 

5. 57354 

4.93954 

5.22266 

3.59528 

3.96501 

LOGARITHMS  OF  AVERAGE  TERMINAL  MARKET  RECEIPTS  OF  FIVE  GRAINS  AT 

SPECIFIED  MARKETS  BA'  10-A'EAR  INTERVALS. 


Corn. 

AVheat. 

Oats. 

Barley. 

R.ye. 

Northwest;  • 

1883-1887 . 

“>.  83.378 

4. 69887 

3. 06371 

2.  .38917 

1.00000 

1893-1897 . 

3. 53769 

5. 0.3487 

4. 0:3266 

3. 64078 

3. 1179:5 

1903-1907 . 

3.  64758 

.5. 09167 

4.  4.8372 

4. 35110 

3. 39270 

1913-1917 . *. 

4. 00979 

5.  24,805 

4. 5571.5 

4.029:36 

4. 00775 

Southwest: 

1883-1887 . 

4.  41162 

4.  2.8630 

3.93381 

3.  45834 

2. 841:36 

1893-1897 . 

4.  .55078 

4. 38769 

4. 13360 

3. 28825 

2.76118 

1903-1907 . 

4.  76615 

4.  82259 

4.  .59 11 2 

3. 56360 

3. 08819 

191.3-1917 . 

4.  82968 

5. 04.567 

4. 69299 

3.  58422 

3.229^)1 

l^Iiddle  AVest: 

1883-1887 . 

4.  .8.591 4 

4.  48701 

.  4. 7373.5 

4.21927 

3.53314 

1.893-1897 . 

.5. 01237 

4.  5674:5 

5. 06920 

4. 4516:5 

3.  .55691 

190:3-1907 . 

5. 10.891 

4.  .55706 

5. 04045 

4. 63801 

3. 602r»0 

191:3-1917 . 

5. 14019 

4. 88:397 

5.  24,500 

4. 69788 

3. 90499 

Ea.'t  Central: 

1.88.3-1887 . 

4.  ^790 

4.47245 

3.  69152 

3. 16673 

2. 5.5871 

189.3-1.897 . . . 

4. 42999 

4. 39926 

4. 09258 

3.42681 

3. 15045 

190:3-1907 . 

4.  .56.8.51 

4.09889 

4. 447,86 

3. 46938 

3. 1277:5 

1913-1917 . 

4.  58727 

4.32974 

4. 51546 

3. 04139 

3. 20656 

40 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


The  first  section  of  the  diagram,  the  Northwest,  shows  a  very- 
definite  correlation  between  production  in  the  four  States  for  the 
four  10-year  intervals,  and  the  combined  receipts  at  Minneapolis 
and  Duluth  during  the  same  periods.  The  movement  of  grain  in 
this  section  is  relatively  unaffected  by  railroad  competition,  con¬ 
sumptive  demand,  or  other  factors  which  disturb  the  correlations 
obtained  for  the  sections  farther  east.  Either  for  mill  consumption 
or  for  large  scale  shipping  the  bulk  of  the  grain  must  move  to  one 
of  these  two  markets,  so  long  as  transportation  rates  are  favorable. 

In  considering  the  Southwest,  Middle  West,  and  East  Central 
sections  it  must  be  borne  in  mind  that  milling  centers,  or  largely 
consumptive  markets,  and  a  futures  market  such  as  Chicago,  will 
attract  grain  from  distant  areas  to  meet  an  abnormal  demand.  This 
Avould  be  true  even  assuming  an  equality  of  transportation  facil¬ 
ities  and  rates,  which  is  undoubtedly  an  incorrect  assumption. 

There  are  cross  currents  of  competition  operating  in  these  sections 
which  adversely  affect  the  correlation  between  receipts  and  produc¬ 
tion  in  certain  instances,  although  in  the  main  the  trend  is  shown  to 
be  toward  the  markets  indicated. 

Section  4.  Distribution  of  country  shipments. 

A  concrete  demonstration  of  the  flow  of  countiy  shipments  to  the 
more  adjacent  primary  markets  appears  in  the  followmg  table. 
These  figures  by  no  means  represent  the  total  movement,  but  do  give 
a  fair  cross  section  of  the  distribution  under  prewar  conditions. 


Table  21. — Percentage  analysis  of  sources  of  grain  receipts  {u'heat,  corri,  oats,  rye,  and 
barley)  at  specified  markets  during  the  crop  years  19P2-13  to  1916-17 d 


Grand 
total 
(car¬ 
loads). 2 

Illi¬ 

nois. 

Indi¬ 

ana. 

Iowa. 

Kan¬ 

sas. 

Michi¬ 

gan. 

Minne¬ 

sota. 

Mis¬ 

souri. 

Mon¬ 

tana. 

Ne¬ 

braska. 

('hicago . 

Minneapolis . 

Kansas  City . 

Duluth . 

St,  Louis.. . 

262. 03.3 
308,691 
Sl,.)ol 
85, 385 
42.174 
53;  0S5 
70, 33S 
27,  576 
24, 026 
12, 091 
8.  070 
8,  712 

16,  991 
6,  293 
5,  053 
11,087 
4,364 

7, 677 
5, 473 

5,  530 
e;  496 
2,117 

51.98 

.01 

.04 

2. 44 

31.43 
1.01 
6.  .53 
.02 
26.47 
32.  3,5 
22. 38 

21.04 

> 

0. 35 
.11 
.55.  24 

0.03 

5.  79 
36. 03 
.71 
17.  79 
1.07 
23.53 
,20 
.10 

G) 

.08 

0.  71 

"'3.’ 26’ 

0.02 
4. 24 
.16 
6. 15 
.43 

(^) 

.47 

1.78 
.86 
26.39 
.02 
6. 39 
.74 
63. 19 

41.  63 
1.39 

"Yf.m 

47.  26 
12.  09 

1 1.  95 

.  10 

.49 

.01 

.21 

■ 

19.73 

Milwaukee . 

. 

Omaha . 

"is.'ei’ 

67.99 
39.  74 

Peoria . 

. 

.01 

Indianapolis . 

Cincinnati . 

Detroit . 

Wichita . 

.33 

.02 

.21 

.44 

.08 

.02 

97. 81 

. 

.11 

.05 

Secondary  markets: 
Bulfalo . 

16.  73 
20.  56 
40. 43 

7. 12 
1.17 

14.  59 

47.  01 
12.  .59 
49.40 
39.99 

1.94 
2. 69 
.04 
9. 96 

Baltimore . 

.  -  •  ' 

• 

Louisville . 

6.  67 

"is.  79 

.04 

Toledo . 

.01 

St.  Paul . 

.  66 

.92 

17.  66 
23.15 

# 

6. 19 

.32 

.10 

.04 

Gulf: 

New  Orleans. . . 
Galveston . 

... 

Pacific  coast: 

Portland . 

.  63 
1.31 

Seattle . 

.05 

.28 

Los  Angeles. . . . 

*  Percentages  computed  and  adjusted  by  the  Bureau  of  the  Census. 
According  to  shipments  reported  by  country  CiCvators  and  warehouses. 
®Lcss  than  one  one-hundredth  per  cent. 


j 


1 


A 


-DEVELOPMENT  OF  TERMINAL  MARKETS. 


41 


Table  21. — Percentage  analysis  of  sources  of  grain  receipts  {wheat,  corn,  oats,  rye,  and 
barley)  at  specified  marlcets  during  the  crop  years  1912-13  to  1916-17 — Continued. 


Chicago . 

Minneapolis . 

Kansas  City . 

Jhiluth . 

St.  Louis . 

Milwaukee . 

Omaha . 

Peoria . 

Indianapolis . 

Cincinnati . 

Detroit . 

Wichita . 

Secondary  markets: 

13  ufTalo . 

Baltimore . 

Louisville . 

Toledo . 

Gulf: 

New  Orleans. . . 

Galveston . 

Pacific  coast: 

Portland . 

Seattle . 

Los  Angeles . . . . 


North 

Dakota. 


0.23 
33. 98 
.0.5 
72.  20 
.04 
.25 


Ohio. 


0. 01 


(•) 


.01 

11.03 

1.10 


30. 33 
19.  75 
.20 
40. 98 


Okla¬ 

homa. 


0.  07 
.05 
1.81 


.33 

'.'62 


1.56 


32.  24 
53.  08 


,09 


South 

Dakota. 


3. 30 
23. 11 
3.  78 
3.38 
.25 

23. 15 

12.16 
.04 

C) 


.02 

,02 


.02 


.08 


Wis¬ 

consin. 


0.50 
.09 
.10 
.01 
.40 
17.  74 


,01 


Middle 

Atlantic 

division. 


0.09 
13. 34 


Moun-  j 

tain  and  j  Southern 
Pacific  I  division. 

division,  i 

1 

_ I. _ 


0. 53 
.38 
1.00 
.15 
..51 
.04 
.97 


,28 


,03 


.06 

2.31 


4.09 

3.40 

99. 36 
98. 57 
99.  26 


0.  44 

".'0.3' 


24.  79 


1..32 
20. 32 


Central 

division.^ 


0.84 
.13 
.48 
.28 
2.12 
.79 
.40 
.13 
4. 12 
7. 96 


2.  22 


3.  81 
6.  IS 
.91 
1.93 


1  Warehouses  only.  Shipments  from  elevators  were  separately  tabulated  by  States  and  are  included  in 
the  individual  State  figures.  (See  Vol.  I.) 

2  Less  than  one  one-hundredth  per  cent. 


It  will  be  seen  that  Chicago  derived  from  Illinois  about  52  per 
cent  of  all  grain  received  from  the  country;  from  Iowa  about  31  per 
cent;  from  Minnesota  about  6  per  cent;  and  from  South  Dakota  about 
3  per  cent. 

Minneapolis  drew  upon  Minnesota  for  about  36  per  cent;  derived 
about  34  per  cent  from  North  Dakota;  about  23  per  cent  from  South 
Dakota;  and  about  4  per  cent  from  Montana. 

Kansas  City  derived  about  55  per  cent  from  Kansas;  about  26 
per  cent  from  Nebraska;  and  about  7  per  cent  from  Iowa. 

Duluth  received  about  18  per  cent  from  Minnesota;  about  72  per 
cent  from  North  Dakota;  about  6  per  cent  from  Montana;  and  about 
3  per  cent  from'  South  Dakota. 

vSt.  Louis  received  about  42  per  cent  from  Illinois;  about  27  per 
cent  from  Iowa;  about  20  per  cent  from  Missouri;  and  about  6  per 
cent  from  Nebraska. 

Milwaukee  received  about  32  per  cent  from  Iowa;  about  24  per  cent 
from  Minnesota;  about  23  per  cent  from  South  Dakota;  and  about 
18  per  cent  from  Wisconsin. 

Omaha  received  about  63  per  cent  from  Nebraska;  about  22  per 
cent  from  Iowa;  and  about  12  per  cent  from  South  Dakota. 

Peoria  received  about  79  per  cent  from  Illinois  and  about  21  per 
cent  from  Iowa. 

Reference  to  this  table  will  show  the  distribution  to  the  other 
terminals.  It  is  clear  that  the  general  movement  was  eastward 


42 


TERMII^-AL  GRAIN  MARKETS  AND  EXCHANGES. 


and  southeastward  to  the  primary  markets  except  in  the  case 
of  St.  Louis,  which  drew  largely  on  Illinois ;  and  Onmha,  which  re¬ 
ceived  22  per  cent  from  Iowa.  All  the  primary  markets  received 
the  great  bulk  of  their  country  shipments  from  closely  contiguous 
territory. 

It  m.a\  1)0  generally  concluded  that  to  operate  successfully  as  a 
primarv’  concentration  point  a  market  must  be  located  adjacent  to 
large  producing  areas;  and  that  markets  so  located  have  an  initial 
advantage.  This  does  not  mean,  however,  that  geographical  loca¬ 
tion  has  been  the  controlling  factor  in  developing  these  judncipal 
grain  markets.  Numerous  cities  might  be  pointed  out  along  the 
margin  of  dense  production  which  might  havo  marketed  the  grain 
quite  as  effectively  as  the  existing  niiirkets.  Geographical  position  will 
not  explain  why  Milwaukee  has  received  in  recent  years  on  an  aver¬ 
age  only  12  per  cent  as  much  wheat  as  Chicago,  or  why  Omaha, 
lying  adjacent  to  both  spring  and  winter  wheat  areas,  receives  less 
wheat  than  St.  Louis.  It  will  not  exjdain  why  I)es  jMoines,  Sioux 
( ity,  St.  Joseph  and  Springfield  (Mo.),  have  not  developed  as  grain 
terminals  comparable  to  the  other  primary  markets.  To  fully  un¬ 
derstand  the  development  of  the  grain  markets,  the  transportation 
j  facilities  and  market  organization  as  well  as  productive  areas  must 
'  be  considered.  ^ 

Section  5.  Freight  rates  as  related  to  the  development  of  grain 

markets. 

The  influence  of  transportation  facilities  and  the  freight-rate 
structure  in  building  up  grain  markets  will  be  alluded  to  in  out¬ 
lining  the  histories  of  the  larger  markets  (CLaps.  Ill  and  IV). 
It  is  necessaiT  here  to  analyze  the  various  rate  classifications  and 
adjustments  which  appear  in  the  histoiy  of  grain  transportation, 
so  as  to  ascertain  their  effect  upon  individual  markets. 

Local  rates. — As  Jong  as  the  grain  was  largely  consumed  in 
the  areas  where  produced,  freight  rates  were  on  a  local  basis.  It  is 
needless  to  point  out  that  this  condition  ceased  to  exist  after  the  trunk 
line  railroad  systems  had  reached  the  Mississippi  and  Missouri  Kivers 
.  (i.  e.,  in  the  seventies). 

Through  rates. — It  then  became  necessary  to  consider  the 
aggregate  rates  from  producing  to  consuming  centers  and  to  adjust 
inbound  with  outbound  rates,  so  that  the  combination  of  the  two 
for  a  given  market  should  not  be  higher  than  similar  combinations 
through  other  gateways.  Local  rates  from  country  stations  became 
increasingly  less  important  than  through  rates  via  the  terminal  in 
which  the  grain  was  to  be  marketed.  A  competitive  struggle  ensued 
between  growing  grain  markets  to  obtain  favorable  through  rates 
or  proportions  thereof.  During  the  eighties  the  grain  trade  was 


DEVELOP^NIEXT  OF  TERMINAL  IMARKETS. 


43 


involved  in  the  destructive  rate  wars  which  characterized  unrestricted 
railroad  competition. 


*  *  *  The  roads  were  a  law  unto  themseh'es.  Nobody  had  any  authority  to  say 
what  the  maximum  of  any  rate  might  be  or  to  fix  the  future  rate  or  to  limit  the  car¬ 
riers  in  fixing  any  rate  they  might  please.  ^  *  And  so  we  had  discriminations, 

rebates  were  rife,  free  transportation  was  offered  to  tlioso  who  were  big  enough  to  ])e 
considered  important. 

Out  of  this  chaos  of  preferential  competitive  rates  evolved  the 
present  system  of  proportionals  or  specifics,  comhinatioii  rates, 
reshipping  rates,  transit  privileges  and  export  rates,  which  has  hecn 
elaborated  and  defined  by  the  Interstate  Commerce  Commission. 

The  territorial  classifications  and  adjustments  which  were  built 
into  the  rate  structure  were  determining  factors  in  the  establishment 
of  grain  markets  and  channels  of  grain  traffic.  Where  markets 
became  “rate  brcaldng  points ’ ^ — such  as  Chicago  and  St.  Louis—  y. 
their  interest  lay  in  securing  a  favorable  combination  of  the  inbound 
and  outbound  rates.  Where  markets  lay  in  the  middle  of  classifica¬ 
tion  territory — e.  g.,  Minneapolis  and  Duluth — they  were  allowed  pro¬ 
portional  rates  and  transit  privileges  in  order  to  compete  as  forward¬ 
ing  centers  for  eastern  consumption.  It  has  been  possible  to  make  or 
unmake  markets  by  the  allowance  or  withdrawal  of  what  is  known 
as  “transit” — that  is,  the  privilege  of  reshipping  grain  or  its  equiva¬ 
lent  in  grain  products  on  a  through  rate  calculated  from  producing 
to  consuming  territoiy  or  to  export  points. 

Proportional  rates. — The  “proportional  rate”  Avas  devised  to 
equalize  rates  for  shipment  via  one  gateway  as  compared  Avith  ex¬ 
isting  through  rates  via  another  gatev-ay.  It  also  proAuded  a  Jthrough 
rate  basis  for  certain  interior  points  AAdiich  Avere  formerffi  restricted 
.  to  local  rates  or.  a  combination  thereof.  It  enabled  shippers  already 
enjoying  a  through  rate  via  one  route  to  consuming  territory^  to 
obtain  a  similar  rate  Aua  a  different  junction  point  or  terminal  market. 

It  also  enabled  shippers  in  producing  territory  AAdio  had  never  been 
alloAved  a  through  rate  to  obtain  such  a  rate  by  combination  via  a 
giA^en  gatcAvay  or  basing  point.  The  existing  local  rate  Avas  replaced 
by  a  so-called  “proportional”  into  the  junction  point,  and  this  pro¬ 
portional  Avas  combined  Avith  another  proportional  out  of  that  junc¬ 
tion  point  so  as  to  provide  a  through-billing.  The  intermediate 
_gateways  or  junctions  in  thisjyte„Mimtiire.AATRn-kne^A^^ 
pioints.”  In  the  case  of  grain,  the  basing  point  Avas  usually  a  ter¬ 
minal  matket.  It  Avas  thus  made  possible  for  a  grain  dealer  in  Chi¬ 
cago,  for  example,  to  buy  grain  in  loAva  for  ultimate  shipment  to 
NeAV  York  on  a  through  rate;  or  for  a  Minneapolis  shipper  to  bring 
in  grain  from  the  country  on  a  “proportional”  and  ship  the  grain,  or 
its  equWalent  in  grain  products,  out  of  the  market  on  the  same  billing. 


*  statement  of  Commissioner  Clements  in  “American  Elevator  and  Grain  Trade,”  October,  1916,  p.  231. 


44 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


In  determining  freight  rates  between  two  points  the  rate  by  the  1 
shortest  or  most  direct  route  is  the  prevailing  maximum  through  1 
rate  which  the  longer  and  more  indirect  routes  must  not  exceed  I 
if  they  arc  to  participate  in  the  traffic.  A  ‘h^eshipping’’  rate  is  often  1 
referred  to  as  a  “  proportional/’  meaning  the  part  of  the  through  rate  I 
covering  the  haul  from  the  primary  market  to  destination.^®  I 

A  form  of  proportional  rates  has  been  applied  in  what  is  known  1 
as  Illinois  territor}^.  The  freight  rates  in  this  territory  are  con-  1 
structed  both  with  reference  to  local  shipments  to  the  local  markets  I 
and  also  with  reference  to  shipments  to  the  intermediate  and  eastern  1 
terminal  markets.  Since  the  bulk  of  the  grain  moving  into  Chicago  1 
is  ultimately  reshipped  east,  there  is  practically  no  ‘‘local”  billing  i 
to  Chicago  from  countiy  points  in  Illinois.  The  rates  applied  in  1 
this  territoiy  are  known  as  the  “Illinois  proportionals,”  i.  e.,  the  I 
shipments  from  Illinois  producing  territoiy  to  Peoria  and  Chicago  1 
are  not  made  on  local  rates,  but  on  through  billing  to  eastern  terri-  1 
toiy  with  transit  and  reshipping  privileges  at  the  intermediate  I 
market.  The  proportion  of  the  through  rate  chargeable  to  the  ship-  ■ 
ment  as  far  as  Chicago  is  less  than  the  local  rate.  a 

The  origin  of  the  Illinois  proportional  rates  (introduced  in  1907)  I 
is  explained  b^^  the  Interstate  Commerce  Commission  as  follows:  m 

Altlioagli  Illinois  is  divided  into  territorial  groups  to  wliicli  percentage  rates  are  a 
applied  on  most  commodities,  grain  rates  are  not  so  stated.  The  State  is  traversed  9 
by  a  number  of  east  and  west  lines  leading  to  New  York  or  other  points  on  the  eastern  m 
seaboard,  intersected  by  a  number  of  north  and  south  lines  centering  at  Chicago.  9 
There  are  also  certain  lines  entering  Chicago  from  the  East  which  do  not  tap  the  State  fl 
to  any  great  extent.  These  lines  and  the  merchants  of  Chicago,  the  greatest  grain  a 
market  of  the  United  States,  were  desii'oiis  of  handling  the  grain  of  Illinois  as  were  ^ 
also  the  noidli  and  south  lines.  To  divert  a  portion  of  the  grain  from  the  east  and  west  J 
shoi  t  lines,  grain  rates  from  Illinois  points  were  early  made  the  same  tlirough  Chicago  3- . 
as  by  the  direct  lines,  though  the  distance  might  be  much  greater.  The  abuse  of 
certain  transit  privileges  at  Chicago  led  to  their  discontinuance  and  the  reestablish  # 
ment  by  the  carriers  leading  east  from  Chicago  of  what  are  known  as  reshipj)ing  rates. 
Whereupon,  the  north  and  south  lines  established  “proportional”  rates,  the  simj  of  y 
the  proportional  and  reshipment  rates  equalling  the  through  rate  by  the  direct  line.  ^ 
While  the  bulk  of  the  grain  was  shipped  to  the  East,  some  was  shipped  to  the  southeast, 
south  and  southwest,  through  rates  being  formed  by  combinations  on  the  ^lississippi  ^ 
and  Ohio  gateways. 

The  through  rate  on  Illinois  grain  to  eastern  territory  is  divided  i 
into  two  parts  called  “specifics.”  The  inbound  “specific”  into  the  I 
primary  market  (that  is,  Chicago  or  Peoria)  is  the  rate  actually 
collected  and  retained  by  the  carrier  as  its  compensation  for  the 
inbound  transportation,  whether  the  grain  be  consumed  locally  or 
reshipped  to  points  other  than  to  points  in  the  eastern  or  so-called 
“Trunk  line  territory.”  In  case  the  grain  (or  a  similar  substituted 
quantity)  be  subsequently  reshipped  (within  a  year)  to  any  point 


le  27  I.  C.  C.,  p.  290. 


21  I.  C.  C,,  5  and  9;  see  also  28  I.  C.  C.,  549, 


DEVELOPMENT  OF  TERMINAL  MARKETS. 


45 


in  trunk  line  territory,  any  amount  which  has  been  collected  in  excess 
of  the  proportional  or  ‘^specific”  is  deducted  from  the  outbound  rate. 
This  is  accomplished  through  the  presentation  by  the  outbound” 
shipper  of  ‘^expense  bills”  (freight  receipts)  to  the  transportation 
company. 

Peoria,  as  a  terminal  market  lying  in  tlie  lieart  of  the  Illinois  grain- 
producing  section,  halfway  between  St.  Louis  and  Chicago,  has  a 
system  of  proportional  rates  similar  to  its  larger  rival,  Chicago. 
Peoria’s  complaint,  however,  is  that  the  adjustments  of  the  reship¬ 
ping  rate  to  the  proportionals  on  through  shipments  to  eastern  terri¬ 
tory  are  unfair  to  Peoria.  The  prevailing  difference  in  the  reship¬ 
ping  rates  has  been  2  cents  (per  100  pounds)  in  favor  of  Chicago, 
which  is  100  miles  nearer  to  the  eastern  seaboard.  This  2  cents 
differential  is  complained  of  by  Peoria  as  excessive.  The  reshipping 
rail  rate  from  Chicago  to  trunk  line  territory  is  induced  (as  claimed 
by  Chicago)  by  the  lake  competition.  Grain  from  Chicago  can  move 
to  the  east  via  the  lakes  as  well  as  by  all-rail  transportation.  Ship¬ 
ments  from  Peoria  directly  east  can  not  participate  in  the  water  route 
unless  the  grain  passes  through  Chicago  or  some  other  of  the  terminal 
gateways. 

Grain  from  the  Trans-Mississippi  territory  may  be  through-billed 
to  Chicago  and  St.  Louis  on  Trans-Mississippi  (T.  M.)  billing  in  the 
same  manner  and  under  the  same  regulations  as  the  Illinois  propor¬ 
tional  billing  already  described.  '  This  billing  allows  a  proportional 
rate  into  the  terminal  market  with  reshipping  privilege  lower  than 
the  combination  of  the  local  rates. 

As  another  example  of  a  proportional  adjustment,  Toledo  was  for 
many  years  prior  to  1913  unable  to  secure  a  joint  through  rate  on 
grain  over  connecting  lines.  The  dealers  were  required  to  pay 
local  rates  in  and  local  rates  out  on  shipments  east,  unless  both 
the  ‘Gn”  and  “out”  shipment  was  over  the  lines  of  the  same 
carrier.  Moreover,  the  rate  on  ex-lake  grain  from  Toledo  was 
higher  relatively  than  the  proportion  of  the  through  all-rail 
rate  from  Chicago.  The  Interstate  Commerce  Commission,  as 
the  result  of  a  complaint,  ordered  the  railroads  reaching  Toledo 
to  establish  joint  through  rates  with  transit  at  Toledo  to  cover  the 
movement  of  grain  products  by  all  reasonably  direct  routes  to  points 
east.  It  also  ordered  that  the  domestic  and  export  rates  on  ex-lake 
grain  forwarded  from  Toledo  to  New  York  be  established  at  78  per 
cent  of  the  Chicago-New  York  rates  and  that  the  customary  differ¬ 
entials  to  other  destinations  should  be  observed. 

12  See  I.  C.  C.  Docket  8347. 

Rail  proportional  of  a  through  lake-rail  rate. 

Toledo  Produce  Plxchange  v.  Ann  Harbor  Railroad  Co.  ft  al.,  decided  June  23, 1913  (27 1.  C.  C.,  p.  536). 


46 


TERMINAL  GRAIX  AIARKETS  AND  EXCHANGES. 


Omaha. — The  history  of  the  Omaha  grain  market  offers  a  con- 
spicuous  example  of  the  immediate  effect  of  favorable  through-rate 
adjustment.  It  is  stated  by  the  trafTic  dci:)artment  of  the  Omaha 
Oliamber  of  Commerce  that  the  rate  combinations  in  effect  on  Omalui 
to  the  east  prior  to  1903  were  higher  than  the  through  rates  east  from 
points  west  of  Omaha,  and  that  the  outbound  rates  from  that  city  were 
too  high  to  permit  rebilling  on  the  combination  of  locals.  About  this 
time,  however,  the  Chicago  Great  Western  Railroad  entered  tlio 
Omaha  market.  This  road  insisted  that  the  through  rates  on  grain 
from  points  in  Nebraska  to  the  Mississippi  River,  Chicago  and  com¬ 
mon  points,  Minneairolis  and  also  the  Atlantic  and  Gulf  jiorts  slioiild 
be  on  a  proportional  basis  through  Omaha,  rather  than  on  a  com¬ 
bination  of  locals.  In  this  position  they  were  supported  by  the 
exchange  and  various  largo  grain  shippers.  A  bitter  rate  contro¬ 
versy  followed  which  lasted  for  several  months.  Finally,  an  under¬ 
standing  was  reached  and  new  rates  effective  June  10,  1904,  were 
promulgated.  These  new  rates  were  in  accordance  with  the  position 
of  the  Chicago  Great  Western  Railroad  and  the  Omaha  Exchange 
and  are  shown  in  the  following  statement  in  comparison  with  the 
former  rates  on  wheat  and  corn: 


f  Ratos  in  rents  per  100  pounds.] 


Wheat. 

Corn. 

From  Omaha  to — 

Nov.  1, 
1903. 

June  10, 
1904. 

Nov.  1, 
1903. 

Juno  10, 
19(31. 

Chicago; 

Local . . 

21 

17 

IS 

16 

Proportional . i . 

21 

12 

18 

11 

M 

St.  Loins; 

Local . .* . 

16 

14 

13 

Proportional . 

16 

9 

13 

8 

14 

St.  Paul  and  Minneapolis;  . 

Local . T . • . 

21 

17 

IS 

Proportional . 

21 

11 

IS 

10 

Duluth;" 

Local . 

31 

27 

2S 

24 

Proportional . 

31 

16 

28 

15 

Memphis; 

Local . 

21 

19 

18 

IS 

13 

Proportional . . . 

21 

It 

18 

New  Orleans;  < 

Local . 

2.S 

27) 

25 

•  23 

Proportional . 

26 

19 

25 

18 

Galveston; 

Local . 

2.S 

24 

2.5 

23 

Proportional . . 

28 

19 

25 

IS 

New  York; 

Local...' . 

37 

34.  5 

31 

34 

33. 5 

Pro  port  ion  a  I . . 

o7 

29.  5 

28. 5 

Poston;" 

Local .  . 

39 

36.  5 

36 

36 

3.5.  5 

Proportional . 

39 

31.5 

30.  5 

Baltimore; 

Local . 

31 

31.7) 

31 

30.5 

Proportional . . 

34 

26.  3 

31 

2S.5 

Philadelphia; 

1  yoc.a  1 . .  .  . . . 

35 

32.  .5 

32 

3t.5 

Proportional . 

35 

27.5 

32 

26.5 

Rc'port  the  secretary  oi  the  Omaha  Grain  EKChango,  .Tan.  1,  lOO-l. 


'  47 


DEVELOPMENT  OF  TERMINAL  MARKETS. 


The  secretary  of  the  exchange  reported,  January  1, 1905,  as  follows: 


In  tlic  readjustment  of  the  grain  rates,  a  reduction  of  one-half  to  3  cents  per  100 
I)ounds  was  made  to  Omaha  from  nearly  -one-half  of  the  stations  in  Nebraska,  and  a 
reduction  in  the  through  rates  to  the  Mississippi  River,  Chicago,  and  common  points, 
from  approximately  700  stations.  It  would  be  a  difficult  matter  to  estimate  the  bene- 
ht  derived  by  the  producers  in  Nebraska  from  these  reductions.  They  should  appre¬ 
ciate  what  the  Omaha  Grain  Exchange  has  done  for  them,  and  patronize  this  market 
in  preference  to  any  other. 

Sonic  of  the  rates  have  been  altered,  but  the  adjustment  has  not 
))een  substantially  changed  and  lias,  at  least  by  implication,  been 
approved  by  the  Interstate  Commerce  Commission.  As  noted  in 
Chapter  IV,  the  rapid  increase  in  the  grain-forwarding  business 
resulting  from  this  adjustment,  warranted  the  formation  of  a  grain 
exchange  at  Omaha  and  placed  that  market  on  a  more  or  less 
competitive  equality  with  the  other  Missouri  and  the  Mississippi 
River  gateways.  The  following  extract  indicates  the  constant 
struggle  Avhich  has  been  kept  up  to  maintain  favorable  projiortidnal 
rates: 


A  very. serious  menace  to  the  continued  growth  and  prosperity  of  the  Omaha  grain 
market  is  the  so-called  ''equalization”  plan,  wdiich  was  put  in  force  by  the  Frisco 
system  on  July  1.  Under  the  operation  of  this  plan,  grain  originating  at  all  stations 
on  and  south  of  the  main  line  of  the  Union  Pacific  Railroad  in  Nebraska  is  hauled  from 
Kansas  City  to  Memphis,  by  the  Frisco  road,  at  whatever  rate  is  necessary  to  equalize 
the  combination  of  rates  via  Omaha,  down  to  a  minimum  of  9  cents  ixu’  hundredweight. 
The  viciousness  of  this  plan  lies  in  the  fact  of  its  apparent  fairness.  If  we  accept  the 
principle  upon  which  it  is  based,  we  virtually  concede  the  proposition  that  the  Kan¬ 
sas  City  market  is  entitled  to  an  equal  footing  with  Omaha  in  all  of  Omaha’s  teriitoiy, 
and  to  all  the  advantages  it  now'  has  in  its  own  territory.  To  concede  such  a  principle 


would  mean  the  death  of  our  hope  of  making  Omalia  a  great  primary  market  and  w'o 
have  done  everything  in  our  power  to  obtain  the  W'ithdraw'al  of  the  "equalization” 
plan.  So  far  avc  have  not  succeded,  but  we  are  hopeful  that  w'e  may  still  be  able  to 
conwnce  the  railroads  that  are  responsible  for  the  policy,  that  it  is  a  wrong  and  unjust 
application  of  the  gatew'ay  equalization  irrinciple. 


Buffalo. — Milling  in  triinsit  privileges  and  other  reshipping  privi¬ 
leges  on  grain  products  have  operated  to  build  up  milling  centers  as 
grain  markets.  It  developed  in  the  1901  hearings  of  the  Interstate 
Commerce  Commission  on  rates  on  grain  and  grain  products  that  cer¬ 
tain  western  millers  enjoyed  not  only  transit  privileges  in  their  own 
markets,  but  what  was  in  effect  a  reshipping  privilege  at  Buffalo. 
Under  this  practice,  the  western  millers,  particularly  those  at  Minne¬ 
apolis,  were  given  a  through  rate  on  flour  shipments  to  the  East  via 
Buffalo,  and  then  allowed  to  stop  this  flour  at  Buffalo  for  repacking. 
The  carriers  had  agreed  to  give  tliis  privilege  because  tlie  flour  was 
usually  shipped  to  Buffalo  l)y  ]>oat  in  jute  sacks,  and  since  the  eastern 
trade  demanded  the  flour  in  paper  sacks,  it  was  l)olted  and  repacked 
at  Buffalo  and  then  went  forward  by  rail.  It  was  necessary  to  ship 


i®  Secretary’s  report,  Jau.  31, 1907 


48 


TEKMTNAL  GEAIl^  MARKETS  AND  EXCHANGES. 


the  flour  in  jute  sacks  by  the  lake  boats  because  when  paper  sacks 
were  used  there  was  likely  to  be  heavy  loss  from  breakage.  The 
carriers  at  Buffalo  furnished  the  facilities  for  this  repacking  and  un¬ 
loaded  and  reloaded  the  flour  Avithout  additional  charge.  On  the 
other  hand,  on  wheat  shipped  in  to  local  millers  they  charged  for 
unloading  and  storage  and  charged  local  rates  when  the  Buffalo 
juillers  shipped  flour  to  the  East.  In  addition  these  western  millers 
could  even  enter  into  local  competition  at  Buffalo  and  undersell  the 
local  millers  because  they  were  allowed  to  bill  in  flour  sold  locall}^ 
on  the  through  rate  and  also  given  the  repacking  facilities  free.^^ 
Kansas  City. — It  was  testified  at  this  1901  hearing  that  the  through 
lines  at  Kansas  City  favored  a  fcAV  large  grain  forwarders,  operating 
on  a  through  rate  basis,  to  the  disadA^antage  of  the  local  commission 
men  and  mill  buyers.  The  following  extracts  illustrate  this  matter: 

Mr.  Hagerman.  On  the  Missouri  Pacific— AA'hat  concern  or  concerns  haA^e  the 
grain  pri\dleges  there? 

Mr.  Trickett.  Hall  &  Robinson  do  the  major  portion  of  the  export  business; 
Or^enleaf  &  Baker,  at  Atchison,  Kans.,  operate  in  the  domestic  trade,  as  do  Denton 
Brothers,  of  LeaA^enworth,  Kans. 

Mr.  Hagerman.  Greenleaf  &  Baker  and  Denton  practically  divide  the  domestic 
business  and  Plall  &  Robinson  attend  to  the  export  business? 

Mr.  Trickett.  Yes,  sir, 

Mr.  Hagerman.  That  is  on  the  Missouri  Pacific? 

Mr.  Trickett.  Yes,  sir. 

Mr.  Hagerman.  Now,  in  the  practical  working  of  that  system  of  ha\dng  one  con¬ 
cern  or  one  man  or  company  do  the  business  upon  a  line  of  road,  what  has  been  your 
observation  as  to  its  effect  and  what  abuses  does  it  lead  to? 

Mr.  Trickett.  The  operations  of  these  firms  ha\'e  excluded  the  Kansas  City  grain 
dealer  from  participating  in  the  grain  trade  along  that  line— the  different  grain 
lines.  *  *  * 

Mr.  Trickett.  In  former  years  it  was  the  custom  for  grain  purchasers  to  consign 
gi-ain  to  this  market,  and  for  Kansas  City  grain  firms  to  bid  for  grain  in  the  country. 
There  is  practically  no  consignment  business  here  to-day.  All  the  gi’ain  that  Kansas 
( 'ity  receives  it  has  to  fight  for,  and  in  very  few  instances  is  a  Kansas  City  grain  firm 
able  to  successfully  compete  with  these  larger  firms  on  the  grain-producing  lines. 

Mr.  Hagerman.  Suppose  that  a  Kansas  City  firm  gets  it  fixed  some  way  so  it 
makes  up  the  arbitrary;  Avhat  additional  difficulty  is  there  in  dealing  with  this  situa¬ 
tion  when  some  particular  firm  has  all  the  grain  priAuleges? 

Mr.  Trickett.  Regardless  of  concessions  which  he  may  recede  from  Kansas  City, 
the  firm  operating  on  the  through  line  is  still  able  to  control  the  business. 

Commissioner  Proety.  What  do  you  mean  by  that;  that  he  can  handle  the  grain 
better  on  the  through  rate  than  the  Kansas  City  man  can? 

Mr.  Trickett.  Yes,  sir;  regardless  of  any  concessions  he  might  secure  here  or  else¬ 
where,  the  firm  operating  on  the  throughdine  is  in  a  position  to  handle  the  business. 
They  can  go  in  the  country  and  bid  whateA'er  is  necessary  to  obtain  the  grain. 

Commissioner  Prouty.  Then  the  necessary  inference  from  that  would  be  that  they 
would  have  to  make  it  some  way  in  the  rate,  in  addition  to  the  arbitrary. 

Mr.  Trickett.  Yes,  sir.  That  is  supposed  to  be  the  way  they  handle  the  business. 

R  I.  C.  C.  hearings,  1901,  Rales  on  Grain  and  Products,  AVestern  Points  to  Atlantic  Seaboard,  pp.  59, 
57,  58,  93,  100. 

18  Pp.  1.83-1S7. 


DEVELOPMENT  OF  TERMINAL  MARKETS. 


49 


ronimissioner  Pkouty.  Have  you  any  figures  to  show  what  has  been  the  growth  of 
lliis  w  heat  business  and  the  proportions  that  Kansas  City  has  received  and  the  effect 
upon  the  market? 

^fr.  Trickett.  It  is  not  possible  for  us  to  determine  the  exact  proportion  of  the 
V.  heat  crop  of  the  State  of  Kansas  received  at  Kansas  City.  1  have,  however,  taken 
the  total  receipts  at  Kansas  City  for  a  number  of  years  and  estimated  the  proportion 
of  the  wheat  crop  of  Kansas  tliat  those  figures  represent.  In  1893  we  handled  69.1 
per  cent  of  the  total  wheat  crop  of  Kansas,  estimated  as  previously  explained.  In 
J895  we  handled  51.4  per  cent.  In  1896,  when  the  trou})le  with  the  through  lines 
originated,  w'e  handled  but  25.1  per  cent,  despite  the  fact  that  with  one  exce])tion 
the  crop  w^as  larger  that  year  than  for  five  years  pre^  ious. 

Mr.  Day.  Was  that  after  the  reconsignment  was  abolished? 

Mr.  Trickett.  That  w’as  after  the  reconsignment  was  abolished;  yes,  sir.  In  1898 
we  handled  47.2  per  cent.  In  1901,  out  of  a  crop  of  90,000,000  bushels,  the  banner 
crop  of  the  State  of  Kansas,  w^e  handled  but  29.8  per  cent,  showing  that  our  receipts 
have  decreased  regularly  for  a  number  of  years,  and  especially  since  the  establish¬ 
ment  of  the  proportional  rate  basis  and  the  operation  of  the  larger  dealers  on  the  through 
grain  lines. 

Export  differentials  and  export  rates. — Differentials  or 
arbitraries  for  specific  markets  and  commodities  liave  influenced 
the  growth  of  grain  centers  in  many  ways. 

A  witness  in  testifying  before  the  Industrial  Commission  (1901) 
asserted  that  as  a  result  of  competition  the  railroads  had  put  freight 
rates  into  effect  which  favored  the  cities  as  against  the  country,  the 
big  shippers  as  against  the  small  men,  and  sections  which  contain 
the  large  cities  and  have  the  main  currents  of  traffic  as  against  the 
sections  that  lie  a  little  out  of  the  central  current,  like  New  England.*® 
Wliile  this  is  a  sweeping  generalization,  it  is  true  that  rates  have  been 
frequently  adjusted  on  a  preferential  basis. 

'  A  long  series  of  rate  wars  culminated  in  1877  in  the  establisliment 
of  fixed  differentials  in  rates  from  specified  western  territory  to  the 
North  Atlantic  ports.  In  this  agreement  of  1877  and  in  later  agree¬ 
ments  the  Chicago-New  York  rate  was  made  the  basis.  The  amount 
of  the  charge  under  or  OA^er  this  rate  is  dedgnated  the  differential 
and  has  been  applied  to  the  folloAAung  territory:  The  section  bounded 
on  the  east  by  a  line,  drawn  from  Pittsburgh  to  Buffalo,  on  the 
south  by  the  Ohio  River,  on  the  west  by  the  Mississippi  River,  and 
on  the  north  by  the  Great  Lakes  and  a  line  drawn  west  from  Chicago 
to  Dubuque.  Rates  between  points  in  this  territory  and  New  York 
City  are  based  upon  the  Chicago-NeAv  York  rate;  that  is,  the  rate 
between  a  given  point  in  this  territory  and  New  York  is  either  the 
same  as  the  Chicago  rate  or  a  certain  percentage  of  that  rate.  To 
other  points  upon  the  Atlantic  seaboard,  the  rates  liaA^e  been  higher 
or  lower  than  that  to  New  York  by  a  giA^en  number  of  cents  per 
hundred  pounds. 

Report  of  the  U.  S,  Industrial  Commission,  Ami.  IX,  p.  130. 

™  In  the  Matter  of  Differential  Freight  Rates,  11  I.C.C.,  13;  see  also  Daish,  Atlantic  Port  Ditferentials, 
pp.  12,  13. 

108698°— 20 


4 


50  TERMINAL  GRAIN  AIARKET3  AND  EXCHANGES. 

Til  addition  to  the  difFcrentials  in  the  territory  described  above, 
:  hipments  over  the  Great  Lakes  to  the  lower  lake  ports  and  thence 
to  North  Atlantic  ports  have  been  placed  on  an ‘^ex-lake  differ entiah^ 
])a'^ds. 

The  method  of  securing  export  rates  prior  to  1900  was  brouglit 
out  in  the  1901  hearing,-^  as' follows: 

At  Kansas  City  there  are  numerous  firms  which  send  their  business  out  via  Gal¬ 
veston,  others  via  Mobile,  some  via  Chicago,  some  ^ia  Baltimore,  and  others  by 
Norlolk  or  Newport  News.  All  those  firms  are  in  there  bidding  for  the  gi’ain,  and  the 
different  lines  find  it  necessary  from  time  to  time  to  make  rates  in  order  to  carry  the 
liusiness  by  their  rails.  For  example,  a  line  leading  from  Kansas  City  to  St.  Louis 
in  connection  with  some  line  leading  to  Baltimore  would  want  to  move  a  line  of  wheat. 
They  would  go  into  the  market  and  find  out  what  was  being  bid  by  Galveston  ship¬ 
pers,  by  Chicago  shippers,  by  Newport  News  shippers,  or  Alobile  shippers.  They 
would  write  to  the  road  and  say,  here  is  the  wheat  and  the  price  fixed  by  the  other 
lines,  and  here  is  what  we  can  pay  for  it  in  Baltimore.  The  difference  approximates 
the  rcrte.  And  in  that  way  the  roads  would  niakc  the  rate  in  order  to  got  their  share 
of  the  business. 

The,  published  rates  for  export  grain  have  been  largely  deter¬ 
mined  with  reference  to  foreign  competition  and  ocean  freight  rates. 
They  are  distinguished  from  domestic  rates  in  nearly  all  classifica¬ 
tions  and  adjustments.  Grain  from  the  western  primary  markets 
can  be  exported  to  Europe  or  South  American  points  either  from  the 
Gulf  ports  or  through  the  Atlantic  terminals,  so  that  these  routes 
have  become  competitive.  Adjustment  in  the  rates  applying  to  one 
route  has  usually  been  counterbalanced  b}^  an  adjustment  appljdng 
to  the  other. 

The  railroads  extending  through  the  Mississippi  Valley  to  the 
Gulf  began  to  build  up  their  traffic  in  grain  about  1900  after  the 
river  movement  had  been  practically  abandoned.  At  first,  in  order 
to  attract  the  traffic,  these  railroads  made  rates  on  export  billing 
including  elevation  and  other  terminal  services  far  below  those  in 
effect  at  Atlantic  seaports.  The  grounds  of  defense  for  lower  Gulf 
rates  were  (1)  shorter  haul  from  the  grain  fields,  (2)  absence  of  heavy 
grades,  and  (3)  less  expensive  operation.  The  railroads  running 
east  to  the  various  Atlantic  ports,  in  order  to  protect  their  export 
grain  traffic,  adjusted  their  rates  to  meet  those  to  the  Gulf. 

Since  St.  Louis,  for  example,  is  an  intermediate  point  bn  routes  to 
New  Orleans  from  Chicago  and  Minneapolis  on  the  north  and  from 
Omaha  and  Kansas  City  on  the  west,  the  grain  freight  rates  (both 
domestic  and  export)  from  St.  I^ouis  have  logicall}"  been  proportions 
of  the  through  rates  from  the  more  distant  markets  to  the  Gulf. 
The  Omaha  rate  to  New  Orleans  and  the  Chicago  rate  to  New  Orleans 
have  been  made  on  the  St.  Louis  combination,  this  combination 

I.  C.  C.,  ‘Un  the  Matter  of  Rates,  Facilities,  and  Practices  Applied  in  the  Transportatiaa,  Handling 
and  Storage  of  Grain,  etc.”. 


DEVELOPMENT  OF  TERMINAL 


INIARKETS. 


being  adjusted  to  the  through  rate  from  Omaha,  Qhicago,  and  other 
western  terminals  to  the  Atlantic  seaboard.^- 
The  1919  export  adjustments  appear  in  the  following  table: 


Tap.lk  22. — Export  grain  rates  from  10  jminary  marhets  to  6  Atlantic  and  Gulf  ports. 

in  force  Jan.  1,  lO'lQ. 


iln  cents  per  100  pounds.] 


Boston. 

New 

A'crk. 

Philadelphia. 

Baltimore. 

New 

Orleans. 

Galves¬ 

ton. 

From — 

All  rail. 

Lake, 

rail. 

All  rail. 

Lake, 

rail. 

All  rail. 

Lake, 

rail. 

All  rail. 

Lake, 

rail. 

All  rail. 

All  rad. 

Chicago _ ^ . 

/  129 
\  2  23 

1  29 

2  2.3 

1  29 

2  23 

1  29 

2  23 

1  28 

2  22 

1  28 

2  22 

1  27} 

1  27} 

}  24 

1  1 50} 

2  21.} 

2  21} 

1  244 

Milwaukee . 

)  1  29 
\  2  23 

1  29 

2  23 

1  29 

2  23 

1  29 

2  23 

1  28 

2  21} 

1  28 

2  22 

1  27} 

2214 

1  27} 

2  21} 

}  27} 

1  352 

1  *i() 

Duluth . 

2.9541- 

2;  8  3H 

0  29.} 

2,  0  31} 

6  29.1. 

2,  5  32} 

e  27} 

2,  5311 

6  26} 

2  34 

\  7  42} 

Minii^apolis. _ 

1  8  4.5} 

2;  5  341- 

2,0,9  32} 

2,  0  34} 

2,0,9  32} 

2,  0  32} 

2,0,930-}. 

8  31} 

•  ••••••• 

234 

f  1  51 
\  249 

11  26} 
11  25' 

(  1 38 

\  237 

1  13  25 

Omaha . 

10  38 

!0  38 

1037 

10  36-} 

11  26} 

11  25" 

(  1  22} 

1  13  10} 

Kansas  Citv.../ _ 

10  3S 

10  38 

1037 

10  36} 
j  1  29.} 

1  2  25' 

St.  Louis . y. _ 

/  1.31 

1  2  26} 

jo, 12  29 

/  1  31 
\  2  26} 

jo, 12  29 

/  130 

1  *2.5}. 

}o,12  27 

}o-12  26 

Peoria . 

31 

31 

30 

29} 

/  124 

} 

1  11  22} 

Indianapolis . . 

25.1 

25.} 

25} 

24 

23 

1  4  391, 

Cincinnati . 

24 

24 

23 

991. 

22} 

/  352 

\  MO 

'  Local  rates  applying  from  points  of  origin  on  shipmcnt.s  not  enlif  led  to  rcslupping  rates. 

2  Reshipping  rate. 

3  Through  rate  made  on  East  St.  Louis  combination  (domestic  reshipping  rate). 

4  Through  rate  made  over  East  St.  Loui.s,  using  joint  rate  to  East  St.  Louis  and  the  25-ccnt  export  rate 
beyond. 

&  Rates  apply  on  gi-ain  products  and  wheat. 

s  Lake  rates  suspended  in  January.  Rates  named  arc  those  in  force  opening  navigation  as  of  Mar.  1 . 1910. 

■  Through  rates  made  over  East  St.  Louis,  using  joint  proportional  rate  to  Liast  St.  Louis  and  the  2.')-ccnt 
export  rate  beyond. 

8  Through  rate  made  over  East  St.  Louis,  u.sing  joint  local  rate  to  East  St.  Louis  and  the  25-ccnt  export 
rale  beyond. 

8  Lake  rates  suspended  in  January.  Rates  named  are  those  in  force  opening  navigation  as  of  ifar.  29, 1919. 

18  Rates  made  on  St.  Louis  combination. 

■1  Proportional  rate  on  grain  originating  beyond. 

12  Rates  named  apply  on  grain  products  other  than  on  flour  and  are  reshipping* rates.  Rates  on  flour  arc 
1  cent  per  100  pounds,  lower  to  Boston  and  New  York,  but  same  as  on  grain  products  to  Philadelphia  and 
Baltimore. 

18  Reshipping  rate  from  St.  Louis,  for  export. 


The  term  'A'es hipping  rate''  as  used  in  this  table  has  reference  to 
rates  applicable  to  shipments  originating  localty  at  Milwaukee, 
Cliicago,  etc.,  as  distinguished  from  through  shipments  from  pointy 
beyond,  or  shipments  which  are  held  at  those  points  under  proper 
tariff  authority  and  afterwards  reshipped  to  eastern  points.  A 
‘h'eshipihng  rate’'  is  defined  An  Cairo  Board  of  Trade  v.  C.  C.  C.  & 
St.  L.  By.  (46  I.  C.  C.  343),  as  follows:  , 


A  reshipping  or  rebilling  rate  is  a  proportional  rate  under  which  after  a  commodity 
has  been  shipped  to  a  distributing  market  and  unloaded  for  the  imrpose  of  storage 
or  treatment  in  transit,  the  same  commodity  or  an  equivalent  amount  may  be  re- 
shipped  to  final  destination.  There  is  close  analogy  between  reshipping  rates  and 
transit. 


-2  See  Transcript  of  Hearings  Before  Western  Freight  Traffic  Committee,  Interstate  Commerce  Commis¬ 
sion,  Dec.  10  and  11,  1918,  pp.  33-3(J. 


52 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


Tile  foregoing  table  shows  the  present  differentials  whereby  the 
re-hipping  rate  to  Philadelphia  from  Chicago  is  1  cent  and  to  Balti¬ 
more  is  1^  cents  under  that  to  New  York  and  Boston.  It  also  indi¬ 
cates  the  transit  privileges  effective  at  Minneapolis  and  Duluth. 
The  only  rate  open  to  Omaha  and  Kansas  City  for  exports  through 
the  Atlantic  ports  is  a  combination  via  St.  Loins. 

A  conspicuous  feature  of  the  schedule  is  the  low  reshipping  rate 
of  161  cents  from  St.  Louis  to  New  Orleans  while  the  proportional 
from  Kansas  City  to  New  Orleans  is  25  cents.  It  will  be  noted  that 
Omaha,  Kansas  City,  and  St.  Louis'  are  allowed  substantially  lower 
export  rates  to  the  Gulf  ports  than  to  the  Atlantic  seaboard. 
These  are  offset,  to  a  var^dng  extent,  by  higher  ocean  rates  from 
the  Gulf  to  Europe. 

Duluth  and  Minneapolis  are  the  only  primary  markets  which  are 
allowed  export  rates  via  the  lake-rail  routes  which  are  substantially 
cheaper  than  the  all-rail  rates. 

Northwestern  territory. — In  the  northwestern  grain-growing 
territory  is  included  the  principal  spring  wheat-growing  belt  and  one 
of  the  most  important  oats-producing  areas  of  the  United  States. 
It  includes  Minnesota,  the  Dakotas,  parts  of  Iowa  and  Nebraska, 
and  extends  westward  into  Montana  and  Wyoming.  The  section 
is  chiefly  tributary  to  the  Duluth  and  Minneapolis  markets,  but 
Chicago,  Omaha,  and  even  vSt.  Louis  also  bid  for  the  grain  from  this 
region.  The  principal  market  competition  for  northwestern  grain  is 
between  Minneapolis  and  Duluth  on  the  one  hand  and  Minneapolis 
and  Chicago  on  the  other.  Since  Milwaukee  for  the  most  part  has 
the  same  freight  rates  east  and  west  as  Chicago,  it  is  linked  as  a 
market  with  Chicago.  Minneapolis,  because  of  its  location  between 
('hicago  and  Duluth  (it  is  about  400  miles  northwest  of  Chicago 
and  150  miles  southwest  of  Duluth)  forms  a  primary  gateway  for 
much  of  the  grain  moving  east  to  or  through  its  two  principal  rival 
markets.  Accordingly,  Minneapolis,  because  of  its  convenience  both 
as  a  gateway  and  as  a  marketing  point,  demands  transit  and  ^^propor¬ 
tional”  privileges  such  as  are  enjoyed  by  Chicago,  St.  Louis,  Kansas 
City,  and  other  largo  reshipping  centers.  Moreover,  as  Duluth  and 
Chicago  arc  both  intermediate  markets  for  grain  shipped  via  Minne¬ 
apolis  to  eastern  consuming  and  seaboard  centers,  the  Minneapolis- 
Duluth  rate  in  relation  to  the  Minneapolis-Chicago  rate  is  of  direct 
interest  to  Chicago,  and  the  Minneapolis-Chicago  proportional  is  of 
direct  interest  to  Duluth.  Both  of  these  rates  are  considered  parts 
of  the  through  rates  from  producing  points  to  eastern  consuming 
tenitory. 

In  commenting  upon  the  difficidty  of  making  a  final  and  satis¬ 
factory  adjustment  of  proportionals  and  transit  privileges  in  the 
Northwest  the  Interstate  Commerce  Commission  stated  in  1913: 


f 


DEVELOPMENT  OF  TJ^mMINAL  MARKETS. 


53 


If  it  be  proper  to  fix  the  rates  to  Milwaukee  on  the  basis  of  one-half  cent  per  100 
pounds  for  each  additional  50  miles  in  distance  as  compared  with  Superior  it  is  equally 
jiroper  to  apply  that  same  principle  in  the  relkive  rates  as  between  Minneapolis  and 
Duluth,  and  as  between  Omaha  and  Minneapolis.  In  determining  the  rates  to  Duluth- 
Superior  via  Minneapolis,  we  required  that  they  should  be  not  more  than  4  cents 
higher  than  to  Minneapolis.  In  fixing  the  rates  to  Duluth-Superior  via  the  Great 
Northern,  we  held  that  from  its  junction-point,  Wilmar,  and  points  beyond  from 
Avhich  the  shipments  moved  through  Wilmar,  the  rates  to  Duluth-Superior  should  not 
be  more  than  3  cents  higher  than  to  Minneapolis.  The  difference  in  distance  from 
Wilmar.  to  Duluth-Superior  and  Wilmar  to  jNIinneapolis  is  about  106  miles.  From 
Minneapolis  to  Duluth-Superior  is  about  150  miles.  If  the  rates  to  Duluth-Superior 
were  made  on  a  basis  of  one-half  cent  for  each  additional  50  miles  beyond  Minneapolis, 
it  would  result  in  a  differential  of  1.5  cents,  and  the  establishment  of  that  differential 
would  revolutionize  the  relationship  of  the  markets  and  the  movement  of  the  grain., 
******* 

*  *  *  Removal  of  the  discrimination  that  was  found  to  exist  against  Duluth- 
Superior  and  in  favor  of  Mihvaukee  and  Chicago  necessitated  some  increases  in  rates 
to  Milwaukee  and  Chicago,  and  the  reduction  of  the  differentials  Duluth-Superior 
over  Minneapolis,  and  over  Wilmar,  resulted  in  a  great  many  reductions  in  rates. 
The  history  of  these  rates  and  the  proceedings  before  the  Commission  show  that  there 
has  never  been  an  adjustment  that  was  satisfactory  to  the  rival  markets.  Duluth 
and  Superior  on  the  one  hand,  Chicago  and  Milwaukee  on  the  other  hand,  and  Minne¬ 
apolis  in  between  them,  each  contend  that  any  adjustment  that  has  existed,  or  that 
has  been  proposed  by  the  canders,  either  on  their  own  initiative  or  under  findings  of 
the  Commission,  unduly  prefers  some  or  all  of  the  competing  markets.  It  is  not  at 
all  difficult  to  pick  out  from  any  large  and  complicated  rate  adjustment  apparent  or 
actual  inconsistencies,  but  in  endeavoring  to  correct  all  such  inconsistencies  it  is 
almost  invariably  found  that  as  to  some  of  them  the  correction  of  one  creates  others.^^ 

The  rate  system  in  the  Northwest  is  at  present  in  a  highly  contro¬ 
versial  state  as  a  result  of  readjustments  during  the  period  of  Federal 
control  of  the  railroads.  The  general  increase  in  rates  on  June  25, 
1918,  had  materially  disturbed  the  relationship  of  rates  on  grain 
and  grain  products,  especially  in  the  Northwest.  Subsequent  tariffs 
failed  to  give  a  solution  satisfactory  to  the  conflicting  interests  and 
“instructions  were  issued  by  the  Director  General  to  the  Western 
Freight  Traffic  Committee  to  work  out  a  general  revision  of  North¬ 
western  grain  rates  and  practices  through  the  various  competing 
markets.”  The  report  of  this  committee  was  referred  to  the  Inter¬ 
state  Commerce  Commission  for  recommendations.*^ 

Their  decision  resulted  in  at  least  three  adjustments  of  importance 
to  the  grain  trade  of  the  Northwest: 

(1)  The  controversy  involved  certain  routes  through  Minneapolis 
to  Chicago  and  to  Duluth.  Dealers  in  the  Minneapolis  market  had 
previously  operated  under  a  transit  arrangement  whereby  grain  orig¬ 
inating  in  the  larger  part  of  the  Northwest  (including  most  of  Min¬ 
nesota,  North  and  South  Dakota,  and  Montana)  could  be  stopped 
for  merchandising  or  milling  purposes  at  Minneapolis  and  subse¬ 
ts  Investigation  and  Suspension  Docket  No.  220;  Chicago-Duluth  Grain  Rates,  27  I.  C.  C.  216. 

«  56  I.  C.  C.  134. 

«  Decided  in  Ex  Parte  70,  56  I.  C.  C.  133. 


54 


TERIvriNAL  GRAIN  AIARKETS  AND  EXCHANGES. 


queiitly  forwarded  to  Chicago  at  the  direct  Chicago  rate  or  at  certain 
prescribed  transit  penalties  above  that  rate.  The  Minneapolis  dealers- 
were  anxious  to  retain  these  privileges.  The  Interstate  Commerce 
Commission,  however,  disapproved  the  transit  airangements  in  view 
of  the  out-of-line  hauls  which  were  involved.  They  required  that 
the  rates  should  break  on  Minneapolis,  allowing  a  fixed  proportional 
rate  of  11  cents  from  Minneapolis  to  Chicago  and  5%  cents  from  Min¬ 
neapolis  to  Duluth.  The  opinion  on  the  matter  of  transit  was  as 

follows: 


Wc  have  required  the  estal)lishinent  of  transit  in  few  instances.  ^  hen  practicable, 
rates  through  important  grain  inarhets  should  break  into  definitelj  known  inbound 
and  outbound  components.  Such  an  adjustment  is  preferable  to  transit  under  a 
through  rate,  where  the  opportunities  for  complications  in  the  application  of  rates, 
and  for  undue  preferences  resulting  from  the  selected  use  of  inbound  expense  bills 
in  securing  a  desired  outbound  transit  rate,  are  multiplied  in  proportion  to  the  greater 
volume  of  tonnage  handled  through  important  markets  and  the  greater  number  of 
carriers  that  ordinarily  servo  sirch  markets.  A\e  shcrrld  view'  as  e^en  less  warranted 
orrr  establishment  of  transit  at  such  important  markets  if  srrbstantial  out-of-line  hauls 
w'cre  involved.  Minneapolis  is  an  im.portant  grain  mmrket,  and  the  charge  above 
the  direct  Chicago  rate  is  proxrosed  only  for  out-of-line  hauls. 

At  least  since  June  25,  1918,  the  transit  arrangements  at  ^Minneapolis  have  not  been 
satisfactory,  even  to  the  milling  and  other  interests  at  that  point,  although  material 
extensions  of  those  arrangements  have  been  granted  irnder  the  Boyd  tariffs.  It  seems 
evident,  therefore,  that  transit  offers  no  satisfactory  solution  of  the  difhculties  inci¬ 
dent  to ’the  rivalries  of  Minneapolis,  Chicago,  the  Missouri  River  cities,  and  other 
markets  in  the  handling  of  grain  and  grain  products. 

The  proposal  of  the  Western  Freight  Traffic  Committee  with  respect  to  the  revision 
of  the  Chicago  rates  and  the  cancellation  of  transit  at  Minneapolis  should  be  adopted. 
The  proDOsed  proportional  rate  of  11  cents  from  INIinneapolis  to  Chicago,  w'hich  will 
apply  on  traffic  routed  out  of  line  through  Minneapolis,  is  in  effect  a  reshipping  rate 
and  comes  wmll  within  the  limits  of  reasonableness. 

It  has  been  stated  that  in  the  cancellation  of  transit  at  ^linncapolis  an  exception 
is  to  be  made  of  Montana  grain.  This  is 'mainly  because  of  the  effect  upon  the  west¬ 
bound  rates  from  Montana  which  the  witness  for  the  carriers  states  the  cancellation 
w’ould  have.  ATewing  alone  the  eastbound  rates,  there  would  seem  to  be  no  more 
reason  for  the  retention  of  transit  on  grain  from  Montana  than  fiom  othci  parts  of  the 
general  territory  of  origin,  and  we  recommend  that  it  be  eliminated.-® 

Duluth  asks  for  transit  on  grain  moving  to  Chicago  from  Montana  and  beyond.  We 
have  already  disapproved  the  granting  of  transit  at  Alinneapolis  on  Alontana  grain. 
The  request  of  Duluth  for  transit  on  -Montana  grain  should  also  be  denied.-’ 


They  held  further  that  transit  should  be  granted  “at  directly  inter¬ 
mediate  intt'rior  milling  points”  in  ^Minnesota-*  and  Wisconsin  under 
the  proposed  proportional  rates  from  ^Minneapolis  to  Chicago  and 
Miimeapolis  to  Duluth;  likewise  at  Minneapolis— “ when  a  directly 


25  Idein,  pp.  137,  138. 

Idem,  p.  140. 

25  Upon  the  rcargumeiit  of  this  case  the  rccommciidatioii.s  of  the  C  ommLssion  were  somew  hat  modified  .so 
as  to  make  the  line  of  the  Chicago  and  North  \\  o^stcra  from  Mankato,  Mina to  Rapid  C-ity ,  S.  Uak..,  tlio 
logicaldividinglinc between  the  penalty  and  nonponaUy  territories  for  ont-of-linc  hauls.”  (See  56 1.  C.  C. 
CS9.)  Above  this  line  Chicago  is  required  to  pay  rates  not  Ic.ss  than  lho.\'e  prescribed  for  combinations  ou 
Minneapolis  to  Chicago. 


DEVELOP.MENT  OF  TERMINAL  MARKETS. 


intermediate  point” — ^l)ct\veen  Omaha  and  Duluth  and  l)ctween 
Sioux  City  and  Duluth;  ''the  same  as  transit  has  been  and  is 
granted  under  the  proportional  rate  from  the  Missouri  Riycr  to 
Chicago.”-^ 

(2)  The  second  ruling  involved  the  through  rates  from  Minneapolis 
to  New  York  via  Duluth,  Manitowoc,  Milwaukee,  and  Chicago.  The 
committee  appointed  by  the  Director  General  had  propose<l 

to  leave  the  lake-and-rail  rate  on  grain  products  from  Duluth  to  New  Aork  at  27 1 
cents,  and  to  reduce  the  lake-and-rail  rate  from  Chicago  to  New  York  from  23  cents 
to  22  cents,  in  order  to  equalize  the  through  rail-lake-and-rail  rates  from  Minneapolis 
to  New  YYrk  through  the  two  gateways,  the  proposed  difference  of  54  cents  from  the 
respective  jrorts  in  favor  of  Chicago  to  be  offset  by  the  proposed  difference  of  5j  cents 
against  Chicago  in  the  proposed  proportional  rates  of  11  cents  from  Minneapolis  to 
Chicago  and  5^  cents  from  Minneapolis  to  Duluth."” 

This  firoposal  was  substantially  approved.  Instead  of  equalizing 
rates  from  the  lake  ports  of  Duiiith  and  Chicago— as  requested  by 
Duluth  and  Minneapolis — an  equalization  of  rates  was  made  from 
Minneapolis  via  either  gateway.  The  Commission  found  "the  con¬ 
ditions  of  transportation  on  Lake 'Superior  *  *  *  to  he  as  good 

as  if  not  better  than  on  Lake  Michigan,  and  the  harbor  facilities  at 
Duluth  to  ho  superior  to  those  at  Chicago.  ”  There  was  also  unre¬ 
futed  testimony  to  the  effect  that,  because  of  cheaper  water  rates 
over  the  Lake  Superior  route,  "when  grain  from  the  Northwest  moves 
down  the  lakes  by  cargo  ship  to  Buffalo,  and  is  transshipped  to  New 
York  City  from  there,  that  grain  pays  the  New  Lork  Central  Railroad 
2  cents  a  hunch-ed  pounds  more  than  grain  moved  in  a  cargo  ship  from 
Chicago  to  Buffalo.” is,  it  was  impossible  to  equalize  these 
rail-water-rail  routes  without  allowing  the  receiving  railroad  at 
Buffalo  a  larger  division  for  handling  Lake  Superior  grain  than  for 
handling  grain  coming  out  of  Lake  Michigan.  It  was  also  conceded 
that  no  similar  differential  existed  in  the  westbound  proportional 
from  Buffalo  to  Duluth  over  that  from  Buffalo  to  Chicago: 

Wcstboimd  tlie  rail-and-lake  class  rates  from  trunk  line  territory  to  Duluth  are  the 
same  as  to  Chicago,  the  latter  under  our  order  in  Commercial  Club  of  Duluth  v. 
B.  d-  0.  n.  R.  Co.,  27  I.  C.  C.  039.”” 

The  Commission  found,  however,  that  unless  the  rates  from 
■Minneapolis  east  were  made  the  same  via  either  gateway  certain 
interior  milling  points  between  Minneapolis  and  Chicago  "would  he 
confined,  under  transit  arrangements,  to  the  higher-rated  route 
through  Chicago,  while  Minneapolis  could  ship  out  either  through 
Chieago  or  through  Duluth  at  a  lower  rate  than  .through  Cliicago.” 
The  recommendation  therefore  was  as  follows: 

■  Y'ith  respect  to  the  through  rail-lake-and-rail  rates  from  Minneapolis  to  tlic  east,  Didutli 
is  merely  an  intormediato  ]>oint  in  one  of  the  routes  o\'er  which  it  is  proposed  that  the 


l(Jem,  p.  llG. 


idem,  p.  110. 


M  r.  no. 


]’p.  110,  111. 


“  r.  141. 


56 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


rales  sliall  be  equalized,  and  Chicago  is  an  intermediate  point  in  another,  The  desira¬ 
bility  of  having  the  through  rates  over  these  routes  the  same  through  both  gateways^ 
is  of  more  importance  than  the  relative  mileages  to  the  gateways,  which  becomes  less 
pronounced  when  merged  into  the  longer  through  routes.  Distances  often  vary  to  a 
considerable  extent  between  two  points  over  various  routes  that  take  a  common  rate. 
Generally  speaking,  it  is  the  rule,  and  not  the  exception,  that  rates  are  the  same  over 
all  routes  between  given  points.  And  it  is  desirable  that,  vrhen  practicable,  this 
should  be  so. 

If  the  rates  here  should  vary  according  to  a  close  refinement  of  mileages  to  and  from 
the  ports,  there  would  be  different  through  rates  via  Duluth,  Manitowoc,  Milwaukee, 
and  Chicago,  all  of  which  are  practical  routes  from  Minneapolis  to  the  east.  By  the 
jiort  equalization  proposed  the  interior  milling  point  between  Minneapolis  and  Chicago 
would  be  continued  on  a  parity  in  the  milling  and  marketing  of  grain  bought  on  the 
Minneapolis  market.  Under  the  plan  proposed  by  Duluth,  and  concurred  in  by 
Minneapolis,  the  interior  milling  point  between  Minneapolis  and  Chicago  would  be 
confined,  under  transit  arrangements,  to  the  higher-rated  route  through  Chicago, 
while  Minneapolis  could  ship  out  either  through  Chicago,  or  through  Duluth  at  a 
low'er  rate  than  through  Chicago. 

We  recommend  an  adjustment  under  which  the  through  charges  from  Minneapolis 
to  the  east  would  be  the  same  via  the  various  gateways,  so  far  as  this  can'  be  done 
wdthout  unduly  prejudicing  any  locality.  As  the  Great  I.akes  Transit  Corporation  is 
not  under  Federal  control,  and  is  not  a  party  to  this  proceeding,  we  make  no  recom¬ 
mendation  concerning  its  rates  from  Duluth.^'* 

(3)  As  a  third  recommendation  they  disapproved  the  joint  through 
'  rate  on  grain  products  from  Minneapolis  to  New  York  whereby 
Minneapolis  millers  had  been  able  to  ship  flour  to  the  east  at  rates 
lower  than  those  charged  for  similar  shipments  of  grain.  The  decision 
reduced  by  cents  the  disadvantage  of  Kansas  City  as  compared 
with  Minneapolis  in  shipping  grain  products.  It  also  made  it  possible 
for  the  Buffalo  miller,  because  of  cheaper  water  rates,  to  procure 
grain  from  Duluth  at  charges  less  than  those  required  of  the  Minne¬ 
apolis  miller  attempting  to  buy  wheat  and  deliver  it  as  flour  at  Buffalo. 
The  Commission  held; 

There  is  no  justification  for  the  present  rate  on  grain  products  from  Minneapolis  to 
New'  York,  2^  cents,  or  other  amount,  lower  than  the  contemporaneous  rate  on  grain 
from  and  to  the  same  points.  The  flour  rate  should  be  at  least  not  low'er  than  the 
rate  on  grain.  The  lower  rate  on  the  products  from  Minneapolis  affords  the  only 
exception  to  this  general  rule  shown  by  this  record  to  exis-t  throughout  the  entire 
northwestern  and  western  grain-producing  territory.  The  fact,  referred  to  by  Minnea¬ 
polis,  that  Chicago  and  other  intermediate  points  can  mill  in  transit,  under  this  rate, 
grain  purchased  in  Minneapolis  does  not  make  the  adjustment  proper. 

******* 

The  readjustment  proposed  by  the  director  general  wdll  reduce  the  disadvantage 
of  Kansas  City  on  grain  products  by  cents,  leaving  it  but  three-tenths  of  a  cent  higher 
than  it  rvas  prior  to  Federal  control;  and  while  the  proposed  differential  of  4  cents  on 
both  grain  and  grain  products  is  substantial,  w^e  are  not  persuaded  by  this  record,  in 
view'  of  the  influence  of  rail-and-lake  movements  from  Minneapolis,'  that  it  is  excessive. 
Tlie  proposed  all-rail  rates  from  Minneapolis  to  the  east  on  grain  and  grain  products 
sliould  be  approved.  <  ' 


*  *  *  the  elimination  of  the  transit  and  the  establishment  of  the  11-cent  rate 
will  result  in  an  advance  of  Twin  City  rates  to  consuming  territory  of  from  2.1  to  2.7 
per  100  pounds.  If  the  Commission  is  desirous  of  giving  the  Minnesota  markets  an 
opportunity  to  live  in  competition  with  Chicago,  Milwaukee  and  other  eastern  markets 
there  must  be  through  rates  established  and  maintained  from  the  Minnesota  markets 
on  a  basis  of  not  over  9  cents  over  Chicago  or  the  transit  privileges  that  it  is  proposed 
to  eliminate  must  be  continued.  With  the  one  or  the  other  the  Minnesota  markets 
can  live,  although  even  then  seriously  handicapped  in  competition  with  Chicago, 
Milwaukee  and  other  eastern  points.  We  can  not  believe  that  with  the  full  apprecia¬ 
tion  of  this  situation  the  Commission  will  desire  to  hand  the  entire  Northwest  over 
to  the  Board  of  Trade  of  Chicago,  especially  as  there  are  no  transportation  condition 
justifying  such  a  sacrifice. 

Trans-Missouri  territory. — This  temtor’y  embraces  roughly 
the  States  of  Nebraska,  Kansas  and  Oklahoma,  and  the  grain-growing 
regions  directly  west  thereof,  and  is  largely  a  winter  wheat  and  corn 
producing  section.  Grain  dealers  in  Kansas  City,  Omaha,  St.  Louis, 
Chicago,  Minneapolis,  and  even  as  far  east  as  Buffalo,  Toledo  and  Cin¬ 
cinnati,  bid  for  grain  in  trans-Missouri  territory,  so  that  the  whole 
grain  freight  rate  structure  is  involved  in  moving  the  surplus  crops 
from  this  section  to  places  of  ultimate  consumption.  For  many  years 
grain  rates  from  Missouri  River  points  eastbound,  were  so  adjusted 
that  a  shipper  of  grain  west  of  the  Missouri  River  coidd  ship  via  Chicago 
or  St.  Louis  to  seaboard  territory  at  the  same  aggregate  charges 
through  either  gateway.  The  proportion  of  this  rate  from  Kansas 
City  to  St.  Louis  was  9  cents  per  100  pounds  and  from  the  same  point 
to  Chicago  12  cents  per  100  pounds.  The  rate  from  St.  Louis  to 
seaboard  territory  was  adjusted  at  3  cents  above  the  Chicago  rate, 
thereby  providing  an  equalization  upon  western  grain  moving  through 
Chicago  and  St.  Louis  to  seaboard  territory.^®  The  intermediate  grain 
growing  and  milling  centers  between  the  Missouri  and  Mississippi 
Rivers  in  order  to  be  placed  on  a  competitive  basis  with  the  trans- 
Missouri  producers  have  demanded  and  generally  received  propor¬ 
tional  rates  to  Chicago  and  St.  Louis  on  through  billing. 

Practically  the  entire  western  grain  rate  fabric  has  been  built  up  with 
reference  to  the  competition  in  the  various  producing  areas  and  at  the 

In  re  Rates  on  Grain  and  Grain  Products  from  Northwestern  Points;  Ex  Parte  70.  Petition  for  Rehear¬ 
ing  by  Minnesota  Railroad  and  Warehouse  Commission,  the  Minneapolis  Chamber  of  Commerce,  St.  Paul 
Association,  St.  Paul  Grain  Exchange,  Minnesota  Millers’  Club,  Farmers’  Grain  Dealers’  Association  of 
Minnesota,  Farmers’  Grain  Dealers’  Association  of  South  Dakota,  Tri-State  Country  Grain  Shippers’ 
Association,  Minneapolis  Traflic  Association¬ 
s';  Sec  27  I.  C.  C.  2St).  •  / 


58 


TER^tlNAL  GRAIN  MARKETS  AND  EXCHANGES. 


grain  marketing  centers.  The  competitive  relationship  between  pro¬ 
ducing  areas  on  the  one  hand,  and  marketing  or  consuming  points  on 
the  other,  has  created  for  the  territory  between  the  Mississippi  and 
Missouri  Rivers  a  system  of  combination  rates  applying  to  and  from 
the  river  crossings  (i.  e.,  the  ^h'ate  breaking’’  points).  These  combi¬ 
nations  serve  as  maximum  rates  for  shipments  from  intermediate 
points. 

On  the  principle  of  'Svater  competition”  rates  for  many  years 
were  maintained  from  Missouri  River  points  to  the  Gulf  so  low  as  to 
materiallv  assist  in  the  development  of  the  Kansas  City  market.  As 
river  transportation  of  bulk'  grain  became  of  negligible  importance 
this  principle  of  ''water  competition”  was  largely  abandoned,  and 
rates  from  certain  producing  points  in  Kansas  and  Oklahoma  to  the 
Gulf  became  less  than  the  combinations  via  Kansas  City.  As  a 
result  grain  was  frequently  sold  on  the  Kansas  City  exchange  which 
■was  shipped  direct  from  the  country  station  to  a  Gulf  point  vithoiit 
passing  through  Kansas  C’ity. 

Conclusion. — In  general,  there  is  sufTicient  evidence  to  indicate  that 
'  transportation  facilities  and  transportation  rates  are  of  controlling 
!  importance  in  establishing  grain  markets  and  a  primary  factor  in  the 
!  cost  of  marketing  grain.  No  adequate  conclusions  can  bo  made  with 
reference  to  the  grain  marketing  system  without  a  detailed  examina¬ 
tion  of  comparative  transportation  costs  from  producing  to  consum¬ 
ing  territory.  Such  an  analysis  is  reserved  for  Volume  IV. 


Chapter  III. 

THE  CHICAGO  MARKET  AND  THE  BOARD  OF  TRADE. 


Section  1.  Origins.  • 


Tlio  development  of  a  grain  market  at  Chicago  is  traceable  to  its 
strategic  position  as  a  lake  shipping  point  located  in  the  heart  of 
the  grain  growing  area,  and  offering  a  natural  terminal  to  lake  and 
water  movement.  The  first  official  record  of  the  grain  trade  in 
the  little  prairie  town  show's  the  receipt  of  78  bushels  of  wdieat  in 
1838.^  The  shipping  business  was  inaugurated  in  the  following  year 
wdien  a  cargo  of,lj678  bushels  of  wdieat  w'as  loaded  from  farmers’ 
wagons  into  a  brig  and  shipped  to  Black  Bock,  Erie  County,  N.  Y 
By  1841  Chicago  had  become  the  grain  market  for  northern  Illi¬ 
nois  and  parts  of  Indiana  and  Wi'-'consin.  The  prairie  farmer  W'as 
interested  not  only  in  the  cash  price  to  be  obtained  for  grain  but  also 
in  the  price  of  the  supplies  wdiich  he  invariably  purchased  with  a  part 
of  the  proceeds.  Ancl  higherjirkj^ij^pxevailed  for  grain,  wdiilo  low'er 
prices  w'ere  asked  for  manufactured  goods,  in  the  lake  port  of  Chicago 
tliairiitTiiterior  points.  In  1841,  on  the  same  day  that  Chicago  w'as 
paying  $l7TcdrIariiought  wdieat  at  40  cents.  At  nearer  points,  dur¬ 
ing  the  same  year,  wdieat  w*as  fete  bin  a:  50  cents  a  bushel  wdien  Chicago 
was  paying  87  cents.  In  September,  1842,  when  Chicago  wns  paying 
53  to  54  cents  cash  for  wdieat,  Springfield  offered  but  374  cents  in 
trade.  Consequently  plank  roads  w'ore  ])iult  out  in  all  directions  to 
enable  producers  to  bring  in  tlieir  wagonloads  over  the  jirairie  miid. 
Trains  of  wvagons  loaded  wdth  wdieat  w'crc  a  frpquent  sight  in  the 
Cliicago  market  and  trains  sometimes  of  80  wngons  wnre  observed 
passing  tlough  the  country  eii  route  to  the  city.^ 

Such  a  lively  traffic  developed  on  Lake  Michigan  that  in  1841  the 
arrivals  and  departures  of  lake  craft  for  the  season  averaged  150  per 
month;  but  (it  is  recorded)  the  grain  trade  had  increased  so  rapidly 
that  there  W'ere  not  vessels  enough  to  carry  aw'ay  the  wdieat.-^ 

The  building  of  railroads  and  canals  relieved  the  farmers,  merchants, 
and  millers  of  the  necessity  of  hauling  by  wngon  sometimes  100  miles 
to  find  a  market.  The  local  stations  on  these  routes  became  country 


1  Report  of  tlic  U.  S.  Industrial  Commission,  1900,  Vol.  IV,  p.  404.  Note.— The  population  of  Cliicaso 
in  1S40  was,  4,833. 

2  See  Taylor,  History  of  Board  of  Trade,  Chicago,  vol.  1,  pp.  114,  11.5,  referring  to  the  Chicago  Press  ancl 
Tribune,  Jan.  6,  18.59,  in  which  the  hill  of  lading  covering  the  shipment  is  reprinted  and  spoken  of  as  ‘Uho 
first  bill  of  lading  for  wheat  made  out  in  Chicago.”  Also,  see  the  American  Elevator  and  Grain  Trade, 
May  15,  1918,  p.  708,  containing  extracts  from  the  Journal  of  the  Illinois  State  Historical  Society,  and 
David  McCulloch  in  Proceedings  of  the  Chicago  Historical  Society,  Jan.  19,  1904.  Also  sec  p.  107,  note  23. 

s  American  Elevator  and  Grain  Trade,  vol.  36,  p.  707,  based  on  studies  of  the  Illinois  Historical  Association. 

*  Idem. 


60 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


markets  from  which  grain  was  shipped  to  Chicago.  Within  a  few 
years  after  the  completion  of  the  Galena  &  Chicago  Union  Railroad, 
Clinton,  Elgin,  Belvidere,  Rockford,  and  other  stations  became  active 
grain  centers,  and  Chicago  the  central  market  for  that  territory.^ 

The  organized  market  at  Chicago  was  established  in  -the  year  1848. 
In  that  year  the  first  wheat  was  received  in  the  market  by  rail,  and 
the  Illinois  &  Michigan  Canal  was  opened  with  Chicago  as  its  terminus. 
In  that  year,  also,  the  merchants  and  traders  of  the  town  organized 
the  Board  of  Trade,  which  will  presently  be  described.  Two  years 
later  connection  was  made  with  the  Atlantic  seaboard  via  the  New 
York  Central  Railroad. 

During  the  subsequent  decade  the  trade  in  greiin  outstripped  that 
of  all  other  commodities,  and  in  1858  it  was  asserted  that  Chicago  had 
the  reputation,  'Gvhich  she  has  enjoyed  for  years,  of  being  the  largest 
primary  gniin  market  in  the  world.’'  ‘'Chicago,"  it  was  pointed  out, 
"from  her  position,  and  connection  by  lake,  canal,  and  railroads,  com¬ 
mands  the  trade  of  an  extent  of  country  controlled  bv^  no  other  city, 
and  nowhere  surpassed  by  the  richness  of  its  soil."® 

A  table  was  cited  by  the  Board  of  Trade  to  show  the  preeminence 
of  Chicago  among  Avestern  markets,  as  follows: 


Table  2’i. -^Receipts  of  grain  at  Cincinnati,  St.  Louis,  and  Chicago  in  IShS.a 


Cincinnati. 

St.  Louis. 

Chicago. 

Flour  (reduced  to  wheati . 

Bushels. 

3. 166..  590 

1.211..  543 
1,000,236 

588, 950 
64,358 
400,967 

Bushels. 
1,861,196 
3, 835, 759 
900,000 
1,690,562 
48, 198 
408,000 

Bushels. 

2,610,685 

9,6.39,614 

8,252,641 

2,313,597 

71,012 

413,812 

AA'heat . 

('brn . 

Oats . 

Bariev . 

Tolal . . . 

6, 432,644 

8, 7.39, 715 

23,301,361 

Chic?a.go  over  ('incinnati  and  St.  Loui.s  combined 


«  First  annual  statement,  p.  4-3. 

The  supremacy  of  Chicago  as  a  distributing  center  for  grain,  which 
was  so  CAndent  in  1858,  was  only  strengthened  by  the  Civil  War.^ 
And  by  1864  the  market  claimed  a  like  preeminence  in  the  distri¬ 
bution  of  beef  and  pork: 

The  same  uatural  causes  Avhich  made  this  the  greatest  interior  grain  market  in  the 
country,  has  also  made  it  the  greatest  collecting  point  for  hogs  and  beef  cattle.  Con- 

*  Idem. 

*  First  aimual  statement  of  tlie  Trade  and  Commerce  of  Chicago  for  the  year  ending  Dee.  .31,  1858,  p.  44. 

Jin  the  critical  year  of  18ti3  the  secretary  of  the  board  reported  that  “while  our  city  has  thus  been  cut 

off  from  some  of  its  commercial  points,  it  is  generally  conceded  that  we  are  gainers  by  the  internal  troubles 
that  afflict  the  coimtry.”  (Annual  statement,  Jan.  1,  1863.) 

The  records  show  that  the  railroads  running  south  out  of  Chicago  were  taxed  to  the  utmost  with  ship- 
ments  of  oats  to  the  armies  in  the  field,  and  an  ever-increasing  number  of  packing  houses  on  the  Chicago 
River  carried  on  a  lively  export  trade  with  London  and  Liverpool.  (1803,  Hoard  of  Trade  Report,  p.  32 
1864,  Report,  p.  34.)  '  ’ 


THE  CHICAGO  MAEKET  AND  THE  BOARD  OF  TRADE. 


61 


iiocted  by  a  perfect  network  of  railroads  with  the  great  Northwestern  States,  Chicago 
is  the  natural  depot  for  the  receipt  of  their  produce,  and  it  is  the  best  general  dis¬ 
tributing  point.  No  matter  what  market  is  the  best,  the  facilities  for  shipping  are 
unequaled — whether  it  be  to  the  South,  or  the  North,  the  East,  or  the  West.  With 
the  lake  trade  and  its  shipping,  produce  can  be  carried  cheaper  from  Chicago  to  the 
East  than  from  any  other  market  in  the  West;  and  in  the  winter  season  there  are 
four  great  lines  of  railroad  connecting  us  with  the  seaboard,  striking  as  far  north  as 
Quebec  and  as  far  south  as  Baltimore.® 

Historically  a  forwarding  market. — It  is  clear  from  the  pre¬ 
ceding  discussion  that  the  Chicago  market  during  its  earlier  years 
was  devoted  primarily  to  the  forwarding  business;  and  it  has  re¬ 
mained  a  shipping  rather  than  a  consumptive  center.** 

This  is  emphasized  by  the  history  of  flour  production  in  Chicago. 
Prior  to  the  great  fire  in  1871  flour  production  in  the  city  had  reached 
an  annual  output  of  543,285  barrels  (1869) ;  but,  with  the  exception  of 
1885  and  1891,  this  figure  was  not  exceeded  for  25  years. (See  table 
below.)  While  the  other  industries  of  the  city  were  revived  with 
marvelous  rapidity  after  that  year  of  destruction  the  grain  interests  ! 
became  even  more  closely  centered  in  the  large  forwarding  business. 

Table  24. — Flour  'production  in  Chicago,  1870  to  1896,  inclmive. 


Vear.i 

• 

1870  . 

1871  . 

]872 . 

1873  . 

1874  . 

1875  . 

1876  . 

1877  . 

1878  . 

1879  . 

18,80 . 

1881 . 

1882 . 

1.S83 . 


1  Annual  reports,  Board  of  Trade. 

Although  flour  production  increased  in  the  later  nineties  the  flour 
trade  became  relatively  less  important  on  the  exchange.  The  frank¬ 
est  statement  of  the  situation  appears  in  the  annual  report  of  the 
secretary  of  the  Board  of  Trade  for  the  year  1902: 

The  flour  trade  in  this  market  is  largely  of  a  local  character  outside  of  the  business 
transacted  in  the  flouring  mills.  The  middle  or  commissLonman  has  disappeared 

«  Annual  statement,  1804,  p.  46. 

» See  Table  13,  p.  27. 

10  Flour  production  jumped  to  751,501  barrels  in  1895.  See  Board  of  Trade  report  for  that  year. 

11  For  example,  in  the  secretary’s  general  review  of  the  year  1874,  the  wheat  movement  was  reported  to 
have  been  “of  unprecedented  magnitude  *  *  *  being  about  3,.500,000  in  excess  of  the  large  receipts 
of  1873.”  But  the  manufacture  of  flour  showed  a  decline  for  that  year  of  nearly  20,000  bushels;  and  the 
grind  for  that  year  amounted  to  only  10.5  per  cent  of  the  barreled  flour  passing  out  of  Chicago  terminals. 
(Reports  for  1874  and  1875.) 


Number  of 
mills  of 
over  5,000 
barrels 
annual 
capacity. 

Total 
aimual  i 
production 
of  flour 
(in  barrels). 

Vcar.i 

Number  of 
mills  of 
over  5,000 
barrels 
annual 
capacity. 

13 

i 

443,976 

1884 . 

4 

8 

327,739 

1885 . 

4 

"  2 

186,968 

1886 . 

4 

3 

264,363 

1887 . 

4 

3 

244,667 

1888 . 

4 

3 

249, 653 

1889 . 

4 

3 

271,074 

1890 . 

4 

3 

293,244 

1891 . 

4 

3 

308,284 

1892 . . 

4 

5 

285,904 

1893 . 

3 

4 

196,041 

1894 . 

3 

3 

2.38,200 

1895 . 

4 

2 

300,358 

1896 . 

3 

2 

294,720 

Total 
annual 
production 
of  flour 
(in  barrels). 


535, 841 
575, 165 
494,789 
514, 870 
435,110 
431,000 
430,609 
578, 180 
542,000 
455, 469 
444,000 
751,501 
923,28:3 


G2 


TERMINAL  GRAIN  AIARKETS  AND  EXCHANGES. 


from  the  market;  his  services  are  not  wanted.  The  buyer  puts  himself  in  direct 
relation  with  the  miller,  or  rather  the  miller  passes  by  the  commission  mcrcliant  and 
calls  at  once  and  directly  upon  the  buyer,  not  only  in  all  domestic  but  in  foreurii 
markets.  Chicago  can  not  be  called  in  any  prominent  sense  a  flour-manufacturing 
center.^- *  *  *  * 

Thanssiiipments. — Not  only  is  the  great  hulk  of  the  grain  received 
at  Chicago  ultimately  shipped  on  to  eastern  or  European  buyers  Init 
a  considerable  percentage  is  transshipped  without  going  into  storage. 
The  weighing  committee  of  the  board  reported  in  1886  that  the 
tlirough  eonsignment  business  was  on  the  inerease: 

In  1876  only  13  per  cent  of  the  grain  arriving  here  was  not  sent  to  store;  in  1880  only 
20  per  cent  was  not  sent  to  store,  while  in  1885  nearly  57  per  cent  did  not  go  to  store; 
and  your  directors  unite  in  the  opinion  that  it  is  the  duty  of  this  board  to  do  all  in  its 
power  to  increase  the  importance  of  this  city  as  a  great  and  reliable  produce  dis¬ 
tributing  center.'^  *  *  * 

Section  2.  History  of  the  transportation  problem.  ^ 

Water  vs.  rail  transportation. — Transportation  has  been  shown 
to  be  a  controlling  factor  in  the  development  of  aii}^  terminal  mar¬ 
ket.  It  has  been  of  especial  importance  at  primaiw  shipping  points 
such  as  Chicago.  In  fact,  the  history  of  the  Chicago  cash  grain 
market  from  1860  until  the  present  day  is  largely  a  record  of  the 
acquisition  or  the  loss  of  transportation  advantages.  This  is  the 
perennial  problem. 

During  the  period  1840-1860  shipments  were  almost  exclusively 
by  lake.  The  business  of  the  port  in  grain  was  therefore  restricted  t6 
the  period  of  open  navigation.  The  year  1860  may  be  taken  as  a  turn¬ 
ing  point  in  the  history  of  transportation  in  the  United  States, and 
specifically  of  Chicago.  The  great  bulk  of  grain  shipments  from 
Chicago  in  1860  was  by  lake  routes.  In  fact,  only  6.4  per  cent  of  all 
grains  shipped  out  'of  Chicago  terminals  (i.  e.,  including  through 
shipments)  was  forwarded  by  rail.  This  predominance  of  the  lake 
movement  appears  in  Table  25. 

>2  Annual  report,  Chicago  Board  of  Trade,  1902,  p.  liii. 

Report  of  the  Chicago  Board  of  Trade  for  the  year  1883,  p.  XLIV.  Sec  also  Ch.  I,  p.  19. 

“  “Before  1860  the  extent  of  populated  area  of  the  United  States  and  the  facilities  for  transportation 
were  such  that  the  bulk  of  internal  trade  followed  two  distinct  routes;  an  east-and-west  route  over  the  Eric 
Canal  on  the  trunk-line  railroads,  and  a  north-and-south  route  over  the  waters  of  the  Mississippi  River. 

*  *  *  The  westward  movement  of  the  population  and  the  development  of  the  great  railway  net  com¬ 

pletely  put  an  end  to  the  simplicity  which  characterized  the  trade  of  the  period  before  1860.  The  old  line;-; 
were  modified  or  swept  away.’'  (Johnson,  E.  R.,  etc.,  History  of  Commerce  of  the  United  States,  vol.  I, 
p.  270.) 


THE  CHICAGO  MARKET  AKD  THE  BOARD  OE  TRADE.  63 


TAi’ii.E  25. — Shipments  {including  transshipments)  of  all  grains  by  lake,  canal,  and  rail¬ 
road,  ISGOd 


AVheat. 

Corn. 

Oats. 

Rye. 

Barley. 

All 

grains. 

Percent 
of  total. 

3‘oU)!  forwarded: 

Bv  lake . 

By  canal . 

ifv  rail . 

Brand  total . 

Bushels. 

11,817,476 

60,166 

524,555 

Bushels. 

13,063,043 

685 

636,385 

Bushels. 
605,304 
110,584 
369, 810 

Bushels. 

114,686 

62 

41,894 

Bushels. 

60,328 

5,734 

201,387 

Bushels. 
25,660,8:17 
183, 231 
1,774,031 

93. 00 

.  6 

6.  4 

12, 402,197 

13,700,113 

1,091,698 

156,642  1  267,449 

27,618,099 

100.00 

»  Figures  from  third  annual  statement,  year  ending  Dec.  31, 1860. 


By  1867,  however,  the  rail  routes  had  captured  38  per  cent  of  this  ^ 
traflic  and  ‘'the  elimination  of  the  Erie  Canal  as  an  important  factor 
ill  the  transportation  of  grain  was  clearly  indicated.’' 

The  status  of  Chicago  as  a  forwarding  market  in  the  seventies 
was  brought  out  by  the  Supreme  Court  of  the  United  States  in  the 
Muim  case.  Accepting  as  true  the  statements  of  fact  submitted  bv 
the  counsel  for  the  Chicago  elevator  interests  the  court  said: 

It  appears  that  the  great  producing  region  of  the  AVest  and  Northwest  sends  its  grain 
by  water  and  rail  to  Chicago,  wliere  the  greater  part  of  it  is  sliipiied  by  vessel  for 
transportation  to  the  seaboard  by  the  Great  Tiakes,  and  some  of  it  is  forwarded  ])y 
railway  to  the  eastern  ports.  *  *  *  A'essels  to  some  extent  are  loaded  in  the 
Chicago  harbor  and  sailed  through  the  St.  Lawrence  directly  to  Europe.  *  *  The 
quantity  (of  grain)  received  in  Chicago  has  made  it  the  greatest  grain  market  in  the 
world.  This  business  has  created  a  demand  for  means  by  which  the  immense  quantity 
of  grain  can  be  handled  or  stored,  and  these  have  been  found  in  grain  warehouse.s, 
which  are  commonly  called  elevators,  because  the  grain  is  elevated  from  the  boat 
or  car  by  machinery  operated  by  steam  into  the  bins  prepared  for  its  reception,  and 
elevated  from  the  bins  by  a  like  process  into  the  vessel  or  car  which  is  to  carry  it 
on.  *  *  *  In  this  way  the  largest  trafTic  between  the  citizens  of  the  country 
north  and  west  of  Chicago  and  the  citizens  of  tlie  country  lying  on  the  Atlantic  coast 
nortli  of  AAnshington  is  in  the  grain  which  passes  tlirough  the  elevators  of  Chicago. 

In  this  way  the  trade  in  grain  is  carried  on  by  the  inhabitants  of  seven  or  eight  of  the 
great  States  of  the  AVest  with  four  or  five  of  the  States  lying  on  the  seashore  and  forms 
the  largest  part  of  interstate  commerce  in  these  States.^® 

With  the  further  development  of  trunk  railroad  lines  to  the  sea¬ 
board  there  ensued  a  comparative  increase  in  the  rail  movement 
and  a  tetidency  toward  diversion  of  the  movement  by  water,  which 
presented  an  ever-pressing  problem  to  Chicago  shippers.  It  was  not 
merely  a  problem  of  rates  but  rather  of  the  actual  diversion  of  grain 
through  and  around  the  Chicago  market. 

The  necessity  of  maintaining  the  lake  marine  was  continually 
emphasized  by  shippers.  As  the  year  1875  closed  it  was  apparent 
that  the  alternating  rate  Avars  and  pooling  agreements  instituted 
by  competing  railroads  out  of  Chicago  had  “tended  to  divert  larcre 


Idem,  p.  271. 

1®  Munn  V.  Illinois,  91  U.  S.  1.30. 
w  The  Baltimore  Ohio  had  reached  Chicago  in  1S72. 


G4 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


{unoiiiits  of  })roperty  tliat  would  under  ordinary  circumstances  M 
liave  found  its  way  to  market  through  this  city.’’  The  members  | 
of  tlie  Board  of  Trade  felt  that  such  competition  wmdd  only  work 
its  own  destruction: 

Tins  <Uversion  by  rail  of  large  quantities  of  grain  and  freight  of  every  description  j 
tlirougli  and  around  our  city  is  sometimes  spoken  of  as  threatening  tlie  permanency  of  ■] 

our  position.  *  *  *  4 

'Fhe  present  managers  of  these  roads  liaA'ing  no  responsibility  or  expectations  of  J 
])aying  interest  or  dividends  on  the  cost  of  their  const  ruction  would  seem  to  be  (and 
it  is  not  to  be  denied)  formidable  competitors  even  against  the  great  free  water  com-  ^ 
munication  which  nature  has  provided.  It  is  impossible  for  this  state  of  things  to  ^ 
long  (continue  unless  the  operating  of  these  roads  is  to  result  in  their  entire  confisca-  j 

tion.  When  they  are  compelled  to  jjay  interest  and  dividends  they  will  cease  to  j 

])e  competitors.  This  city  should  be  c-ontent  with  the  five  trunk  lines  of  railways  j 
leading  to  the  seaboard,  and  trust  the  competition  between  them  for  securing  reason-  cl 
ably  cheap  transportation  during  winter  and  rather  look  to  our  lakes  and  rivers,  the 
Erie  Canal,  the  New  York  Central  Railroad,  with  four  tracks  to  Buffalo  and  an  elevator  y 
system  at  New^  York  City,  to  maintain  our  supremacy  as  the  great  grain  depot  of  the 
West.  To  our  lake  marine  we  must  mainly  look.  The  various  interests  centering  :i 
in  Chicago  and  other  lake  cities  could  better  afford  to  subsidize  it  than  to  see  it  languish 
and  die.'®  ji 


The  next  year  rate  agreements  were  again  consummated  by  the 
competing  lines  out  of  Chicago  and  a  combination  formed  that  was 
branded  “as  little  less  than  unmitigated  extortion”  on  the  ground 
that  the  Chicago  shippers  “were  subjected  to  a  giyen  and  inflexible 
standard  of  charges,  while  at  competing  points  no  such  arrange¬ 
ment  existed.”^®  *  *  *  Yet  this  situation  was  of  short  dura¬ 

tion.  To  further  ciuote  from  the  secretary  of  the  board: 

Events  wdthin  and  without  this  combination,  how^ever,  brought  about  its  entire 
disruption  about  the  time  the  ice  blockade  released  our  lake  shipping  interests,  and 
then  commenced  a  w^ar  of  rates  betw^een  the  elements  of  the  previous  combination, 
which  w^as  kept  up  with  unabated  vigor  until  near  the  close  of  the  year,  when  what 
may  be  more  properly  termed  a  truce  rather  than  an  established  reconciliation  and 
agreement  was  entered  into  and  a  moderate  advance  w'as  agreed  upon.  During 
the  pendency  of  the  contest  rates  remained  nominally  on  the  basis  of  20  cents  per 
100  pounds  on  grain  and  fourth-class  freights  and  40  cents  per  barrel  on  flour  from 
Ghicago  to  New^  York  and  a  trifle  less  to  Philadelphia  and  Baltimore,  but  even  these 
unprecedentedly  low"  rates  w^ere  at  times  shaded  to  as  low  as  14  cents  per  100  pounds 
on  grain  to  New  York,  and  generally,  if  for  export,  they  w  ere  taken  at  the  same  rate 
to  New'  York  as  to  Philadelphia.  *  *  *  Probably  nothing  that  has  ever  occurred 
in  the  history  of  transportation  in  this'  country  has  so  shaken  the  public  confidence 
in  hitherto  accepted  data  as  to  the  cost  of  railw'ay  transportation.'-®  *  *  * 

Within  the  year  the  railroads  were  compelled  to  increase  their 
rates  eastward  and  there  was  a  corresponding  increase  in  the  lake 
movement.  During  1876  the  lake  movement  had  represented 
534  per  cent  of  all  shipments,  whereas  in  1877  the  lake  shijiments 

>*  Report  of  George  Armour,  president  of  the  Chicago  Board  of  Trade,  for  the  year  1875,  pp.  24,  25. 

■*  Report  of  secretary  of  the  Board  of  Trade  for  the  year  ending  Dec.  31,  1876,  p,  19. 

^  Report  for  the  year  ending  Dec.  31, 1876,  pp.  19,  20.  3 


65 


.  THE  CHICAGO  MAUKET  AND  THE  BOARD  OF  TRADE. 

amounted  to  71  f  per  cent  of  the  total.  There  was  a  similar  increase 
in  the  movement  throiigli  the  Eric  Canal,  and  whereas  the  export 
trade  had  been  diverted  somewliat  from  New  York  in  1877  it  returned 
to  normal,  with  the  increase  in  the  water  movement. The  com- 
])arativc  increase  in  export  trade  through  New  York  was  favored  by 
the  Chicago  Board  of  Trade,  not  because  of  any  preference  as  between 
the  eastern  seaports,  but  because  it  was  felt  that  an  increase  in 
ti'ade  movement  through  Philadelphia  and  Baltimore  indicated  ''a 
railway  diversion  from  tlie  water  routes,”  which  meant  a  diversion 
of  business  from  Chicago.  The  shippers  were  still  insistent  upon  the 
maintenance  of  lake  traffic : 

Chicago  exists  to-day  as  a  great  produce  market  because  of  her  position  in  respect  to 
water  transportation,  and  her  citizens  can  ill  afford  to  contemplate  with  indifference 

any  serious  diversion  of  traffic  from  this  great  natural  means  of  communication.  22 
*  *  * 

Nothing  occurred  for  several  years  to  shake  the  convictions  of 
members  of  the  Board  of  Trade  in  the  surpassing  advantage  of  cheap 
water  transportation.  In  1878  the  water  movement  exceeded  all 
expectations,  a  ton  of  wheat  being  ‘transported  from  Chicago  to 
New  York  for  $2.25,  or  6?^  cents  per  bushel.  It  is  hardly  probable,” 
said  the  secretary  of  the  board,  “that  the  most  sanguine  advocate 
of  cheap  railroad  transportation  expects  that  as  low  a  rate  as  this 
can  ever  pay  for  the  same  service  performed  by  rail.  The  water 
line  is  undoubtedly  the  great  advantage  that  Chicago  possesses  for 
attracting  to  her  the  produce  of  the  Northwest.  Railway  lines  are 
invaluable  as  auxiliaries  to  this  great  route,  but  it  must  continue,  as 
in  the  past,  to  regulate  the  rates  that  will  prevail  for  moving  from 
the  producer  to  the  consumer  this  vast  volume  of  traffic.” 

Toward  1880,  however,  the  character  of  railroad  terminal  arrange¬ 
ments  became  such  as  to  cause  general  alarm  to  the  shipping  public. 
Whereas  during  the  two  previous  decades  railroads  had  been  fostered, 
assisted,  and  promoted  by  public  and  private  measures,  now  there 
was  a  rising  sentiment  against  railroad  manipulations  which  fre¬ 
quently  appeared  to  be  wholly  at  variance  with  the  public  interest.^^ 
As  is  well  known,  this  agitation  resulted  in  the  passage  of  the  inter¬ 
state  commerce  act  of  1887. 

For  the  first  time,  the  shippers  voiced  a  feeling  ol  positive  appre¬ 
hension  lest  the  lake  traffic  should  no  longer  constitute  a  check  upon 

Report  of  the  Board  of  Trade  for  the  year  1877,  p.  18,  et  seq. 

**  Report  of  the  Chicago  Board  of  Trade  for  the  year  1877,  p.  19. 

•*  Report  for  the  year  1878,  p.  18. 

the  seventies  the  public  gradually  came  to  realize  that  the  railroad  companies  disregarded  the 
interests  of  the  public.  Persons  and  communities  found  themselves  at  the  mercy  of  railroad  corporations, 
which,  by  discriminations  in  charges,  built  up  and  destroyed  towns  and  had  power  to  control  arbitrarily 
the  economic  future  of  sections  of  the  country.”  (Johnson,  etc..  History  of  Domestic  and  Foreign  Com¬ 
merce  of  the  United  States,  Vol.  T,  294.) 

1G8093‘’— 20 - 5 


66 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


the  rate  advances  of  railroads.  There  is  no  reason  to  doubt  the  sub¬ 
stantial  accuracy  of  the  statement^'*  of  Charles  Randolph;  secietaiy 
of  the  Board  of  Trade  (1880) : 

A  comparatively  few  individuals  arc  steadily  gaining  control  of  the  valuable  inter¬ 
state  lines,  through  which  they  can  dictate  the  poUcy  of,  or  effectually  destroy  those 
of  less  importance.  By  far  the  most  formidable  scheme  for  destioying  competition 
that  has  ever  been  devised  in  this  country  or  the  world,  has  been  developed  during 
the  past  year.  By  it  all  the  great  trunk  lines  between  the  East  and  the  West  are  prac¬ 
tically  consolidated,  in  so  far  as  their  relations  to  the  people  are  concerned,  into  a 
giant  monopoly,  from  which  the  element  of  competition  seems  to  be  entirelj  elimi¬ 
nated.  *  *  *  ^  ^ 

In  December  the  organization  embraced  34  railroad  lines,  substantially  coi  ering 

the  whole  of  the  east  and  west  traffic  of  the  United  States  north  of  the  Ohio  Pd\  er  and 
through  Canada.  *  *  * 

For  a  portion  of  the  year  the  navigable  waterways  will  undoubtedly  hold  in 
check  any  disposition  that  might  otherwise  prevail  for  the  undue  advance  of  rates 
but  for  nearly  half  the  year  these  can  exercise  little  but  a  prospective  influence,  and 
for  the  vast  volume  of  property  that  must  be  moved  in  the  winter  months  lates  can  be 
maintained  at  a  point  wholly  unjustified  by  the  cost  of  the  service. 

The  shifting  of  the  center  of  wheat  production  toward  the  North¬ 
west  after  1880  also  had  a  marked  effect  upon  transportation  arrange¬ 
ments.  An  increasing  percentage  of  the  spring  wheat  marketed 
over  the  Northern  Pacific  Railroad  was  moved  direct  to  Buffalo, 
out  of  the  Minneapolis  and  Duluth  terminals.  It  was  apparent  that 
Chicago  would  have  to  depend  largely  upon  a  tributary  area  not 
commanded  by  the  shipping  port  of  Duluth-Superior  or  b}^  the  flour 
mills  of  Minneapolis.^® 

The  Erie  Canal  movement.— In  1880  the  electorate  of  the  State 
of  New  York  authorized  the  removal  of  all  tolls  for  the  use  of  the  Erie 
Canal.  No  shippers  welcomed  this  act  more  warmly  than  did  the 
grain  dealers  of  Chicago,  since  the  canal  formed  an  important  link  m 
the  chain  of  lake  traffic  upon  which  they  placed  dependence.  And  it 
was  testified  before  the  Industrial  Commission  in  1899  that,  as  a 
general  rule,  the  cheapest  route  for  shipping  out  of  Chicago  v  as  b\ 
the  Great  Lakes  and  canal."^ 

*  -X-  *  The  favorite  routes  are  from  Chicago  to  Buffalo,  for  shipment  from  there 
East  via  the  Erie  Canal  and  Hudson  River  to  New  York,  or  by  rail  from  Buffalo  or 
Albany  to  Boston,  New  York,  Philadelphia;  or  from  Chicago  to  Erie,  then  by  rail 
Philadelphia  or  Baltimore;  from  Chicago  by  water  to  FaiiTort,  Ohio,  and  then  to  Bal¬ 
timore;  from  Chicago  to  Port  Huron,  Sarnia,  Portland,  Owen  Sound,  Parry  Sound, 
and  Collingswood,  and  thence  by  rail  through  Canada  to  Montreal,  St.  Jolms,  Portland, 

25  Annual  report,  secretary  of  Chicago  Board  of  Trade,  year  ending  Dec.  31,  1879,  pp.  17-19. 

26  It  was  reported  in  1884:  “  *  *  *  a  considerable  percentage  of  the  crop  of  spring  wheat  grown  in 
northern  Minnesota  and  Dakota  and  not  used  at  home  or  by  the  Mimieapolis  mills,  has  passed  eastward 
by  way  of  Duluth,  and  it  is  not  improbable  that  this  route  will  in  the  future  command  the  greater  portion 
of  the  eastward  movement  of  wheat  from  along  the  line  of  the  Northern  Pacific  Railroad.  Freight  rates 
from  Duluth  to  Buffalo  are  maintained  on  substantially  the  same  basis  as  from  Chicago,  and  an  effort  wiU 
doubtless  be  made  to  secure  the  haul,  by  the  railroad  line  first  receiving  it,  of  the  longest  possible  distance. 
*  *  (Chicago  Board  of  Trade,  annual  report  for  1883,  p.  14.) 

22  Report  of  the  U.  S.  Industrial  Commission,  Vol.  IV,  p.  412. 


-  THE  CHICAGO  MARKET  AKD  THE  BOARD  OF  TRADE. 


67 


or  Boston;  from  Chicago  via  the  Great  Lakes  and  the  Welland  Canal  to  Prescott,  Kings¬ 
ton,  or  Ogdensburg,  and  the  transfer  to  barges  and  down  the  St.  LawTence  River  to 
Montreal,  or  taken  from  Ogdensburg  by  rail  to  Portland  or  Boston.  *  *  * 

At  present  the  Canadian  routes  are  the  cheapest,  and  during  last  season  they  have  had 
all  the  grain  they  could  possibly  take  care  of  at  Montreal,  and  the  lack  of  ocean  tonnage 
has  been  the  only  thing  which  prevented  Montreal  from  doing  a  much  larger  business. 
The  lines  from  Montreal  are  now  establishing,  for  the  wintertime,  ocean  lines  from 
St.  Johns  and  Portland,  and  will  doubtless  do  a  very  large  business  via  that  route. 

Tlic  canal  tonnage,  depth,  and  general  facilities  were  becoming, 
however,  hopelessly  inadequate  and  lower  rates  had  little  effect  upon 
railroad  competition.^'^  The  marked  decline  in  canal  shipments  of 
grain  out  of  Buffalo  as  compared  with  the  lake  receipts  at  that  point 
from  1880  until  1900  (inclusive)  appears  in  Table  64,  p,  184. 

After  ownership  of  the  lake  lines  was  acquired  by  the  trunk  lines 
in  1900  the  through-route  arrangements  and  the  interchange  of  traffic 
between  lake  lines  and  these  canal  barge  lines  was  terminated. 
Canal  grain  traflic  thereupon  practically  disappeared,  and  as  a  result 
serious  competition  between  lake  lines  and  railroads  for  grain  business 
was  eliminated.  To  quote  from  the  decision  of  the  Interstate  Com¬ 
merce  Commission  in  1915: 

It  is  contrary 'to  the  interests  of  tlic  owming  railroads,  operating  from  Buffalo  east, 
for  their  boat  lines  to  continue  any  through  operating  arrangement  with  these  canal 
barge  lines  for  the  movement  of  eastbound  traffic. 

These  boat  lines  under  the  control  of  the  petitioning  railroads  have  been  first  a  sword 
and  then  a  shield.  When  these  roads  succeeded  in  gaining  control  of  the  boat  lines 
which  had  been  in  competition  with  paralleling  rails  in  which  they  were  interested 
and  later  effected  their  combination  through  the  Lake  Line  Association,  by  which 
they  were  able  to  and  did  drive  all  independent  boats  from  the  thi’ough  lake-and- 
rail  transportation,  they  thereby  destroyed  the  possibility  of  competition  with  their 
railroads  other  than  such  competition  as  they  were  of  a  mind  to  permit.  Having  dis¬ 
posed  of  real  competition  via  the  lakes,  these  boats  are  now  held  as  a  shield  against 
possible  competition  of  new  independents.  Since  it  appears  from  the  records  that  the 
railroads  are  able  to  operate  their  boat  lines  at  a  loss  where  there  is  now  no  competition 
from  independent  lines,  it  is  manifest  that  they  could  and  would  operate  at  a  further 
loss  in  a  rate  war  against  independents.  The  large  financial  resources  of  the  owning 
railroads  make  it  impossible  for  an  independent  to  engage  in  a  rate  war  with  a  boat 
line  so  financed. 

Ex-lake  rates. — With  the  removal  of  lake-and-caiial  competition 
there  remained  (aside  from  Canadian  competition)  only  the  lake-and- 
rail  route  as  a  waterway  competitor  with  all-rail  lines. 


28  “The  Erie  Canal  is  a  factor  to  a  certain  extent, but  it  is  really  not  as  great  a  factoras  is  generally 
supposed.  It  does,  to  a  certain  extent,  regulate  the  rates  which  are  charged  by  the  railroads  east  of 
Buffalo  and  has  a  tendency  to  keep  them  from  charging  exorbitant  rates.  The  Eric  Canal’s  total  capacity 
is  very  small  compared  with  the  amount  of  grain  passing  through  Buffalo— -not  over  about  15  per  cent. 
This  canal  tonnage  has  decreased  yearly.  The  cause  for  this  is  largely  the  fact  that  a  great  deal  of  agitation 
has  been  going  on  looking  to  the  improvement  of  the  Eric  Canal  so  as  to  allow  vessels  carrying  larger 
loads  to  make  the  passage.  This  has  had  a  tendency  to  keep  people  from  building  additional  canal 
boats,  as  when  the  change  is  made  the  small  boats  will  be  of  little  value.”  (Report  of  U.  S.  Industrial 
Commission,  1900,  Vol.  IV,  p.  412.) 

«33I.C.  C.  714-710. 


68 


TERMI^^AL  GRAIN  MARKETS  AND  EXCHANGES. 


Those  ex-lake  rates  on  grain  have  been  a  subject  of  complaint  in 
Chicago  for  more  than  a  decade.  In  1914  the  matter  was  stated  as 
follows: 

*  *  *  We  are  fully  convinced  that  the  ex-lake  rates  which  apply  easterly  from 
Buffalo  on  grain  coming  off  the  lake  are,  and  have  been  since  1908,  too  high,  so  high 
indeed  that  it  is  cheaper  to  ship  to  most  points  all  rail  than  to  ship  lake  and  rail.  In 
other  words,  we  are  deprived  of  the  value  of  our  location  on  the  lake  and  the  value  of 
cheap  water  transportation.  The  rates  east  of  Buffalo  ought  to  be,  we  believe,  at  least 
1|  cents  per  bushel  lower  than  they  are,  and  on  that  basis  the  carriers  would  earn  as 
much  on  the  water-borne  grain  as  they  earn  on  all-rail  grain  from  Buffalo,  and  that,  we 
think,  is  all  they  are  entitled  to. 

Rail  and  water  differentials. — There  were  certain  advantages 
possessed  by  rail  carriers  over  water  transportation,  such  as  quicker 
and  more  direct  routes,  more  extensive  distributing  connections,  and 
superior  terminal  facilities.  Yet  these  advantages  could  not  have 
offset  the  lake  rate  differential  for  export  shipments  had  it  not  been 
for  rate  wars,  long-haul  agreements,  terminal  discrimination,  and 
finally  the  operating  control  of  American  lake  lines  and  barges  by  the 
trunkline  railroads. 

During  the  period  1880-1900  the  lake  movement  of  wheat  and  corn 
out  of  Chicago  maintained  a  substantial, increase  over  that  by  rail,  and 
the  percentage  of  shipments  of  these  cereals  through  and  out  of  the 
market  by  rail  during  those  years  averaged  less  than  40  per  cent  of 
the  total.  On  the  other  hand,  the  railroads  carried  approximately 
70  per  cent  of  the  oats.  A  fair  equilibrium  was  thus  maintained  be¬ 
tween  the  railroad  and  water  traffic.  There  was  nevertheless  a  sharp 
competition  with  widely  varying  results  in  individual  years.  In 
specific  years  the  railroads  made  great  gains  while  in  others  the  lake 
carriers  almost  monopolized  the  trafFic.”^^ 

So  long  as  lake  freight  rates  could  be  maintained  at  a  scale  sub¬ 
stantially  lower  than  rail  rates  (other  things  being  favorable)  a 
vigorous  lake  movement  was  assured.  With  the  practical  elimina¬ 
tion  of  the  lake  lines  as  a  competitive  factor  in  the  eastward  movement 
of  grain,  the  freight  rate  differential  was  also  gradually  reduced. 
From  1899  to  1916  a  decline  in  the  ratio  of  rail  to  water  rates  from 
Chicago  to  New  York  was  progressively  accompanied  by  a  decline  in 
the  percentage  of  lake  shipments  eastward  from  Chicago.  The  reduc¬ 
tion  in  the  rate  differential  during  the  five-year  period  1899-1904  was 
sufficient  in  itself  to  render  the  lake  shipping  business  in  grain  un¬ 
profitable,  regardless  of  other  factors  which  accelerated  this  decline. 

Such  a  progressive  reduction  in  the  rail-to-water  differential  can 
not  be  explained  by  the  decline  in  business  on  the  Erie  Canal  or  any 


i 

i 


.1 


I 


^  ■ 

\ 


80 Chicago  Board  of  Trade  report  for  1913,  p.  30. 

81  Tiinnell,  Geo.  G  ,  in  Journal  of  Political  Economy,  vol.  5,  p.  350  (1897). 

88  Cl.  33 1.  C.  C.,  p.  714.  “  Furthermore,  there  Is  much  in  the  records  tending  to  show  that  the  very  pur¬ 
pose  of  these  advances  in  lake-and-rail  rates  was  to  divert  tonnage  to  the  all-rail  lines.  As  a  direct  result  of 
this  rate  policy  of  the  owning  railroads,  the  lake  boats  bavo  operated  with  small  cargoes,  although  their 
operating  expense  was  almost  as  great  as  il  they  had  been  fully  loaded.  *  *  *» 


I 


THE  CHICAGO  MARKET  AND  TPIE  BOARD  OF  TRADE. 


69 


consequent  adjustment  of  ex-iake  rates.  (See  Table  26  below.) 
No  distinct  trend  is  evident  in  the  variations  of  actual  lake-and-canal 
rates  now^  in  the  corrresponding  lake-and-rail  rates  during  the  period 
1889-1916.  The  trend  is  in  the  all-rail  to  water  ratio.  The  all-rail 
rate  broke  sharply  in  1900,  and  from  that  year  on  the  differential 
can  not  be  said  to  have  })een  on  a  competitive  basis. 

The  tables  following  show  that  there  was  a  decline  in  the  ratio  of 
all-rail  to  lake-and-canal  average  freight  rates  from  Chicago  to  New 
York  after  1900  (Table  26) ;  that  there  was  a  decline  in  the  percentage 
of  wheat  shipments  from  Chicago  by  lake  in  the  period  1902-1916,  al¬ 
though  not  an  actual  decline  in  such  shipments  (Table  27) ;  that  there 
w^as  both  an  actual  and  proportional  decline  in  the  lake  shipments  of 
corn  and  oats;  that  the  percentage  of  lake  shipments  in  the  three 
grains  combined  shows  a  distinct  decline  for  the  period  1902-1916 
(Table  28);  that  the  relative  trend  in  lake  shipments  has  followed,  in 
general,  the  trend  in  the  freight  rate  differentia]  for  the  30-year  period 
(Table  29). 

How  the  divorcement  of  lake  from  water  lines  and  the  opening  of 
Canadian  and  New  York  water  routes  to  the  grain  traffic  will  affect 
this  situation,  is  as  yet  a  matter  of  speculation. 

Table  2G. — A  verage  export  f  reight  rates  omvheat,  Chicago  to  New  York,  hy  lake-and-canal 
and  hy  all-rail,  'with  ratio  of  all-rail  to  lake-and-canal  rates,  1887  to  1916. 

[Rates  in  cents  per  bushel.] 


Lake- 

and- 

canal. 

All-rail. 

Ratio  of 
all-rail 
to  lake- 
and- 
canal. 

1887-1891 . . 

7.44 

14.91 

2.00 

1892-1896  . 

6.05 

13. 10 

2  17 

1897-1901 . 

5.02 

10.84 

2. 16 

1902  1906  . . . . 

5.39 

8.38 

1.55 

19')7-1911 . 

5.62 

7.80 

1.39 

1912-1916 . 

6.15 

7.96 

1.29 

Tabi.e  27. — Movement  of  wheat,  corn,  and  oats  eastward  from  Chicago,  hy  five-year 
a  verages,  1887  to  1916,  wUh  percentage  of  lake  to  total  shipments. 


^  - 

Total  ship¬ 
ment. 

Lake  ship¬ 
ment. 

Percentage 
of  lake  to 
.total. 

Wheat: 

Bushels. 

Bushels. 

1887  to  1891 . 

21,192, 858 

14,321,625 

67.58 

1892  to  1896  . . 

27, 08.5, 4-81 

18,945,477 

69. 94 

1.897-1901 . 

31,  544,087 

21,666, 056 

68.68 

1902-1906 . . . 

20,651,412 

11,661,625 

56.47 

1907-1911 . . . . . 

22, *479-,  341 

11,576, 692 

51.50 

1912  1916 . 

56, 791,220 

22, 632, 630 

39.85 

Corn : 

1837-1891 . 

72,200,915 

49,399,314 

68.42 

1892-1896 . 

69,446,014 

53,254,800 

76.68 

1897-1901 . 

103,921,622 

71,523,854 

68.82 

1902-1906 . 

76, 209,980 

46,782,277 

61.39 

1907-1911 . . 

80, 970, 613 

37, 152,  871 

45.88 

1912-1916 . 

73,407, 420 

23,568,610 

32.11 

Oats: 

1. 887-1891 . 

53, 714, 595 

17, 056, 753 

31.75 

1892-1896 . . . 

66,7.59,396 

19,415,465 

29.08 

1897-1901 . 

85,920,  422 

26,931,552 

31,34 

1902-1906 . 

61,744,659 

10, 767, 769 

17. 44 

1907-1911.' . . . 

76,272,425 

6,327,086 

8.30 

1912-1916 . . . 

112,  .510, 800 

6, 138, 880 

5.46 

i  / 


70  TEFvMIXAL  GRAIN  MARKETS  AND  EXCHANGES. 


Table  28. — -Total  movement  of  u'hcat,  corn,  and  oats  combined  eastward  from  Chicago, 
by  five-year  averages,  1887  to  1916,  with  percentage  of  lake  to  total  shipments. 


Wheat,  corn,  and  oats. 

Total  ship¬ 
ment. 

Lake  ship¬ 
ment. 

Percentage 
of  lake  to 
total. 

1SS7  1R01  . 

Bushels. 
147, 108,368 

Bushels. 

80,777,693 

54.91 

1802  189fi  . 

163,290,890 
221,386, 131 

91,615,741 

56.11 

1897  1901  . 

120, 121, 463 

54.26 

1902-1905  . 

158,606,051 

69,211,671 

43.64 

1007  1011  . 

179,722,379 

242.709,440 

55,056,648 

30.  a3 

1912  1916  . 

52,-340, 120 

21.56 

Table  29  .—Relation  of  freight  rates  ratio  to  percentage  of  lake  shipments  eastward  from 

Chicago,  1887  to  1916. 


Ratio  of 
freight 
rates  (all¬ 
rail  tolake- 
and-canal). 

Increase  or 
decrease. 

Percentage 
of  lake  ship¬ 
ments  to 
total  ship¬ 
ments. 

Increa.s<3 
or  de¬ 
crease. 

1887  1801  . 

2.00 

54.91 

1892  1896  . 

2. 17 

+ 

56.11 

+ 

1897  1901.  . 

2. 16 

54.26 

__ 

1902  i906 . 

1.55 

— 

43.64 

— 

1907  1911 . 

1.39 

— 

30.63 

— 

1912  1916  . . 

1.29 

— 

21.56 

— 

1^  ' 

Section  3.  The  Chicago  Board  of  Trade. 


During  1848  there  was  called  a  “meeting  of  merchants  and  busi¬ 
ness  men'’  at  which  was  organized  the  Board  of  Trade  of  the  City  of 
Chicago.  There  were  82  original  members.  The  association  pro¬ 
cured  a  charter  of  incorporation  under  general  Illinois  laws  in  1850 
and  opened  the  membership  to  reputable  traders  at  an  initiation  fee 
of  $5.^^  Within  a  few  years  this  organization  took  on  the  nature  of  an 
exchange,  including  traders  in  grain,  flour,  beef,  hogs,  hides,  lumber, 
salt,  wool,  high  wines,  lead,  fish,  stone,  coal,  wood  and  other  com¬ 
modities. 

A  room  for  daily  meetings  was  leased  in  1854.  The  trading  in 
this  hall  appears  to  have  been  largely  in  grain,  since  it  was  proposed 
in  1856  to  erect  a  building  which  would  constitute  “a  merchants’ 
exchange,  and  not  as  is  now  the  case  with  the  board  of  trade  rooms,  a 
mere  corn  exchange. This  proposal  was  not  carried  out  at  that 
time. 

Ten  years  after  the  association  was  organized  (1858)  grain  was 
still  apparently  the  leading  commodity  in  the  trade  of  the  port,  but 
the  grain  traders  constituted  then  only  an  important  subdivision  of 
the  genera]  commercial  body.  Wheat  was  foremost  among  tho 
cereals  handled— corn,  oats,  rye,  and  barley  following  in  order. 

33  Annual  reports  1858  and  1859.  No  annual  statements  were  published  until  1853. 

3«  Report  of  the  directors,  annual  statement,  1864. 

*3  Quoted  in  Taylor,  History  of  the  Board  of  Trade  of  the  City  of  Chicago,  p.  221. 


THE  CHICAGO  MARKET  AKD  TRIE  BOARD  OF  TRADE.  7l 

It  is  of  interest  to  note  that  in  1858  the  warehouse  operators,  sur¬ 
mising  that  a  short  crop  had  been  raised,  proceeded  to  hold  their 
grain  for  speculative  profits.  Prices  rose  steadily  through  the  month 
of  August,  but  unexpected  supplies  suddenly  poured  in  and,  ^Hhere 
being  no  margin  for  shipment,  a  panic  took  place  and  prices  receded 
as  rapidly  as  they  had  advanced  until  about  the  middle  of  October.'’^'^ 

The  government  of  the  early  association  consisted  of  a  president, 
vice  president,  secretary  and  treasurer,  a  superintendent,  and  a  board 
of  directors  of  10_members  (which  was  increased  to  15  in  1875).  For 
the  settlement  of  disputes  there  were  a  first  committee  of  reference 
and  a  second  committee  of  reference. 

Charter  of  1859. — special  charter  of  incorporation  was  granted 
by  the  State  legislature  in  1859,  enlarging  the  powers  of  the  board, 
and  a  revised  set  of  rules  and  regulations  in  compliance  therewith 
were  adopted  by  the  board.  The  secretary  summarized  in  that  year 
the  benefits  conferred  upon  the  business  community  by  the  new 
association : 

Aside  from  the  valuable  statistical  information  which  it  collects  and  daily  fur¬ 
nishes  for  the  use  of  the  public,  it  is  the  means  of  simplifying,  in  a  great  degree,  the 
enormous  business  transacted  by  its  members,  and  of  arranging  controversies  that 
may  arise  among  them,  *  *  *  It  is  very  desirable  that  other  mercantile  and 
manufacturing  interests  should  be  represented  in  this,  the  only  association  we  have 
to  foster  and  protect  the  business  interests  of  the  city.^^ 

An  analysis  of  the  occupations  of  the  685  members  listed  for  1860 


shows  the  following  principal  groups : 

General  commission  merchants .  20G 

Produce  commission  merchants .  143 

Millers .  25 

Grain  d  ealers . 41 

Grain  elevators .  12 

Flour,  feed  and  commission .  10 

Wholesale  grocers .  25 

Produce  and  provision  brokers .  13 

Lumber  dealers  and  manufacturers .  16 

Beef  and  pork  packers .  13 

Coal  and  pig  iron . G 

Railroad  freight  agents .  12 

Miscellaneous  merchants  and  manufacturers .  IG.- 


Total .  685 


It  is  quite  clear  that  the  board  set  out  to  conform  to  the  broad 
purpose  set  forth  in  the  charter  of  1859,  i.  e.,  to  ^‘maintain  a  com¬ 
mercial  exchange.’^  Only  the  millers,  grain  dealers  and  grain  elc- 

Annual  report  for  1858,  p.  18. 

37  The  boards  of  arbitration  and  appeal  were  given  quasi  judicial  powers.  Act  approved  March  7,  1859. 
33  Report  1860,  p.  28. 

39  Annual  report  for  1850. 


TERMINAL,  GRAl^I  MARKETS  AKD  EXCHANGES. 


70 


f 


vators  were  classed ‘as  primarily  interested  in  grain  and  these  com¬ 
prised  but  78  out  of  the  665  members,  or  less  than  12  per  cent. 

How^  the  character  of  this  membership  has  changed  during  the 
past  58  years  under  the  same  articles  of  association,  is  brought  out 
in  Table  30  (p.  75).  To-day  wuth  nearly  a  thousand  more  members 
fully  88  per  cent  of  the  traders  are  directly  interested  in  the  grain 
trade. 

The  EXCHANGE  HALL. — The  ’Change,  or  trading  floor,  became  the 
center  of  trading  for  members  prior  to  1860.  The  concentration  of 
buying  and  selling  in  one  place  offered  obvious  advantages  over 
bargaining  in  railroad  yards  or  at  steamboat  landings.  The  trading 
rooms  wdiich  had  been  leased  in  1854  w^ere  given  up  in  1860  and  new 
quarters  w'ere  taken,  including  an  Exchange  Hall  95  feet  long,  47 
feet  wude,  and  18  feet  high.  In  1865  the  board  came  into  possession 
of  a  still  larger  hall  in  the  new  building  erected  by  the  Chamber  of 
Commerce  building  association.^®  Trading  in  an  exchange  hall  has 
been  continuous  from  that  time  to  the  present  with  the  slight  inter¬ 
ruption  due  to  the  great  fire  of  1871.  It  is  noteworthy  that  the 
exchange  was  kept  in  operation  even  during  the  panic  of  1872. 

Membership — admission  and  assessments. — ^Membership  during 
the  earlier  years  of  the  association  did  not  involve  any  considerable 
property  interest  and  new^  members  W'ere  taken  in  upon  payment  of  a 
small  initiation  fee.^^ 

The  proposal  in  1864  to  increase  the  fee  to  $25  was  met  with 
positive  disapproval  by  the  directorate  of  that  day.  ^^The  amount  of 
1  initiation  fee,”  they  said,  ''is  not  one  of  the  questions  taken  into 
j  account  when  a  man  is  proposed  for  membership.  The  character 
I  and  standing  of  thq  applicant  is  the  only  matter  for  consideration.” 

'  OiTthimasis  the  membership  had  increased  to  1,261  members  in 
that  year,  "embracing  men  in  every  branch  of  commercial  busi¬ 


ness.” 

However,  the  financial  statement  a  year  later  showed  an  increase 
.  in  initiation  fee  to  $10  and  the  annual  assessment  on  members  was 
j'  increased  from  $10  to  $25.^^  The  decline  in  membership  from  1,462 
~  (in  1864)  to  1,259  (in  1866)  was  attributed  largely  to  this  increased 
assessment The  assessment  was  fixed  at  $35  in  1867  "in  view  of 
the  probability  that  the  rates  of  inspection  wmuld  not  pay  the  ex¬ 
penses  of  inspection  until  after  the  harvest.” The  income  of  the 
association  as  then  operated  was  derived  from  grain  inspection, 
annual  assessment,  table  rents,  arbitration  fees,  appeal  fees,  and,sale 
of  annual  reports;  and  the  annual  assessments  were  calculated  to 


Taylor’s  History  of  the  Board,  vol.  1,  p.  330. 

«  Prior  to  I860  the  initiation  fee  was  not  in  excess  of  $5. 
<2  Report  of  the  directors,  April  4, 1864. 

<3  Directors’  Annual  Report,  1866. 

<<  Annual  Report  of  the  directors,  April  1,  1867. 

Report  of  the  directors,  1867.  5 


THE  CHICAGO  MAEKP^T  AND  THE  BOAED  OF  TEADE.  73 

meet  the  operating  deficits  which  would  have  otherwise  been  in¬ 
curred.^® 

Memberships  made  transferable. — In  March,  1875,  the  rules 
were  changed  so  as  to  make  memberships  transferable.  The  initia¬ 
tion  fee  for  the  previous  year  had  been  $250  and  the  membership 
had  reached  1,851  names.  Under  the  new  policy  members  might 
be  added  through  purchase  and  transfer  of  a  membership  as  well  as 
by  payment  of  the  initiation  fee.  This  iiolicy  was  entered  upon 
with  some  reluctance  by  the  directors  because  of  the  loss  of  revenue 
to  the  association  which  it  entailed: 

The  policy  of  making  these  memberships  merchandise  has  not  been  tested  suffi¬ 
ciently  long  to  enable  us  to  pass  a  matured  judgment  upon  its  wisdom.  There  are 
undoubtedly  advantages  of  a  pecuniary  nature  in  this  arrangement  to  members  retir¬ 
ing,  or  who  may  wish  to  do  so;  but  it  seems  quite  probable  its  adoption  has  permanently 
destroyed  the  source  of  a  large  revenue  to  the  association — a  revenue  which,  in  1874, 
amounted  to  $17,250,  and  would  not  probably  have  materially  differed  from  that 
amount  for  many  years  to  come.'*^ 

On  this  basis  of  admission  the  total  membership  continued  to 
increase  until  in  1881  it  reached  the  high-water  mark  of  1,936.  By 
that  time  the  initiation  fee  had  been  increased  to  $1,000  and  it  is  ^ 
noteworthy  that  during  that  year  the  first  74  applicants  were  admitted 
at  $1,000  while  the  next  69  applicants  were  required  to  pay  an 
increased  rate  of  $2,500.  This  marks  the  adoption  of  the  policy  of 
maintaining  the'  initiation  fee  at  such  a  figure  above  the  prevailing 
transfer  price  as  to  practically  eliminate  anyfurther  extension  of 
the  total  membership.'**  The  initiation  fee  was  set  at  $10,000  in  k 
a  rule  effective  in  1887."*® 

Since  1884,  with  the  continuous  increase  in  the  initiation  fee, 
membership  has  been  acquired  only  by  transfer  of  an  existing  certifi¬ 
cate  and  the  membership  total  has  therefore  been  within  the  control 
of  the  association.  iVlthough  admission  by  payment  of  initiation 
fee  and  issuance  of  a  new  certificate  is  still  provided  in  the  lules 
(see  p.  204),  such  a  procedure  is  practically  obsolete. 

The  loss  of  revenue  due  to  making  memberships  transferable  has 
been  offset  by  the  imposition  of  a  transfer  fee.  This  fee  was  kept  at 
$25  for  a  considerable  period  so  that  it  did  not  materially  affect  the 
purchase  price  of  a  membership.  In  1909  the  fee  was  increased  to 

«E.  g.— The  Directors’  Report  for  1868  stated:  ''The  membership  of  the  board  for.  the  last  year  was 
1,224,  being  an  increase  over  the  year  previous  of  23,  and  in  view  of  the  slight  increase  3'oiiu  directors  deem 
it  prudent  to  change  the  yearly  assessment  fee  for  membership  from  $35  to  $30.” 

Report  of  the  directors,  Jan.  i,  1876,  p.  22.  , 

«  "During  the  past  year  no  initiation  fees  have  been  received,  nor  is  it  probable  any  revenue  from  tliis 
source  may  be  expected  in  the  near  future.  The  current  market  value  of  memberships  in  the  board  is  so 
far  below  what  the  initiation  fee  was  previous  to  the  large  advance  in  that  fee  voted  by  the  membership 
in  October  last,  that  it  vrould  seem  to  have  been  a  quite  unnecessary  if  not  unwise  measure  to  adopt,  espe¬ 
cially  as  it  destroys  all  hope  of  securing  the  additional  number  of  members  which  the  association  expect 
to  be  amply  able  to  accommodate  on  the  occupation  of  their  new  quarters  now’  in  course  of  creclion.” 
(Report  of  Board  of  Directors,  1882,  p.  23.) 

<5  The  market  value  of  a  membership  reached  $1,S00  in  1883  w’hich  was  the  highest  price  for  ovoi,3U  years. 


9 


74 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


$100;  and  at  this  rate  145  transfers  were  recorded  for  the  year  1915. 
In  1916  the  fee  was  increased  to  $250. 

The  present  status  of  the  regulation  of  memberships  is  as  follows: 


^  Number  of  members,  January,  1919 .  3,  620 

Net  price  of  membership,  September,  1919 .  $10,850 

“Initiation  fee,”  1919 . . .  $25,000 


Tlic  steady  decrease  in  the  membership  total  was  effected  mainly 
tlirough  the  pohcy  of  buying  in  unused  certificates  at  their  market 
value  and  retiring  the  memberships.  President  Warren  advocated 
the  continuation  of  this  policy  in  his  inaugural  address  in  1900,  as 
follows: 

I  -X-  *  *  policy  of  retiring  memberships  pursued  during  the  past  year  should 

j  be  continued,  and  the  conditions  for  admission  of  new  members  should  be  made  more 

I  strhigent.  This  is  not  a  charity  organization  and  there  is  no  reason  why  we  should 

1  not  require  applicants  to  show  that  their  acquisition  will  be  of  some  value  to  the  board. 

1  Genuine  and  x>ermanent  reform  can  only  come  through  elevating  the  character  and 

\  responsibilityofourmembershipandincreasingthe  value  of  our  certificates.  *  * 

1  • 

1  In  1905  the  members  assessed  themselves  $25  a  year  in  order  to 
buy  in  unused  memberships.  The  next  year  44  memberships  were 
so  purchased  at  an  aggregate  cost  of  $116,500.  Under  this  policy 
the  total  membership  was  reduced  from  1,785  in  January,  1905,  to 
1,647  in  January,  1911. 

Property  value  op  membership. — In  1883  it  was  ruled  in  the 
Illinois  courts  that  for  purposes  of  taxation  and  attachment  the 
exchange  membership  constituted  a  privilege,  rather  than  personal 
property  of  the  holder.^^  The  president  of  the  board  reported: 

We  have  now  1,936  members.  These  memberships  represent  a  valuation  of  about 
six  million  dollars.  The  question,  whether  or  not  these  memberships  were'  personal 
property,  and  subject  to  taxation  or  attachment  as  i)ersonal  property,  under  the 
laws  of  the  land,  or  whether  they  were  simply  privileges  given  by  this  board,  granting 
the  holders  thereof  certain  rights  and  privileges  to  transact  business  under  the  rules 
of  the  Board,  has  been  determined  in  favor  of  the  latter  *  *  *. 


The  membership  was  held  to  be.  property,  however,  by^  the  Federal 
courts  (1917)  in  construing  the  national  bankruptcy  act,  section 
70a,  in  its  application  to  a  membership  held  on  the  Chicago  Board 
of  Trade.  The  court  cited  the  rules  of  the  board  with  regard  to  the 
admission  of  members  and  transfer  of  memberships  (rule  4,  section 
7;  and  rule  10,  sections  1  and  2,  1917)  and  that  a  membership 

in  such  board  of  trade,  having  a  value  of  about  $4,000,  was  property 
passing  to  the  member’s  trustee  in  bankruptcy,  under  bankruptcy 
act,  section  70a,  though  other  members  of  the  board  of  trade  held 


*50  Market  price  including  transfer  fee.  The  price  on  Jan.  1, 1913,  was  $2,250  and  in  1915  had  been  only 
$2,700. 

51  Chicago  Board  of  Trade,  Report  for  1899,  p.  82. 

52  Seo  Barclay  v.  Smith,  107  Ill.  349  (1883).  ‘  \ 

53  Chicago  Board  of  Trade,  Report  for  year  1883,  p.  22. 

51  Bd.  of  Trade  v.  Weston,  243  Fed.  Rep.  333. 


THE  CHICAGO  MARKET  AND  THE  BOARD  OF  TRADE.  75 

outstanding,  unadjusted,  and  unsettled  claims  against  him,  aggrega¬ 
ting  about  $35,000,  and  protested  or  objected  against  the  transfer 
of  his  membership.’’® 

Classification  of  members. ^ — The  larger  groups  of  grain  traders 
in  Chicago  to-day  are  (1)  the  future  commission  operators,  (2)  the 
cash  commission  men,  or  receivers,  and  (3)  the  terminal  elevator 
interests.  Reference  to  Table  30  shows  that  the  future  com¬ 
mission  business  claims  the  greatest  number  of  traders  on  the  ex¬ 
change  and  that  the  cash  grain  business  is  carried  on  more  extensively 
as  a  secondary  feature  than  as  an  exclusive  or  primary  business. 
It  is  also  clear  that  shipping  on  commission  is  more  frequently  a 
secondary  than  a  primary  function.  The  total  number  of  elevator 
representatives,  121,  considering  the  character  of  the  business  and 
the  capital  involved,  is  a  large  group. 


Table  30. — Classification  of  members  of  Chicago  Board  of  Trade.  {List  dated  Mar.  6, 

1918.) 


/ 

Engaged 

exclu¬ 

sively. 

Engaged 

primar¬ 

ily- 

Total. 

Engaged 

second¬ 

arily. 

Resident  members  in  grain  trade; 

Poch  .  . - . . 

15 

no 

125 

325 

32 

89 

121 

r> th pr  d P.a1  prsl  . . 

29 

2 

31 

37 

P.nncnTYiPr^s  2  .  .  . . . 

40 

3 

43 

T .1  n p.  p1  p.va.tnrs  . . . . 

10 

10 

53 

RVi i nnpTt:  3  _ _ _ _ _ _ _ _ _ _ 

13 

18 

31 

76 

Vntnrp  pnmmi<;sinTl  4  _ _ _ _ _ _ 

420 

219 

639 

218 

340 

340 

76 

76 

198 

6 

Tnfal  -mPTnhprc:  _  _ 

549 

867 

1,620 

709 

1  Including  feeders,  and  all  others  not  in  other  classes. 

"  Millers,  malsters,  etc. 

3  Not  operating  terminal  elcvatcrs. 

<  Including  wire  houses  and  pit  traders. 

The  figures  in  the  table  confirm  the  generally  known  facts  as  to  the 
separation  of  trading  groups,  namely,  that  many  of  the  wire  houses 
are  solicitors  of  cash  commission  business  on  a  large  scale;  that  the 
members  interested  in  a  cash  commissiop  business  are  sufficiently 
numerous  to  enforce  the  “uniform  commission  rule”  as  against  the 
interests  of  “direct  buyers”;  and  that  the  future  trading  group  is 
sufficiently  numerous  to  maintain  its  owm  methods  in  the  face  of  any 
internal  opposition. 

This  relationship  is  demonstrated  even  more  clearly  in  Table 
31  following,  showing  the  trading  representation  on  the  directorate 
from  1908  to  1917,  inclusive. 

a  But  see  Secretary’s  statement,  p.  208. 


76 


TKRMIKAL  GRAIX  MARKP:TS  AXD  EXCHANGES. 


Table  31. — Ola&sijiraiion  of  interests  represented  on  hoard  of  directors  of  the  Chicago 
Board  of  Trade  ion  the  basis  of  their  firm  connections)  and  the  voting  powers  of  the  trad¬ 
ing  growps. 


Year. 

Cash 
grain 
commis¬ 
sion  men 
(re¬ 
ceivers). 

Futures 
commis¬ 
sion  men 
(includ¬ 
ing 
wire 
houses). 

Termi¬ 
nal  ele¬ 
vators.  • 

Pit  bro¬ 
kers. 

Provi¬ 
sion  men. 

Grain 

con¬ 

verters. 

Miscel¬ 

laneous. 

1908 . 

5 

r> 

3 

1 

3 

1 

0 

1909 . 

.3 

6 

1 

2 

3 

2 

1 

1910 . 

4 

q 

3 

1 

2 

2 

1 

1911 . 

3 

5 

4 

2 

2 

1 

1 

1912 . 

5 

.5 

3 

1 

2 

1 

1 

5 

6 

1 

1 

3 

1 

1 

1914 . 

7 

5 

3 

0 

3 

0 

0 

191") . 

6 

7 

3 

0 

2 

0 

0 

1916 . 

6 

7 

3 

1 

1 

0 

0 

1917 . 

6 

7 

3 

1 

1 

0 

0 

Current  revenues  and  expenses. — The  regular  sources  of  reve¬ 
nue  to  the  Board  of  Trade  association  are  (1)  the  Real  Estate  De¬ 
partment,  which  manages  the  exchange  building;  (2)  "tlie  Cleanng 
House  Department,  and  (3)  transfers  of  membership  providing  a 
$250  fee  in  each  case.  At  times  substantial  net  revenues  have  been 
derived  by  other  services  such  as  the  Grain  Sampling  and  Seed  In¬ 
spection  Department  and  the  Weighing  and  Custodian  Department; 
])ut  these  offices  have  in  recent  years  been  scarcely  self-sustaining 
and  the  latter  was  operated  at  a  net  loss  of  $39,477.65  in  1917.  There 
are  other  incidental  sources  of  revenue,  none  of  them  from  trading 
operations.  The  assessments  upon  members  are  calculated  to  cover 
operating  expenses  not  otherwise  defrayed. 

Section  4.  Facilities  developed  by  the  exchange. 

It  may  be  noted  that  the  marketing  facilities  developed  by  the 
Board  of  Trade  during  the  first  decade  after  the  charter  grant  of 
1859  comprised  essentially  the  facilities  offered  by  the  exchange 
to-day.  Weighing,  inspection  and  grading,  warehousing,  the  market 
^  ciuotations  s^vice,  arbitration  of  comrnercial  disputes,  as  well  as  the 
provision  of  floor  facilities  for  cash  and  future  trading,  were  all  in 
evidence  during  this  early  period.  Such  matters  are  discussed  here 
only  as  they  have  affected  the  development  of  the  market.  •  v 

The  trading  floor. — The  conspicuous  features  of  the  trading 
floor to-day  are:  The  four  octagonal  pits  for  future  trading  in  wheat, 
corn,  oats,  and  provisions;  the  parallel  rows  of  sample  tables  for  cash 
trading;  the  'ffiri^e’^  from  which  the  Cleveland  Telegraph  Co. 
collects  and  transmits  the  continuous  quotations;  and  the  various 
blackboards  for  cash  prices,  to-arrive  prices,  the  visible  supply  of 
grain,  and  general  market  and  crop  reports.  At  present  a  small 
volume  of  trading  in  barley  and  rye  takes  place  in  the  former  “pro¬ 
vision  pit’’  or  on  the  main  floor. 


i 


Sec  iliu  miration  opposite  p.  60. 


THK  CHICAGO  MARKET  AND  THE  BOARD  OF  TRADE. 


77 


Inspection  systems. — Inspection  and  grading  grain  became  a 
leading  problem  in  the  affairs  of  the  board  in  1858.  The  manner  in 
\^ich  the  farmers  cleaned,  or  failed  to  clean,  the  grain,  and  the  prac- 
tice  of  mixing  followed  by  the  dealers,  ^  induced  the  Board  early  in 
the  season  to  adopt  more  stringent  measures  for  the  inspection  of 
grain  than  had  previously  been  practiced.  ”  Accordingly  a  com¬ 
mittee  was  appointed  whose  report  constitutes  one  of  the  most 
important  documents  in  the  history  of  the  inspection  and  grading  of 
grain : 

We  have  met  the  inspectors,  and  examined  and  compared  various  samples  as  graded 
under  the  old  system,  and  have  come  to  the  conclusion,  after  giving  the  matter  much 
thought,  that  to  improve  the  character  of  our  grain  it  will  be  necessary  hereafter  to 
reject  entirely  much  of  the  grain  that  has  heretofore  passed  as  standard  in  this  market. 

We  are  credibly  informed,  and  believe  that  it  is  a  common  occurrence,  for  farmers 
to  send  damp  and  dirty  grain  to  this  market,  calculating  that  under  the  present  system 
of  inspection  it  will  bring  about  as  much  as  it  would  if  it  were  thoroughly  cleaned  and 
in  good  order,  and  consequently  it  will  not  pay  them  to  clean  it. 

We  have  no  doubt  of  the  fact,  either,  that  some  parties  buying  grain  in  the  country 
are  in  the  habit  of  mixing,  at  times,  oats,  rye,  barley,  screenings,  or  damp  and  un¬ 
merchantable  wheat,  with  that  of  sound  and  good  quality,  and  that  when  sent  here  it 
has  brought  about  the  market  price  for  standard  wheat.  It  is  also  frequently  the  case 
that  shippers  from  this  port  bill  rejected  and  standard  wheat  mixed  as  all  standard, 
or  even  sometimes  as  extra,  thereby  much  injuring  the  standing  of  our  grain  abroad, 
and  consequently  at  home  also. 

Under  these  circumstances,  we  propose  after  the  15th  of  June  proximo,  to  make  the 
inspection  much  more  rigid  than  it  has  heretofore  been,  and  that  spring  wheat  may 
bring  in  this  market,  a  price  in  proportion  to  its  true  value;  we  propose  to  grade  it  as 
follows,  viz:  “Club  Wheat,”  “No.  1  Spring,”  “No.  2  Spring,”  and  “Rejected.” 
Without  the  assistance  of  the  storage  merchants  of  the  city,  we  would  be  unable  to 
carry  out  our  design;  with  their  assistance,  which  they  readily  accord  to  all  our  requests 
(provided  the  board  pass  a  resolution  making  it  compulsory,  so  far  as  in  their  power, 
upon  parties  receiving  grain  to  pay  back  to  them  the  inspection  fees  upon  receiving 
their  receipts),  we  think  our  whole  efforts  may  be  successful.  (In  our  proposition  to 
them  we  provide  for  the  inspection  of  grain  not  only  into  store,  nut  on  to  the  vessels 
also;  and  further,  that  they  shall  furnish  to  the  board,  daily,  a  statement  of  the  quan¬ 
tity  and  grade  of  all  grain  delivered  to  each  vessel,  a  correct  account  of  which  shall 
be  kept  by  the  superintendent  of  the  board,  in  a  book  for  that  purpose,  and  be  daily 
posted  on  ’change.®^ 

The  warehouse  operators  agreed  to  this  inspection  system  and 
stated  that  they  would  ‘‘at  all  times  deliver  grain,  which  in  the 
opinion  of  the  inspectors  is  equal  to  the  grade  called  for  by  the 
receipts  *  *  The  board  adopted  substantially  the  report 

of  their  committee.  Within  three  yearn  after  the  adoption  of  the 
above  system  it  v/as  reported  that  practically  the  entire  receipts 
were  being  inspected. 

Grain  was  not  the  only  commodity  which  was  subjected  to  inspec¬ 
tion  standards  by  the  board.  In  fact  in  this  same  year  it  was  de¬ 
clared  by  traders  in  provisions  “that  our  inspection  is  not  suffi- 


»«  Annual  Statement,  Februar}’,  18o9,  p.  10. 


6'  Idem,  p.  11. 


78 


TERMINAL  GRAIN  AIARKETS  AND  EXCHANGES. 


cicnt ly  rigid ,  particularly  as  regards  mess  pork.” Likewise  the  record 
shows  that  a  system  of  fish  inspection  was  established  with  grades 
similar  to  those  for  grain,  i.  c.,  No.  1,  No.  2,  and  rejected.  The 
grain  inspection  rules  were  amended  (effective  January,  1860)  so  that 
‘'no  spring  wheat  shall  pass  as  No.  1  that  weighs  less  than  59  pounds 
to  the  measured  bushel;  none  shall  pass  as  No.  2  that  weighs  less 
than  56  pounds  to  the  measured  bushel,  and  none  shall  pass  as  rejec¬ 
ted  that  weighs  less  than  45  pounds  to  the  measured  bushel.”^®  As 
an  effect  of  this  increase  in  inspection  requirements  the  price  of 
spring  wheat  approached  that  of  red  winter  ^Tor  the  first  time  in  the 
history  of  the  Chicago  grain  trade.” 

Toward  the  close  of  navigation  No.  1  spring  and  No.  2  red  winter  occasionally  sold 
at  the  same  price,  although  usually  there  was  a  difference  of  two  or  three  cents  in 
favor  of  the  latter,  while  the  new  grade  of  extra  club  commanded  a  premium  of  about 
five  cents  over  No.  1  spring.®*^ 

The  rules  for  inspecting  grain  were  altered  from  time  to  time  with 
a  view  to  adopting  standards  more  conformable  to  the  reported  crop 
conditions.  The  evils  attendant  upon  these  frequent  changes  in 
the  grades  were  pointed  out  in  1868  by  the  directors  who  favored  a 
more  permanent  system  rather  than  one  based  upon  annual  experi¬ 
mentation. 

We  would  earnestly  recommend  that  no  further  alteration  be  made  in  the  rules  of 
inspection  of  wheat.  Heretofore  it  has  been  customary  to  make  frequent  changes  in 
the  inspection,  which  we  believe  to  be  wrong  in  theory.  The  grades  should  be  perma¬ 
nent,  and  the  crops  should  come  up  to  the  requirements  rather  than  reduce  the  inspec¬ 
tion  to  meet  a  bad  crop.  As  frequent  changes  only  tend  to  injure  our  market  by  lead¬ 
ing  foreign  wheat  buyers  astray  in  purchasing  by  inspection,  which,  when  once 
established  on  as  good  a  standard  as  now,  should  be  permanent. 

The  inspection  of  grain  was  taken  over  by  the  State  in  1871.  " 

Weighing. — The  weighmaster  appointed  by  the  board  of  direc¬ 
tors  in  1862  adopted  a  schedule  of  weighing  fees  for  all  commodities. 
For  ^‘all  grain,  provisions  and  other  produce  weighed  by  the  wagon¬ 
load  on  large  team  scales”  the  charge  was  10  cents.  For  grain, 
seed,  beans,  malt  and  potatoes  in  bags  (‘Aveighed  on  platform  and 
beam  scales”)  the  charge  was  1  cent  per  bag.®^ 

As  pointed  out  elsewhere  (Chap.  VI)  weighing  in  the  Chicago 
market  has  been  performed  under  exchange  auspices  since  that  time 
to  the  apparent  satisfaction  of  all  concerned. 

Department  of  grain  sampling. — A  department  of  grain  sam¬ 
pling  and  seed  inspection  was  established  in  1904  for  the  purpose  of 
a  check  on  the  State  inspection  service. 

One  of  the  reasons  assigned  for  establishing  this  department  was 
^  ‘  the  desire  on  the  part  of  the  directors  to  regard  and  reestablish  the 

58  Idem,  p.  30. 

58  Annual  statement,  year  ending  Dec.  31,  1859,  p.  52. 

60  Taylor's  History  of  the  Board  of  Trade,  p.  261,  vol.  1. 

61  Annual  statement  1863,  p.  15. 


THE  CHICAGO  MARKET  AXD  THE  BOARD  OF  TRADE.  79 

entire  confidence  concerning  the  inspection  and  sampling  of  grain  in 
the  Chicago  market,  of  the  western  shippers  whose  grain  is  sold 
largely  by  sample  on  our  exchange,  and  also  of  the  eastern  buyers 
who  must  from  the  nature  of  the  business  depend  largely  upon  some 
disinterested  party  to  see  that  the  grain  shipped  on  their  ordei's  is 
properly  graded  and  the  quality  is  fully  up  to  the  specification  of 
their  contracts.’’®- 

The  TRANSPORTATION  DEPARTMENT. — Ill  1888  a  freight  bureau 
was  established  in  Chicago  to  handle  traffic  complaints  and  all  mat¬ 
ters  relating  to  freight  adjustments.  The  Board  of  Trade  contribu¬ 
ted  to  the  support  of  this  bureau  until  the  establishment  of  its  own 
transportation  department  in  1904.  All  of  these  transportation 
activities  of  the  board  have  been  supervised  by  the  transportation 
committee  which  has  been,  consequently,  one  of  the  most  active 
and  influential  committees  of  the  board. 

The  transportation  department  of  the  board  during  recent 
years  has  not  only  acted  upon  the  traffic  grievances  of  members,  but 
has  compiled  exhaustive  tariff  files  relating  to  the  tributary  territory 
and  eastward  shipping  routes.  For  example,  in  1914,  the  depart¬ 
ment  prepared  for  the  use  of  members  a  book  of  grain  rates  from  points 
in  southern  Minnesota,  Iowa,  South  Dakota,  and  Missouri,  showing 
rates  to  Duluth,  Minneapolis,  Missouri  River  markets,  St.  Louis,  and 
Chicago,  from  territory  tributary  to  such  markets. 

Similar  rate  books  have  been  compiled  for  routes  to  the  Atlantic 
seaboard. 

The  department  has  been  of  particular  service  to  members  by 
prosecuting  claims  before  the  Interstate  Commerce  Commission  and 
with  the  individual  carriers.  In  addition  to  rate  adjustment  cases, 
the  department  has  handled  claims  respecting  demurrage,  free  time 
for  reinspection,  penalty  for  overloading  cal’s,  small  car  order  rule, 
claims  for  reparation,  loss  and  damage  claims,  elevation  allowance, 
receipts  for  bills  of  lading,  embargoes,  track  storage  charges,  lia¬ 
bility  of  lake  carriers  for  shortage,  and  like  matters. 

Section  5.  The  conflict  between  receivers  and  elevator  buyers  on  the 

board. 

In  GENERAL. — Thc  avowed  purposes  and  interests  of  receivers  as 
contrasted  with  those  of  the  elevator  buyers  indicate  a  commercial 
antagonism  which  may  be  traced  through  the  history  of  cash  trading 
on  the  Chicago  Board  of  Trade  for  the  past  30  years. 

The  position  of  the  receivers  is  set  forth  in  Secretary  Stone’s 
report  for  the  year  1888: 

*  *  the  Receivers’  and  Shippers’  Association,  organized  and  maintained  in 

the  interest  of  the  country  shipper,  exerts  a  most  beneficial  influence.  It  is  the  ob¬ 
ject  of  this  association  to  secure  minimum  terminal  charges,  equitable  and  economical 


Board  of  Trade  Report  for  1901,  p.  51. 


80 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


freight  rates,  and  careful  sampling  of  consignments,  to  the  end  that  the  western 
shipper  may  be  justly  treated  in  all  respects,  and  may  obtain  maximum  returns  for 
his  merchandise  without  delay.  Not  depreciating  any  other  market,  it  is  only  just 
to  observe  that  it  is  not  possible  for  the  tvestern  consignor  to  realize  elsewhere  such 
favorable  and  prompt  returns,  the  year  through,  for  all  kinds  of  produce,  as  he  may 
in  Chicago. 

Tlie  opposite  viewpoint  was  brought  out  in  testimony  by  elevator 
operators  before  the  Industrial  Commission  in  1899  to  the  effect  that 
“competition,  and  the  natural  desire  of  both  producer  and  consumer 
to  come  closer  together,  to  eliminate  the  middleman,  and  all  unnec¬ 
essary  intermediate  expense,  have  resulted  in  dispensing  largely 
with  commission  men,  brokers,  and  traveling  solicitors.” 

At  these  hearings  the  history  of  the  cash  grain  trade  was  outlined 
for  25  year’s.  It  was  stated  that  in  the  period  1870-1880  country 
grain  had  usually  been  consigned  by  the  local  dealer  to  some  one  of 
the  larger  markets;  and  that — 

The  bulk  of  it  was  reconsigned  to  the  eastern  seaboard — New  York  or  Baltimore. 
Tliere  it  paid  another  commission,  and  it  was  sold  then  to  the  exporter,  w’’ho  sent  it 
abroad.  *  *  *  That  was  the  system  in  vogue  20  or  25  years  ago. 

The  first  change  in  that  w^as  when  Gill  &  Fisher,  of  Baltimore,  and  C.  H.  Cum¬ 
mings,  of  Philadelphia,  commenced  ]3idding  the  w’estern  dealer  direct  for  gi*ain, 
passing  the  markets  of  accumulation  like  Indianapolis,  Toledo,  Chicago,  Peoria,  and 
8t.  Louis.  They  sent  direct  to  the  country  dealer  and  bought  from  him.  This  sys¬ 
tem  was  then  adopted  by  New  York,  Indianapolis,  Peoria,  and  the  last  market  to  go 
into  it  w’as  Chicago.  To-day  *  *  *  our  firm,  and  others  not  only  buy  direct 
from  the  gi'ain  dealer  at  the  country  stations,  eliminating  the  commission  at  Chicago, 
eliminating  the  commission  at  New  York,  and  selling  it  direct  to  the  consumer  on 
the  Continent  and  in  the  United  Kingdom,  but  w’e  also  do  more:  We  run  hundreds  of 
country  elevators  that  buy  the  grain  direct  from  the  farmer,  and  absolutely  we  are 
the  only  middlemen  between  the  farmer  and  the  foreigner  who  buys  the  grain.  Cer¬ 
tainly  that  change  has  been  for  the  benefit  of  the  producer.  It  has  wiped  out  the 
commissions  at  the  western  point  of  accumulation;  it  has  wiped  out  the  commission 
at  the  eastern  point  of  accumulation.  *  *  * 

The  business  to-day,  as  handled  here  in  Chicago,  is  not  handled  by  the  firms  who 
were  in  business  20  years  ago.  Ten  years  ago  we  had  no  elevator  in  Chicago,  but  the 
necessities  of  the  business  compelled  us  to  build  elevators,  one,  two,  and  we  are  build¬ 
ing  a  third  now.  Until  within  a  week  we  have  never  had  a  regular  house.  We  have 
been  under  no  obligations  to  the  board  of  trade  in  any  way.  We  are  simply  grain 
merchants.  We  have  our  own  houses  in  Liverpool  and  Montreal  and  merchandise 
this  grain.  The  men  who  come  here  and  complain  about  the  elevators  are  generally 
men  who  have  refused  to  adapt  themselves  to  the  change  in  conditions  and  want  to 
have  the  old  commission  system  in  vogue  now  and  levy  toll  at  every  point  of  accu¬ 
mulation  on  the  gi’ain  as  it  passes  through.  That  is  not  in  vogue,  and  you  can  not 
reinstate  it  by  legislation.  The  trade  has  gone  beyond  that.  It  is  simply  the  old- 
timer  railing  at  the  business  that  has  passed  him. 

The  effect  of  these  achievements  of  the  elevator  man  was  further 
described  by  the  president  of  the  Armour  Elevator  Co.  as  follows : 

63  Testimony  of  George  U.  Webster,  President  of  the  Armour  Elevator  Co.,  Report  of  the  U.  S.  Industrial 
Commission  (1900),  yol.  IV,  p.  405. 

W.  IL  Bartlett.  Report  of  U.  S.  Industrial  Commission,  Vol.  IV,  p.  393. 


THE  CHICAGO  MAIIKET  AND  THE  BOARD  OF  TRADE. 


81 


I'hc  oliniination  of  the  commission  charges  at  terminal  points  has  caused  a  very 
hitter  feeling  among  the  commission  merchants  against  what  are  now  known  as  ele¬ 
vator  proprietors  and  buyers.  These  commission  merchants  naturally  feel  bitter  to 
think  that  they  do  not  now  receive  as  much  of  this  grain  as  formerly  and  get  a  com¬ 
mission  out  of  it  as  it  passes  through  terminal  points.  The  Chicago  elevator  men 
would  be  only  too  glad  to  have  the  same  state  of  affairs  restored  which  existed  15  or  20 
years  ago,  when,  on  grain  coming  into  the  grain  commission  men,  the  elevator  j)ro- 
])iietor  had  simply  to  unload  the  grain  and  receive  for  transferring  it  through  his 
(devator  1]  cents  per  bushel,  with  no  risk,  no  wear  and  tear,  and  no  anxiety.  As  it 
is  now,  in  order  to  get  any  business  he  must  go  out  and  compete  against  the  other 
terminal  markets,  to  say  nothing  of  his  own  market,  and  fight  for  the  grain,  handling 
it  on  small  margins  and  taking  large  chances  in  the  way  of  changes  in  the  market,  etc., 
and,  finally,  receive  probably  not  half  of  Avhat  he  formerly  received  without  bother 
or  risk  or  expense.®'^ 


The  economic  aspects  of  buying  direct  as  compared  with  the  con¬ 
signment  method  are  fully  discussed  in  Volume  III.  It  is  intended 
here  merely  to  outline  the  earlier  history  of  this  conflict  of  elevator 
and  commission  interests. 

Restrictions  on  direct  buying  imposed  by  the  exchange. — 
It  is  a  generally  accepted  fact  that  there  was  more  commission 
business  than  direct  buying  prior  to  1885.  Buyino-  direct  from 
(‘ountry  stations  was  instituted  by  the^  operators  who  developed 
tenninal  elevator  and  Ime-house  systems  in  Chicago  after  1885  with 
..  the  expre^purpose  of  merchandising  gruhi,  in  addition  to  making 
a  profit _as_storage  and  transfer  systems. The  primary  interest  of 
these  elevators  was  ^^private’’  rather  than  ^^public;’’  that  is,  they 
utilized  terminal  elevator  facilities  to  store,  mix,  and  condition  their 
own  grain.  On  account  of  the  practice  of  mixing,  they  were  not 
interested  primarily  in  buying  grain  by  sample  and  so  began  to 
bid  the  country  stations  in  preference  to  buying  on  the  exchange. 
The  payment  of  storage  charges  to  themselves  gave  them  an 
additional  return  on  the  elevator  investment.  As  was  stated,  they 
eliminated  the  middleman  and  ^hviped  out  commissions,”®^  but  the 
court  found,  in  CentTol  Elevator  Co.  v.  People, that  in  so  doing  they 
“nearly  crushed  out  competition  in  the  largest  grain  market  of  the 
world.”  They  were  closely  allied  with  the  railroad  interests  (see  p.  42) 
and  allegations  of  rebating  were  frequent  prior  to  the  enforcement  of 
the  interstate  commerce  law  of  1887.®®  The  following  summary  of 
this  whole  development  seems  to  be  supported  by  the  weight  of 
authority: 


X-  *  *  When  I  came  to  Chicago,  the  grain  was,  I  think,  all  consigned  to  Chicago; 
rates  were  not  made  beyond.  It  practically  came  here  to  be  sold  in  Chicago,  was 
received  by  one  set  of  men  called  receivers,  who  sold  it  to  another  set  of  men  called 


Report  of  the  Industrial  Commission,  Vol.  IV,  p.  410. 

So  stated  by  coupsel  of  the  Board  of  Trade. 

67  Sec  p.  80.  • 

68  174  Ill.,  208,  1898. 

69  Report  of  U.  S.  Industrial  Commission!,  Vol.  IV,  pp.  353,  428-429. 

108093°— 20 - -6 


82 


TEFvMIXAL  GRAIN  :MArJvETS  AND  EXCHANGES. 


shippers.  The  receiver  represented  the  people  in  the  country  who  consigned  it 
— Gie  country  merchants — and  the  shipper  either  bought  it  for  speculation  on 
his  own  account  or  bought  it  here  to  be  sold  to  the  eastern  market,  or  else  bought 
it  here  for  some  one  in  the  eastern  market  who  consumed  it.  The  elevators  at  that 
time  were  all  situated  on  western  roads,  and  did  not  buy  grain  thomsel\es.  I  think 
one  elevator  concern,  when  no  one  else  was  buying  grain  on  their  road,  took  it  and 
sold  it  in  the  option  pits—as  we  call  them— and  delivered  it  as  soon  as  they  could 
get  receipts.  The  rates  from  the  West  were  made  into  Chicago.  There  were  very 
few  through  rates  before  the  interstate  law  went  into  effect.  Soon  aftei  it  went  into 
effect  the  elevator  proprietors  became  grain  liuyers  here  on  the  market,  until  to-day 
there  are  practically  no  other  buyers  of  grain  who  go  on  the  market  except  elevator 
proprietors,  and  they  also  buy  grain  in  the  country,  and  send  out  bids  foi  giain  in 
the  country,  and  the  men  wdio  used  to  be  called  receivers,  and  received  it  and  sold 
it  here,  hav^e  been  forced  to  become  buyers,  and  are  bidding  against  each  other. 
Of  course,  you  understand  that  these  elevator  people  are  public  custodians.  The 
law  of  the  State  of  Illinois  gives  them  the  right  to  charge  three-fourths  of  a  cent  per 


bushel  on  every  bushel  of  grain  going  into  their  house  which  covers  ten  days  storage, 
and  that  three-fourths  of  a  cent  gives  them  that  much  leverage  over  anyone  else. 
They  can  give  it  away  to  anyone  they  wish.  If  an  indiv  idual  goes  there  and  ships 
grain  in  and  out  he  has  to  pay  three-fourths  of  a  cent  a  bushel.  *  *  The  men 
who  used  to  buy  the  grain  here  to  ship,  on  the  open  market,  *  *  *  have  been 
going  more  or  less  to  the  West  to  buy  grain  themselv  os,  *  *  and  theie  is  a 
rate  made  now  from  the  West  on  grain  going  through  elevators  which  is  a  reduced 


rate  over  the  local  rate  into  Chicago 


This  increase  in  direct  buying  by  elevator  operators  continued 
through  the  80 ^s  and  90 ’s.  Finally"  the  Supreme  Court  of  Illinois, 
in  the  Central  Elevator  Co.  case  referred  to  above,  enjoined  public" 
elevator  operators  from  buying  grain  and  storing  it  in  their  own 
warehouses.  '‘It  was  thought  by  those  who  sought  this  decision,’’ 
says  the  present  counsel  to  the  board,  "that  it  would  broaden  tlio^- 
market  for  grain  bought  and  sold  'to_arriye’  in  Chicago.”  He  st^es 
that  the  next  year — 

A  statute  passed  by  the  Illinois  Legislature  at  the  instance  of  these  public  pro¬ 
prietors  to  legalize  what  the  Supreme  Court  had  enjoined,  v\as  declared  unconstitu¬ 
tional.  (Hannah  r.  People,  198  Ill.,  77.) 

These  monopolistic  tendencies  were  doubtless  also  aggravated  by  tlie  liberal 
granting  by  the  railroads  of  freight  rebates  to  these  public  elevator  proprietors. 

Neither  these  decisions  of  the  Illinois  Supreme  Court,  nor  the  Hepburn  Act  pro¬ 
hibiting  rebates,  wore  sufficient  to  eliminate  this  already  established  concentration 
of  grain  buying  in  the  hands  of  a  few'.  The  few  large  buyers  already  occupied  the 
field,  with  established  channels  for  the  promotion  of  the  bulk  of  their  business. 

During  the  time  of  this  concentration  of  business  under  the  conditions  above 
enumerated,  the  practice  had  grown  up  of  making  bids  to  the  country  after  the  close 
of  the  Chicago  market,  good  if  accepted  by  wire  before  the  opening  of  the  market 
on  the  following  day.  This  enabled  these  few  large  grain  buyers  to  agree  among 
themselves  upon  the  price  bid  to  the  countrj^  and  place  the  smaller  buyers  at  a  dis¬ 
advantage  by  keeping  them  in  ignorance  of  the  bidding  price.  The  result  of  this 
was  that  an  unduly  small  number  of  the  members  of  the  board  of  trade  participated 
in  this  buying  of  grain  ‘Ho  arrive,”  while  the  farmers  and  other  shippers  of  gram 
suffered  from  tfte  absence  of  competition  in  such  buyers  at  Cliicago. 


70  Testimony  of  II.  F.  Dousman,  grain  shipper:  Report  of  the  U.  S.  Industrial  Commission,  Vol.  IV,  p. 
351. 


THE  CHICAGO  MARKET  AXD  THE  BOARD  OF  TRADE. 


83 


It  will  bo  noted  that  a  marked  feature  of  the  ^hnoiiopolistic  tend¬ 
ency”  was  the  volume  of  buying  done  after  market  hours  and  ofi^ 
exchange./  The  broad  sample  market  which  was  considered  essential 
to  the  exchange  was  being  reduced,  and  floor  tradiug  in  grain  to 
arrive  was  largely  eliminatod.^^ 

It  was  declared  by  the  commission  men  (receivers)  that  the  open 
bidding  and  continuous  price  information  which  characterize  an  active 
cash  market  did  not  exist  under  the  methods  followed  by  the  large 
elevator  operators. 

In  order  to  find  out  what  grain  was  worth  *  *  *  you  had  to  use  your  friendship, 
to  a  great  extent,  or  rely  on  devious  ways  to  hnd  oat  what  the  bid  was  and  \eYy  often 
you  could  not  find  out  what  the  prices  to  arrive  were  until  the  next  morning,  from 
some  interested  customer  in  the  country  or  wires  from  brokers  of  other  markets  what 
the  prices  were;  so  the  volume  of  business  that  came  generally  on  the  market  was 
small  and  the  large  number  of  people  interested  in  the  western  trade  were  at  a  dis¬ 
advantage.'^ 

The  CALL  RULE. — Finally,  1906,  the  Board  of  Trade  took  action 
through  the  adoption  of  the  ^‘call  rule.” 

By  this  rule  a  call  was  established  at  the  close  of  regular  trading 
-  (between  1J.5  and  2  p.  m.).  The  objects  of  the  rule,  as  testified  by 
the  secretary  of  the  board  in  1915;  were  in  the  first  place —  • 

To  increase  public  market  bidding,  increase  competition,  and  facilitate  doing 
business  openly  in  the  open  market,  and,  second,  to  give  us  reasonable  hours  of  closure 
under  which  to  finish  up  our  office  work,  do  our  banldng,  get  out  our  mail,  and  get  away 
from  our  business. 

Conditions  before  that  had  been  running  bad  some  years  and  especially  in  the  earlier 
days  when  business  would  continue  even  as  late  as  10  o’clock  at  night;  men  used 
to  adjourn  to  the  hotel  and  trade;  that  was  not  of  late  years,  however,  but  I  only 
speak  of  that  as  the  extreme  representations  of  the  effect  of  having  no  close  hours 
in  which  to  do  our  office  work  in.'^ 

The  call  thus  instituted  resembled  an  auction  except  that  the 
object  was  to  establish  closing  prices  rather  than  to  sell  goods.  The 
procedure  has  been  fully  described  by  a  former  ''caller’'  under  the 
lule: 

*  *  *  I  took  the  position  as  the  caller  before  this  crowd  of  buyers  and  sellers, 
about  similar  to  an  auctioneer  on  the  block,  disposing  of  the  different  grades  of  grain 
under  the  different  conditions— that  is,  the  shipping  and  the  grades  and  so  forth. 
My  duty  I  felt  was  to  get  as  good  price  for  the  different  grains  as  it  was  possible  for  me 
to  do  so,  and  I  believe  that  that  is  about  all  there  was  to  it. 

Testimony  of  Willicini  N.  Eckhardt  End  otliers  before  the  TJnitcd  StEtes  District  Court  for  the  Xoitlicrii 
District  of  Illinois,  Jonuary,  1915.  (United  States  Board  of  Trade,  City  of  no  opinion  filed.) 

Eckhardt  testified  that  his  knowledge  of  the  grain  trade  in  Chicago  extended  back  continuously  for  U 
years. 

’■'Udem.,  Eckhardt  testimony. 

-3  Sec  246  United  States  237:  “The  defendants  admitted  the  adoption  and  enforcement  of  the  call  rule 
and  averred  that  its  purpose  was  not  to  prevent  competition  or  to  control  prices,  but  to  promote  the  con¬ 
venience  of  members  by  restricting  their  hours  of  business  and  to  break  up  a  monopoly  in  that  branch  of 
the  grain  trade  acquired  by  four  or  five  warehousemen  in  Chicago.  On  motion  of  the  Government  the 
allegations  concerning  the  purpose  of  establishing  the  regulation  were  stricken  from  the  record.’' 

Testimony  of  J.  P.  F.  Merrill  in  case  cited. 


^4  TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 

Q.  Wellj  what  did  you  do? — A .  I  would  offer  the  stuff  and  call  for  bids  and  auction 
it  off  from  one  man  to  the  other  as  the  case  might  be  and  as  the  number  of  buyers  or 
sellers  might  appear. 

Q.  Taking  first  one  grain  and  one  grade  of  that? — A.  I  \vmuld  take  it  and  go  down 
the  list  of  different  grades,  the  different  grades  and<^nditions — that  is,  the  shipping 
conditions  and  the  grades  and  so  forth, 

Q.  And  how  long  did  you  keep  open  the  bids  on  any  partic\ilar  grain?— A,  I  would 
keep  open  until  I  found  that  there  was  no  further  bid  or  offer. 

Q.  And  you  did  not  close  the  call  until  everybody  had  ceased  to  bid? — A.  Every¬ 
body  had  a  chance  to  bid  or  offer. 

Q.  About  how  many  people  attended  that  call? — A.  Sometimes — it  wrould  be  a 
matter  of  guesswork  entirely — thirty  to  one  hundred  according  to  the  amount  of  stuff 
that  was  moving. 

Q,  And  what  class  of  persons  w'ere  in  there? — A.  What  class? 

Q.  Yes,  what  class  of  business  were  they  engaged  in? — A.  They  were  buyers  and 
sellers  of  grain  on‘the  board  of  trade. 

Q.  Were  there  any  elevator  owners ?--A.  Oh,  yes. 

Q.  Manufacturers,  like  glucose  companies? — A.  Yes,  sir. 

Q.  And  there  were,  I  presume,  members  of  the  board  of  trade  representing  country 
interests? — A.  Oh,  yes;  commission  men.'^ 

The  call  rule  was  in  force  from  1906  to  1913.  In  the  latter  year 
suit  was  brought  by  the  United  States  against  the  board  to  enjoin 
the  enforcement  of  the  ride,  alleging  it  to  be  in  violation  of  the  anti¬ 
trust  law  (26  Stat.  209).  Without  waiting  for  a  decree  from  the 
district  court  the  board  modified  the  call  ride  and  adopted  what  is 
known  as  the  ^‘to-arrive  rule.’^ 

The  case  was  carried  to  the  Supreme  Court,  however,  and  the 
decision  as  rendered  by  Mr.  Justice  Brandeis  deserves  carefid 
consideration  for  its  bearing  upon  the  power  of  the  board  of  trade  to 
fix  prices  and  regulate  the  conditions  of  buying  and  selling  among 
its  members. 

The  district  court  had  ^  declared  that  defendants  became  parties 
to  a  combination  or  conspiracy  to  restrain  intemtate  and  foreign 
trade  and  commerce  ^by  adopting,  acting  upon,  and  enforcing’  the 
‘call’  ride,  and  enjoined  them  from  acting  upon  the  same  or  froni 
adopting  or  acting  upon  any  similar  rule  *  *  In  the  dis¬ 

trict  court — 

*  *  *  i'0gtecl  upon  the  bald  proposition  that  a  rule  or  agreement  by 

which  men  occupying  positions  of  strength  in  any  branch  of  trade  fixed  prices  at 
which  they  would  buy  or  sell  during  an  important  part  of  the  business  day  is  an  illegal 
restraint  of  trade  under  the  antitrust  law  *  * 

The  Supreme  Court  differentiated  between  agreements  to  regulate 
and  agreements  to  suppress  competition: 

*  *  *  'pjjg  iggi;  Qf  legality  is  whether  the  restraint  imposed  is  such  as  merely 
regulates  and  perhaps  thereby  promotes  competition  or  whether  it  is  such  as  may 
suppress  or  even  destroy  competition.  To  determine  that  question  the  court  rnust 

'6  Testimony  of  David  H.  Harris. 

'« Board  of  Trade  of  the  City  of  Chicago  et  al.  r.  United  States,  246  U.  S.  231,  decided  March  4, 1918. 

» Idem,  p.  238.  • 


THE  CHICAGO  MARKET  AKD  THE  BOARD  OF  TRADE, 


85 


ordinarily  consider  tlie  facts  peculiar  to  the  business  to  which  the  resti“aint  is  applied; 
its  condition  before  and  after  the  restraint  was  imposed ;  the  nature  of  the  restraint,  and* 
its  effect  actual  or  probable  *  * 


The  decision  was  based  therefore  upon  tlie  economic  effects  of  the 
rule : 


*  *  *  As  it  applies  to  only  a  small  part  of  the  grain  shipped  to  Chicago  and  to 
that  only  during  a  part  of  the  business  day  and  does  not  apply  at  all  to  grain  shipped 
to  other  markets,  the  rule  had  no  appreciable  effect  on  general  market  prices;  nor 
did  it  materially  affect  the  total  volume  of  grain  coming  to  Chicago.  But  within  the 
narrow  limits  of  its  operation  the  rule  helped  to  improve  market  conditions  thus: 

(a)  It  created  a  public  market  for  grain  “to  arrive.”  Before  its  adoption  bids  were 
made  privately.  Men  had  to  buy  and  sell  without  adequate  knowledge  of  actual 
market  conditions.  This  was  disadvantageous  to  all  concerned,  but  particularly  so 
to  country  dealers  and  farmers. 

(b)  It  brought  into  the  regular  market  hours  of  the  board  sessions  more  of  the 
trading  in  grain  “to  arrive.” 

(c)  It  brought  buyers  and  sellers  into  more  direct  relations,  because  on  the  call 
they  gathered  together  for  a  free  and  open  ititerchange  of  bids  and  offers. 

(d)  It  distributed  the  business  in  grain  “to  arrive”  among  a  far  larger  number  of 
Chicago  receivers  and  commission  merchants  than  had  been  the  case  there  before. 

(e)  It  increased  the  number  of  country  dealers  engaging  in  this  branch  of  the 
business;  supplied  them  more  regularly  witli  bids  from  Chicago;  and  also  increased 
the  number  of  bids  received  by  them  from  competing  markets. 

(/)  It  eliminated  risks  necessarily  incident  to  a  private  market,  and  thus  enabled 
country  dealers  to  do  business  on  a  smaller  margin.  In  that  way  the  rule  made  it 
possible  for  them  to  pay  more  to  farmers  without  raising  the  price  to  consumer. 

([/)  It  enabled  country  dealers  to  sell  some  grain  to  arrive  which  they  would  other¬ 
wise  have  been  obliged  either  to  ship  to  Chicago  commission  merchants  or  to  sell  for 
“future  delivery.” 

(h)  It  enabled  those  grain  merchants  of  Chicago  who  sell  to  millers  and  exporters 
to  trade  on  a  smaller  margin,  and,  by  paying  more  for  grain  or  selling  it  for  less,  to 
make  the  Chicago  market  more  attractive  for  both  shippers  and  buyers  of  grain. 

(i)  Incidentally  it  facilitated  trading  “to  amve”  by  enabling  those  engaged  in 
these  transactions  to  fulfill  their  contracts  by  tendering  grain  arriving  at  Chicago  on 
any  railroad,  whereas  formerly  shipments  had  to  be  made  over  the  particular  railroad 
designated  by  the  buyer. 

The  restraint  imposed  by  the  rule  is  less  severe  than  that  sustained  in  Anderson  v. 
United  States,  171  U.  S.  604.  Every  board  of  trade  and  nearly  every  trade  organiza¬ 
tion  imposes  some  restraint  upon  the  conduct  of  business  by  its  members.  Those 
relating  to  the  hours  in  which  business  may  be  done  are  common;  and  they  make  a 
special  appeal  where,  as  here,  they  tend  to  shorten  the  working  day,  or,  at  least, 
limit  the  period  of  most  exacting  activity.  The  decree  of  the  district  court  is 
reversed  with  directions  to  dismiss  the  bill.'^ 


T' 


The  to-arrive  rule. — The  rule  adopted  in  1913  in  place  of  the 
call  rule®®  included  two  important  reciuirements :  (1)  The  so-caUed 
uniform  commission  rule,®^  requiring  direct  purchases  from  the 
country  to  include  certain  charges  calculated  to  place  such  buying 
more  nearly  on  a  par  with  the  consignment  business,  and  (2)  the  to- 
aiTive  rule  whereby  the  board  of  directors  were  empowered  to 


Js  Idem. 


’9  Idem,  p.  240-241. 


fo  Rule  IV,  sec.  32. 


See  Ch.  V,  sec.  7, 


86 


TJ'TvMIXAL  GEAIX  AIArJvETS  AXD  EXCHANGES. 


evstablisli  regulations  governing  the  terms  and  conditions  of  trading 
in  grain  to-arrive  both  during  and  after  the  close  of  the  regular 
market.  (The  to-arrive  regulations  are  quoted  in  Chapter  V,  sec. 
13,  ''Cash  trading  off  exchange.’')  These  rules  were,  respectively, 
designed  to  reduce  the  price  advantages  which  had  been  acquired 
by  the  elevator  mterests  in  buying  direct  from  the  country  and  to 
remove  the  evils  of  secret  bidding.  Members  buying  grain  at  country 
points  to-dayVhen  departing  from  the  closing  price  are  expected  to 
present  satisfactory  evidence  to  the  secretary  of  the  board  'and  to 
their  competitors  that  such  bids  arc  bona  fide  and  based  on  a  new 
market  level. 

Section  6.  Enforcement  of  rules. 

The  power  of  the  board  to  enforce  its  rules  as  against  an  individual 
member  has  been  tested  in  a  long  series  of  court  decisions.  The 
earliest  important  litigation  of  this  kind  was  the  Page  case  decided 
by  the  Supreme  Court  of  Illinois  in  1867.^^  This  case  mvolved  the 
validity  of  a  by-law  of  the  early  association  providing  that  in  case  a 
member  failed  to  comply  promptly  with  the  terms  of  "any  business 
contract,  either  written  or  verbal,”  a  complaint  setting  forth  satis¬ 
factory  evidence  of  the  facts  might  be  filed  with  the  board  of  direc¬ 
tors,  who  were  authorized  to  hear  such  cases  and  to  suspend  delin¬ 
quent  "from  all  privileges  of  membership  in  the  association  until 
such  contract  is  equitably  or  satisfactorily  arranged  or  settled 
*  *  The  facts  are  best  recited  in  the  opinion  of  the  court: 

It  appears  by  tlie  petition  that  on  the  14th  of  May,  1867,  Page  sold  to  Stevers  and 
Brown,  also  members  of  the  board  of  trade,  a  quantity  of  corn,  deliverable  at  any 
time  thereafter  during  the  month;  that  on  the  21st  of  May,  corn  having  advanced  in 
price,  he  offered  to  pay  the  purchasers  $500  to  rescind  the  contract;  tliat  they  accepted 
his  offer,  and  on  the  same  day  he  paid  them  $100  in  money  and  executed  to  them  his 
promissory  note  for  $400,  payable  on  demand;  that  Page,  failing  to  pay  when  re¬ 
quested,  Stevers  and  Brown  made  a  complaint  to  the  board  of  directors;  that  Page 
appeared  and  admitted  the  indebtedness,  but  said  he  was  unable  to  pay;  and  there¬ 
upon  the  board  made  an  order  in  accordance  with  the  fifth  by-law,  suspending  him 
from  the  privileges  of  the  board  *  “ 

■  Page  applied  to  the  circuit  court  for  a  writ  of  mandamus  to  compel 
*  the  restoration  of  his  membership.  Being  denied,  he  appealed  to 
the  Supreme  Court  of  Illinois  where  the  judgment  was  affirmed. 
The  Supreme  Court  held— 

That  a  corporation,  purely  commercial  in  its  character,  would  soon  cease  to  be 
respected  or  respectable,  if  it  tolerated  among  its  members  a  violation  of  an  undisputed 
contract,  is  a  proposition  too  plain  for  argument.  Perhaps  the  rule  would  have  been 
better  if  it  had  allowed  more  discretion  to  the  board  of  directors,  to  be  exercised  in 
cases  of  misfortune  and  not  of  fault.  But  this  does  not  touch  the  question  of  power, 
and  is  a  matter  wholly  for  the  decision  of  the  corporation  itself.  That  the  rule,  even 
in  its  present  form,  is  either  unreasonable  or  unjust,  we  can  not  hold.  Even  if  there 


82  People  ex  rel  Thomas  P.  Page  r.  Board  of  Trade,  45  Ill.  1J.2. 


THE  CHICAGO  MARKET  AXD  THE  BOARD  OE  TIE\DE.  87 

had  been  no  express  grant  in  the  charter  of  a  power  of  expulsion,  we  sliould  be  inclined 
to  hold  that  a  prompt  i^erformance,  by  the  members,  of  their  contracts  with  each 
other,  was  so  important  to  the  well-being  of  such  a  corporation  as  this,  that  a  member 
failing  in  tliis  regard,  was  guilty  of  a  breach  of  his  duty  as  a  corporator;  and  if  the 
corporation  thought  proper  to  pass  a  by-law  making  such  breach  of  duty  a  ground  of 
disfranchisement,  the  act  would  have  to  be  sustained  as  an  exercise  of  its  inherent 
power  under  the  rules  of  the  common  law.®"^ 

The  Nelson  case,  1896. — The  power  of  the  board  to  discipline 
its  members  by  suspension  was  reviewed  at  a  later  date  by  the  Illi¬ 
nois  Supreme  Court  in  Board  of  Trade  of  the  City  of  Chicago  v.  Kel¬ 
son.  This  case  arose  out  of  the  elevator  controversy  which  came  to  a 
climax  in  1896.  The  respondent  was  president  of  the  National 
Elevator  &  Dock  Co.,  which  had,  through  its  secretary,  signed  an 
agreement  (with  other  elevator  proprietors  and  managers)  to  apply 
to  have  their  elevator  made  regular,  providing  a  certain  rule  (not 
material  here)  were  adopted  by  the  association.  The  rule  was 
adopted  by  the  association  but  (as  was  averred)  ^Hhc  petitioner 
declined  to  permit  the  National  Elevator  &  Dock  Co.  to  carry  out 
the  agreement.’’  Nelson  was  formally  charged  with  an  act  of  bad 
faith  and  dishonorable  conduct,  was  summoned  to  appear  at  a  hear¬ 
ing  before  the  board  of  directors,  ^Svas  found  guilty  of  the  charge 
made,  and  suspended  from  the  privileges  of  the  board.”  The  relator 
CMurry  Nelson)  obtained  judgment  in  the  low’er  state  courts  upon  a 
petition  filed  for  a  writ  of  mandamus  to  compel  the  Board  of  Trade 
to  permit  him  to  resume  his  privileges  and  rights  as  a  member  of 
said  board. 

The  Supreme  Court  of  Illinois  was  called  upon  to  review  the  pro¬ 
ceedings.  Their  opinion  had  an  important  bearing  upon  the  status 
of  the  association  and  upon  the  plenary  power  of  the  board  to  dis¬ 
cipline  its  members.  As  the  directors  pointed  out  in  their  annual 
report  for  the  year  1896,  the  decision  was  ^^of  incalculable  value  to 
the  board.”  The  court  said: 

*  *  *  The  status  of  the  board  of  trade  has  been  determined  by  this  court  in 
numerous  cases;  and  it  has  been  held  to  be  merely  a  voluntary  organization,  although 
incorporated  under  an  act  of  the  general  assembly.  It  is  averred  in  the  petition  tliat 
it  owned  a  building,  and  rented  out  rooms  as  offices,  from  which  it  derived  an  income  ; 
that  this  income  was  insufficient  for  its  expenses,  and  an  assessment  was  required  each 
year;  and  that  the  present  value  of  a  membership  is  about  $800.  This  does  not  change 
in  any  respect  the  character  of  the  association,  which  must  be  determined  by  its 
charter.  Any  club  or  voluntary  association,  whether  incorporated  or  unincorporated, 
may  rent  out  rooms  and  derive  income  therefrom;  but  the  character  of  the  association 
is  not  changed  by  that  fact.  The  right  to  pursue  a  business  as  a  member  of  such  an 
organization  in  the  hall  of  the  building  devoted  to  that  purpose  may  be  a  thing  of 
value;  but  its  value  is  incidental  to  the  membership,  and  a  determination  of  such 
membership,  destroys  the  rights  under  it.  This  corporation  is  not  bound  to  admit 
any  pei'son  to  membersliip,  and  a  determination  of  such  membership,  destroys  the 
rights  under  it.  This  corporation  is  not  bound  to  admit  any  person  to  membership, 


*^43  Ill.  110.  Readirmel  in  Rice  v.  Board  of  Trade,  SO  Ill.  133. 


88' 


TERMIKAL  GRAIN  MARKETS  AND  EXCHANGES. 


nor  was  tlie  relator  in  any  way  forced  into  such  association.  He  voluntarily  became  a 
member,  and  by  his  contract  is  bound  to  abide  by  the  rules  and  regulations  of  the 
board.  The  courts  will  never  interfere  to  control  the  enforcement  of  by-laws  of  such 
associations;  but  they  will  be  left  to  enforce  their  rules  and  regulations  by  such  means 
as  they  may  adopt  for  their  government  *  *  *  .  There  is  no  question  that  the 
judgment  of  the  board  of  directors  was  arrived  at  in  accordance  with  the  rules  and 
regulations  of  the  board.  The  relator  was  suspended  by  a  tribunal  which  he  had 
voluntarily  chosen  to  determine  the  question,  and  according  to  the  rules  to  which 
he  assented  in  becoming  a  member;  and  he  had  due  notice  of  the  proceedings.  Such 
a  judgment  can  not.be  collaterally  reviewed  by  the  courts.  So  far  as  the  courts  are 
concerned,  tlie  judgment  of  the  board  of  directors  is  conclusive  like  that  of  any  other 
tribunal.^ 

The  board  has  been  involved  in  nmnerous  damage  suits  instituted 
by  expelled  or  suspended  members,  but  has  suffered  no  serious  en¬ 
croachment  upon  its  disciplinary  powers.®^ 

(Commission  rules.— Uniform  commission  charges  and  brokerage 
fees  to  be  followed  by  the  association  were  adopted  by  the  members 
at  large  and  ratified  by  the  directors  during  1862.  On  grain  received 
by  railroad  the  commission  for  selling  was  a  flat  rate  of  1  cent  per 
bushel.  The  commission  for  purchasing  ^^on  all  kinds  of  gi-ain,  by 
cargo  or  otherwise/'  was  a  minimum  of  ^  per  cent  of  the  purchase 
])rice  and  a  maximum  of  1  cent  per  bushel.  Commission  rates  for 
provisions,  broom  corn,  high-wines,  dressed  hogs,  hides,  and  seeds, 
were  listed  in  the  same  schedule ;  commissions  for  selling  all  kinds 
of  property  not  enumerated  to  be  subject  to  agreement  between  the 
jiarties."®®  Full  commissions  'were  allowed  for  all  property  received 
and  reconsi gned . 

The  schedule  of  brokers’  fees,  for  purchase  and  sale,  allowed  |  cent 
|)er  bushel  on  corn  and  oats  and  I  cent  on  all  other  grains.  The 
brokerage  rates  could  be  used  only  in  trades  for  membei*s ;  the  agents 
of  nonmembers  must  charge  commission  rates. 

In  1864  advances  on  account  were  ruled  to  be  an  additional  serv¬ 
ice  for  which  commission  men  should  charge  an  additional  T  per 
cent  “with  ruling  rates  of  interest.” 

Violations  of  the  minimum  commission  rule  were  defined  from 
time  to  time,®'  and  finally,  in  1900,  an  amendment  was  adopted  pro¬ 
viding  for  the  expulsion  of  violators.  The  reasons  for  this  were  stated 
in  the  respondent’s  brief  in  John  Diclinson  v.  Board  of  Trade  (1904) :®® 

*  some  members,  unmindful  of  their  agreements  to  abide  by  said  rules, 
violated  said  commission  rule  by  soliciting  and  doing  business  at  lower  rates  than  are 

•^44  Northeastern  Reporter,  p.  743. 

The  following  extracts  are  typical; 

■' *  *  *  A  suit  commenced  in  the  Federal  Court  by  Mr.  Woods,  of  St.  Paul,  to  recover  .$400,000  damages 
iigainst  the  board  by  reason  of  his  expulsion,  has  been  disposed  of  favorably  to  the  board.  * 

The  two  suits  brought  by  Charles  R .  and  Albert  O.  McLain  for  $50,000  damages,  by  reason  of 
tlieir  expulsion  from  the  board,  have  been  dismissed  for  want  of  prosecution.”  ^Chicago  Board  of  Trade, 
year  ending  Dec.  31, 1903,  p.  G2.) 

Fifth  annual  statement,  1863,  p.  15. 

”  See  Ch.  V,  secs.,  7,  8,  9,  and  10. 

114  III.  App.  302. 


THE  CHICAGO  MARKET  AND  THE  BOARD  OF  TRADE, 


89 


therein  spseified^  and  lower  than  were  remunerative  when  business  was  honestly 
transacted;  and  by  reason  thereof  the  number  of  applications  by  persons  desiring  to 
))ecome  members  became  very  much  lessened,  and  the  opportunities  of  members  to 
transfer  their  memberships  to  incoming  members  was  very  much  decreased,  and 
tliereby  the  amount  for  which  memberships  could  be  sold  to  incoming  members 
declined  from  the  sum  of  $4,700,  at  which  they  were  selling  at  one  time,  to  less  than 
$750,  at  about  which  ligure  the  value  of  memberships  stood  prior  to  the  inauguration 
of  steps  for  the  adoption  of  the  rule  fixing  commissions,  set  out  in  said  petition.  The 
result  of  this  was  that  the  disciplinary  power  of  respondent  was  thereby  very  much 
weakened  and  this  respondent  and  its  members  found  it  necessary  to  adopt,  and  put 
in  force,  said  rule  fixing  the  rates  of  commissions,  set  out  in  said  petition;  and  there¬ 
upon  and  by  reason  thereof,  the  value  of  memberships  steadily  improved,  and  at  the 
present  time  they  are  selling  at  from  $4,000  to  $4,300.  This  respondent  further  says 
that  said  rule  was  not  adopted  with  any  other  end  or  purpose,  nor  with  the  intention 
of  improperly  or  unreasonably  imposing  any  restraint  upon  its  members,  or  upon  the 
business  done  by  its  members  on  the  floor  of  its  exchange. 

In  the  above  case  Dickinson  contended,  '‘that  he  became  a  mem¬ 
ber  of  the  board  in  the  year  1885,  and  has  continued  as  such  and  been 
recognized  as  such  up  to  the  6th  day  of  February,  1901,  during  which 
time,  owing  to  his  rights  of  membership,  he  has  built  up  an  extensive 
business  in  buying  and  selling  commodities  upon  the  exchange  of  the 
board,  of  an  annual  value  to  him  of  more  than  $50,000;  and  that  his 
right  of  membership  or  membership  ticket  has  a  salable  value  of  at 
least  $2,200,  if  allowed  by  the  board  to  be  transferred;  but  that  be¬ 
cause  of  his  alleged  expulsion  as  a  member,  such  transfer  is  not  per¬ 
mitted  by  the  board.”  / 

In  reaching  its  decision  the  court  made  an  analysis  of  the  powers 
of  the  board  to  enact  such  a  rule: 

It  is  urged  in  behalf  of  appellant  that  any  combination  restraining  freedom  of  trade 
so  as  to  increase  the  price  of  commodities  or  services  and  prevent  competition  in  fix¬ 
ing-prices,  is  illegal  and  contrary  to  public  policy,  and  that  rule  3  comes  within  this 
legal  prohibition.  That  rule  as  above  stated  prohibits,  on  pain  of  expulsion,  any 
member  of  the  Board  of  Trade  of  Chicago  from  charging  less  than  a  fixed  minimum 
rate  of  commission  to  nonmembers  of  the  board  for  the  purchase  or  sale  of  grain  in 
specified  quantities.  Appellant  contends  that  the  rule  does  necessarily  restrain  free¬ 
dom  of  trade  and  increase  the  price  of  commodities  to  the  general  public.  The  board 
is  by  its  charter  authorized  to  make  such  rules,  regulations,  and  by-laws  as  it  may 
deem  proper,  “not  contrary  to  the  laws  of  the  land.”  It  does  not  itself  carry  on  the 
business  of  buying  and  selling  nor  of  dealing  in  commodities.  Its  objects  are  stated  in 
its  charter  to  be  inter  alia  “generally  to  secure  to  its  members  the  benefits  of  coopera¬ 
tion  in  the  furtherance  of  their  legitimate  pursuits.”  It  maintains  a  commercial 
■  exchange  where  its  members  carry  on  their  business,  and  furnishes  them  facilities 
for  so  doing  to  such  an  extent  that  one  not  a  member  can  not,  as  it  seems  to  be  con¬ 
ceded,  profitably  engage  in  buying  and  selling  in  Chicago  the  commodities  in  which 
its  members  deal.  Expulsion  from  membership  therefore  involves  serious  conse¬ 
quences  to  the  member  expelled,  and  inability  to  become  a  member  precludes  one 
seeking  to  engage  in  the  lines  of  business  carried  on  upon  the  board  from  profitalfly 
so  doing  and  in  a  sense  gives  to  its  membership  a  monopoly.  If  the  rule  complained 
of  is  “contrary  to  the  law  of  the  land,”  then  it  is  in  violation  of  the  board’s  express 
charter  powers.®® 


‘»114  Ill.  App.  208. 


soil!  111.  App.  803. 


90 


It  was  hold,  liowevcr,  that  the  enforcement  of  such  a  commission 
rule,  ^  infringes  no  rule  of  law  or  public  policy,  confined  as  it  is  to  the 
members  of  the  hoard,  upon  whom  alone  it  operates,  and  b}'  whom  it 
has  been  enacted  for  their  own  government.” 

Section  7.  Terminal  elevators  and  the  warehouse  controversies. 

Factors  in  the  problem  at  Chicago. — Since  the  Chicago  market 
was  developed  as  a  shipping  center  the  most  conspicuous  facilities  of  the 
market,  even  before  the  maintenance  of  an  exchange  hall,  were  the 
warehouses  constructed  along  lake,  canal,  and  railroad.  The  horse¬ 
power  elevators  of  the  primitive  market  into  which  grain  was  dumped 
regardless  of  grade,  quality,  or  inspection,”  were  soon  replaced  by 
steam-operated  houses  built  as  an  adjunct  to  railway  terminals.  In 
fact,  terminal  grain  elevators  have  always  been  closely  associated  with 
railway  terminal  development.  The  transportation  of  freight  includes 
transfer  and  delivery  services,  and  in  the  case  of  bulk  grain  such  serv¬ 
ices  can  be  performed  only  by  modern  terminal  elevators.  Fmdher- 
more,  at  competitive  points  the  absorption  of  elevating  and  other 
terminal  charges  in  the  railroad  freight  rate  has  constituted  an  effect¬ 
ive  competitive  method.  The  payment  of  elevating  and  handling 
charges  by  railroads  to  elevator  companies  has  been  a  matter  of  re¬ 
current  complaint  before  the  Interstate  Commerce  Commission. 

In  considering  the  history  of  the  elevator  problem  in  Chicago  it  is 
necessary  to  bear  in  mind,  first,  the  position  of  the  market  as  a  natural 
trunk  line  terminal  and  handling  various  grains  in  transit  from  the 
Missouri  and  Mississippi  River  gateways,  with  a  large  reshipping  traffic 
in  winter  wdieat  and  coarse  grains.  A  second,  but  no  less  important, 
consideration  lies  in  the  fact  that  Chicago  has  become  the  greatest 
grain  futures  market  in  the  world  and  that  the  basis  for  this  trading 
is  ^‘contract”  grain  in  regular  storage. 

Growth  of  storage  capacity  and  concentration  of  con¬ 
trol. — A  total  storage  capacity  of  over  four  million  bushels  was  re¬ 
ported  for  Chicago  in  1858,  distributed  among  12  eleva  tors  and  1 1  opera¬ 
tors with  an  aggregate  daily  shipping  capacity  of  1,340,000  bushels. 

Ten  years  later  (1868)  a  census  of  terminal  elevators  showed  a 
capacity  of  over  ten  million  bushels,  more  than  two-thirds  of  which 
was  controlled  bv  four  firms,  as  follows: 


Operator. 


Table  32. — Elevator  storage  distribution  at  Chicago,  Mar.  SI,  1868. 


Number 
of  ware¬ 
houses. 


bushels. 


J.  E.  Buckingham  &  Co 
Flint,  Thompson  &  Co. 
Munn  &  Scott . 


2  Illinois  Central  Railway  and  canal . 

2  Chicago  Rock  Island  Railway . 

4  Chicago  &  Alton ,  Chicago  &  N orth  Western  Rail- 


1, 400, 000 
2,000,<XK) 
2,750,000 


Armoiu,  Dole  &  Co... . 
Munger,  Wheeler  &  Co 
Four  other  .operators... 


way  and  canal. 

2  Chicago,  Burlington  &  Quincy  Railway . 

3  Galena  &  Chicago  Union  Railway  and  canal . . . . 

4  Railroads  and  canal . 


2, 100,000 
1,600,000 
830,000 


Estimated  total  capacity 


10,680,000 


91  First  annual  statement,  year  ending  Dec.  31,  1858,  p.  7. 
9-  .Vnnual  statement  of  the  board,  Mar.  31,  1868 


I 


91 


THE  CHICAGO  HARKET  AND  THE  BOARD  OE  TRADE. 

At  the  time  of  the  great  fire  (Oct.  9,  1871),  the  elevator  storage 
distribution  was  practically  as  above,  with  an  increase  in  aggregate 
capacity  of  less  than  a  million  bushels.  The  capacity  destroyed  b}’ 
the  lire  was  2,475,000  bushels.  Yet  this  disaster  was  of  less  concern 
to  the  elevators  than  the  agitation  for  public  regulation  of  warehouse 
utilities,  which  reached  a  climax  in  1870. 

Regulatiox  of  public  warehouses. — It  has  been  shown  that  the 
first  restrictions  upon  the  operations  of  grain  elevators  were  self- 
imposed,  being  a  part  of  the  agreement  subscribed  to  by  the  ware¬ 
housemen  to  put  into  effect  the  inspection  system  of  1858.  (Sec 
p.  77).  There  was  at  that  time  no  regulation  of  warehousemen  by 
State  agencies.  Accordingly,  it  soon  devolved  upon  the  boarcl  of 
trade  to  make  the  proprietors  responsible  for  the  grain  in  storage 
which  they  held  as  bailees.  The  fact  that  in  the  early  years  of  the 
market,  elevators  could  mix  all  grades  of  grain,  could  even  deliver 
out  on  their  own  account  grain  owned  by  others,  and  could  engage  in 
all  kinds  of  manipulations  for  their  own  profit,  impeded  the  progress 
of  merchandising  grain  in  store  and  (as  was  frequently  stated) 
injured  the  reputation  of  the  official  Chicago  grades.®^ 

This  effort  to  derive  profit  from  handling  grain  in  public  storage, 
which  provoked  so  sharp  a  controversy  in  later  years,  can  be  traced 
through  the  early  history  of  the  market.  During  and  after  the  Civil 
War,  when  the  buying  and  selling  of  grain  in  store  became  a  common 
practice,  there  developed  a  more  insistent  demand  for  a  closer 
regulation  of  warehousing  practice.  A  system  of  posting  the  quan¬ 
tity  and  grade  of  grain  received  and  shipped  had  already  been 
inaugurate d,^'^  and  the  inspection  and  weighing  agencies  of  the  board 
were  in  daily  contact  with  the  individual  elevator  operators.  In  1862 
the  board  of  directors  adopted  a  rule  wherein  they  condemned  the 
practice  of  ^4oaning  grain  by  warehousemen.’’  They  ordered  ^Ahat 
when  charges  are  made  to  the  board  of  directors  that  any  warehouse¬ 
man  has  improperly  loaned  grain,  not  his  own,  stored  in  his  house, 
that  the  same  be  investigated  by  the  directors;  and  if  such  charge 
is  sustained,  the  facts  to  be  posted  on  the  bulletin  of  the  exchange. 

A  system  of  registration  of  warehouse  grain  was  also  adopted,  as 
a  means  of  checking  the  operations  of  the  elevators  and  protecting 
the  grain  placed  in  storage  by  members.  For  this  reason  the  chief 
inspector  was,  in  1862,  instructed  ^Ao  keep  a  record  of  the  weight  of 
grain  inspected  into  and  out  of  each  warehouse,  which  record  shall 
be  open  to  the  inspection  of  any  member  of  the  board  during  busi¬ 
ness  hours  *  *  9G 

Complaints  from  shippers  and  dealers  regarding  the  terminal 
warehouse  service  became  so  frequent  during  the  next  few  years 


83  Fifth  annual  report,  p.  14. 


Sec  p.  77. 


*9  Annual  statement,  1863,  p.  14. 


8  ‘Idem. 


92  TERMINAL  GRAIN  AIARKETS  AND  EXCHANGES. 

tliat  an  cfTort  was  instituted  to  secure  State  regulation.  Legislation 
was  urged  by  the  Board  of  Trade  and  it  was  formally  resolved  on 
danuary  22,  1867 : 

Tliat  any  action  which  may  lie  taken  by  the  , State  legislatare  toward  placing  the 
grain  warehouses  of  this  city  under  wholesome  legal  restrictions  will  meet  with  the 
unqualified  approbation  and  the  cordial  sympathy  and  support  of  the  board. 

Resolved,  That  copies  of  this  resolution  be  sent  to  the  legislature  and  that  Cook 
County  representatives  be  asked  to  act  to  secure  the  passage  of  a  law  which  will  give 
to  the  people  ample  protection  from  the  abuses  which  have  become  so  oppressive  in 

connection  with  the  warehouse  system.^' 

The  law  which  was  passed  in  1867  contained  prohibitions  designed 
to  meet  the  causes  of  complaint.  ‘'Public'’  and  “private”  ware¬ 
housemen  were  defined,  the  latter  being  forbidden  to  mix  lots  of 
grain  belonging  to  different  owners.^®  Public  warehousemen,  in 
places  where  authorized  inspectors  should  be  appointed,  were  required 
to  accept  only  inspected  and  graded  grain,  and  the  practice  of  mixing 
and  conditioning  grain  for  profit  on  the  outturn  was  substantially 
forbidden. 

The  fraudulent  issuance  of  receipts  was  also  forbidden,  and  parties 
interested  were  authorized  to  visit  the  warehouse  and  inspect  stored 
grain.  However,  no  agency  was  provided  to  enforce  the  account¬ 
ability  of  the  operators,  except  that  certain  reports  were  to  be  made 
to  the  board  of  trade  in  Chicago: 

All  persons  keeping  public  warehouses  in  the  city  of  Chicago  shall  file  with  the  board 
of  trade  oif  said  city,  on  Tuesday  of  each  week,  a  statement,  showing  the  amount  of 
each  kind  of  grain  in  store  in  such  warehouses  up  to  the  Saturday  night  preceding 
such  statement,  which  shall  be  sworn  to  by  the  persons  keeping  such  warehouses,  or 
l.)y  their  agents,  and  shall  be  so  made  that  the  aggregate  of  such  statements  during 
the  year  will  show  exactly  the  amount  of  grain  held  in  store  during  the  year;  and  in 
case  any  person  making  such  statement  shall  be  guilty  of  false  swearing  he  shall  be 
and  he  is  hereby  made  subject  to  the  pains  and  penalties  of  perjury. 

The  act  of  1867  did  not,  however,  adequateljM-^lieve  the  situation. 
The  demand  of  Board  of  Trade  operators’®® — particularly  the  future 
traders — was  a  leading  influence  toward  the  enactment  of  the 
warehouse  provision  in  the  Illinois  constitution  of  1870. 

S’  Taylor,  vol.  1,  p.  350. 

!■«  Illinois  Laws,  1867,  p.  178:  “It  shall  be  lawful  for  public  warehousemen  to  store  grain  in  bulk  and  mix 
the  grain  of  like  kind  and  grade  of  different  oAvmers,  and  the  keepers  of  such  public  warehouses  are  hereby 
exempted  from  the  provisions  of  this  act  prohibiting  the  mixing  of  the  grain  of  different  owners,  which 
provisions  apply  alone  to  private  warehousemen.” 

89  Illtuois  Laws,1867,  p.  179:  “Any  public  warehouseman  or  shipper  of  gram,  who  shall  be  guilty  of  mix¬ 
ing  the  different  grades  of  grain  in  cars  or  warehouses  or  of  selecting  or  causing  to  be  selected  choice  lots 
of  any  particular  grade,  for  the  purpose  of  raising  the  grade  thereof,  or  of  placing  the  same  in  special  bins, 
separate  and  apart  from  the  grain  of  the  same  grade,  save  upon  application  of  the  owner  of  such  identical 
grain,  or  shall  be  guilty  of  raising  the  grade  of  any  grain,  or  causing  the  grade  of  any  grain  to  be  raised,  so 
stored  with  him,  as  aforesaid,  shall  be  deemed  guilty  of  a  misdemeanor  *  * 

'w  See  Inaugural  Address  of  President  McCrea,  1870:  “The  business  of  dealing  in  wheat  receipts  in  this 
market  has  grown  to  gigantic  proportions,  and  not  only  our  own  members  and  citizens  are  interested,  but 
also  merchants  at  a  distance  are  constantly  investing  large  sums  in  these  evidences  of  property.  Surely, 
if  it  is  possible  to  know  it,  it  should  be  known  that  these  issues  are  in  every  way  proper  and  right,  and  it 
is  no  reflection  on  the  integrity  of  the  issuer  of  such  receipts  if  he  be  asked  to  make  as  clear  as  possible  the 
record  of  those  issues.” 


THE  CHICAGO  JVIARKET  AND  THE  BOARD  OF  TRADE.  93 

Id  siinimary,  the  following  complaints  had  been  made  by  the  advo¬ 
cates  of  further  elevator  reform  in  Chicago  in  1870  d 

(1)  That  there  was  an  elevator  ^Hnist’’  or  ‘‘pooL’^ 

(2)  That  the  elevator  proprietors  issued  receipts  for  grain  not  in 
their  possession. 

(3)  That  they  traded  in  property  held  in  trust  so  that  no  depend¬ 
ence  could  be  placed  upon  the  quality  of  grain  presumed  to  be  repre¬ 
sented  by  the  warehouse  receipts. 

(4)  That  elevator  receipts  did  not  correspond  to  the  certificates 
of  inspection  for  the  same  grain. 

(5)  That  certain  railroads  had  refused  to  make  switching  con¬ 
nection  whereby  grain  could  be  delivered  to  the  elevators  designated 
by  consignors,  and  that  consignees  on  existing  sidings  had  been 
discriminated  against  in  favor  of  railroad  elevators. 

The  constitutional  provision  of  1870  was  designed  to  meet  these 
enumerated  evils.  The  act  defined  ''public  warehouses”  as  "all 
elevators  or  storehouses  where  grain  or  other  property  is  stored  for 
a  compensation,  whether  the  property  be  kept  separate  or  not. ”2 
Each  operator  of  such  a  warehouse  was  required  to  make  a  weekly 
statement  under  oath — - 

which  statement  shall  correctly  set  forth  the  amount  and  grade  of  each  and  every 
kind  of  grain  in  such  warehouse  together  with  such  other  property  as  may  be  stored 
therein  and  what  warehouse  receipts  have  been  issued,  and  are,  at  the  time  of  making 
such  statement,  outstanding  therefor  and  shall  on  the  copy  posted  in  the  warehouse, 
note  daily  such  changes  as  may  be  made  in  the  quantity  and  grades  of  grain  in  such 
warehouse;  and  the  different  grades  of  grain  shipped  in  separate  lots  shall  not  be 
mixed  with  inferior  or  superior  grades,  without  the  consent  of  the  owner  or  consignee 
thereof.^ 

That  is,  the  holder  of  a  warehouse  receipt  was  to  be  assured  that 
grain  of  the  grade  designated  was  held  for  him  in  store.  Further¬ 
more,  the  owner  (or  holder  of  the  receipt)  should  "always  be  at 
liberty  to  examine  such  property  stored,  and  all  the  books  and  records 
of  the  warehouse  in  regard  to  such  property.” 

The  most  important  restriction  upon  the  railroads  appeared  in 
section  5  of  the  same  article: 

All  railroad  companies  receiving  and  transporting  grain  in  bulk  or  otherwise,  shall 
deliver  the  same  to  any  consignee  thereof,  or  any  elevator  or  public  warehouse  to 
which  it  may  be  consigned,  provided  such  consignee  or  elevator,  or  public  warehouse 
can  be  reached  by  any  track  owned,  leased,  or  used,  or  which  can  be  used,  by  such 
railroad  companies;  and  all  railroad  companies  shall  permit  connections  to  be  made 
with  their  trackj  so  that  any  such  consignee  and  any  public  warehouse,  coal  bank  or 
coal  yard,  may  be  reached  by  the  cars  of  said  railroad. 

The  constitutional  provision  was  made  effective  by  the  warehouse 
act  of  1871  which  established  the  Illinois  Kailroad  and  Warehouse 


*  Taylor,  vol.  1,  p.  397-400,  quoting  from  Chicago  Times  and  Tribune. 

*  Art.  13,  sec.  1. 

•Amendment  to  Constitution,  1870,  sec.  2. 


94 


TER.MIXAL  GRAIX  MARKETS  AKD  EXCHAKC4ES. 


Commission.  Tlie  legislature  went  a  step  further  than  had  ]>een 
contemplated  by  the  Board  of  Trade  in  that  grain  inspection  was  also 
placed  within  the  jurisdiction  of  the  new  commission.  Public 
warehouses”  were  divided  into  three  classes,  class  A  applying  to 
“cities  having  not  less  than  100,000  inhabitants”  and  therefore  to 
Chicago.  This  class  embraced  all  houses  “in  which  grain  is  stored 
in  bulk,  and  in  which  the  grain  of  different  owners  is  mixed  together, 
or  in  which  grain  is  stored  in  such  a  manner  that  the  identity  of 
different  lots  or  parcels  can  not  be  accurately  preserved.”^ 

The  act  required  the  operators  of  public  warehouses  to  be  licensed 
by  the  cAcuit  court  and  to  file  a  bond  with  the  clerk  of  the  court 
in  the  penal  sum  of  $10,000."  Grain  was  to  be  received  as  tendered 
for  storage  and  it  was  required  that — 

each  ‘‘receipt  shall  bear  date  corresponding  with  the  receipt  of  grain  into  store,  and 
shall  state  upon  its  face  the  quantity  and  inspected  grade  of  the  grain,  and  that  the 
grain  mentioned  in  it  has  been  received  into  store,  to  be  stored  with  grain  of  the  same 
grade  by  inspection,  received  at  about  the  date  of  the  receipt,  and  that  it  is  deliverable 
upon  the  return  of  the  receipt,  properly  indorsed  by  the  person  to  whose  order  it  was 
issued,  and  the  payment  of  proper  charges  for  storage.”  ^ 

Detailed  regulations  were  prescribed  to  meet  the  evils  of  fraud¬ 
ulent  issuance  of  receipts.  Weekly  statements  of  grain  in  store  were 
required  to  be  posted  in  the  warehouse  and  both  daily  and  weekly 
reports  to  be  rendered  to  the  warehouse  registrar  showing  in  detail 
the  receipts  and  shipments  of  each  grade  of  grain  and  a  complete 
record  of  each  receipt  issued  or  canceled. 

And  the  warehouseman  making  such  statements,  shall,  in  addition,  furnish  the 
said  registrar  any  further  information,  regarding  receipts  issued  or  canceled,  that  may 
be  necessary  to  enable  him  to  keep  a  full  and  correct  record  of  all  receipts  issued  and 
canceled,  and  of  grain  received  and  delivered.' 

The  Board  of  Commissioners  of  Railroads- and  Warehouses  which 
was  set  up  had  full  authority  over  the  chief  inspector  of  grain  and 
the  State  warehouse  registrar. 

Parties  injured  through  violations  of  this  act  were  authorized  to 
sue  the  warehouseman  upon  his  bond.  And — 

In  all  criminal  prosecutions  against  a  warehouseman,  for  the  violation  of  any  of 
the  provisions  of  this  act,  it  shall  be  the  duty  of  the  prosecuting  attorney  of  the  comity 
in  which  such  prosecution  is  brought,  to  prosecute  the  same  to  a  final  issue,  in  the 
name  of  and  on  the  behalf  of  the  people  of  the  State  of  Illinois.^ 

It  may  be  observed  that  a  conspicuous  feature  in  the  history  of 
grain  elevators  in  Chicago  is  the  concentration  of  control  which  has 
frequently  existed;  that  is,  a  close  commmiity  of  interest  between 
the  larger  houses,  fortified  by  'agreements  with  the  railroads.  It 
has  been  noted  that  four  firms  controlled  more  than  two-thirds  of  the 


<  Illinois  Public  Laws  1871-1872,  p.  762. 
6  Secs.  3  and  4. 

6  Idem,  sec.  7. 


7  Idem  ,  sec.  12. 
«Idem.  sec.  23. 


THE  CHICAGO  MAEKET  AXD  THE  BOAED  OF  TEADE.  95 

storage  in  1870.  The  liistory  of  the  board  during  the  year  1872  as 
related  by  Taylor  throws  additional  light  upon  this  group. 

In  the  latter  part  of  September,  Mumi  <k  Scott  disposed  of  their  interest  in  the 
Union,  City,  Northwestern,  and  Miinn  &  Scott  elevators  to  George  Armour,  who  con¬ 
tinued  the  business  under  the  firm  name  of  George  Armour  &  Co.  It  developed  later 
that  this  action  was  necessary  on  account  of  the  financial  losses  Munn  &  Scott  had  sus¬ 
tained  and  as  receipts  in  their  elevators  were  discredited  and  were  not  bankable. 
This  left  the  warehoused  of  the  city  in  the  hands  of  J.  &  E.  Buckingham,  Flint  & 
Thompson,  Armour,  Dole  &  Co.,  Mungcr,  Wheeler  &  Co.,  and  George  Armour  &  Co., 
five  firms,  which  included  eight  men,  all  of  whom,  it  was  said,  were  ‘•'intermarried” 
commercially.  Wliile  the  matter  was  kept  as  quiet  as  i^ossible  at  the  time,  it  devel¬ 
oped  later  that  these  warehousemen  had  been  in  virtual  combination  for  some  time, 
each  owning  stock  in  all  the  warehouses.^ 

The  coucciitratioii  of  interests  has  at  times  enabled  the  elevators  to 
control  storage  rates  and  most  of  the  warehouse  cbntroversies  have 
been  inaugurated  by  an  increase  in  handling  and  storage  charges. 

The  elevators  did  not  readily  accede  to  State  supervision.  Even 
after  the  establishment  of  the  Railroad  and  Warehouse  Commission 
there  were  numerous  complaints  of  manipulation  of  stored  grain  and 
on  at  least  one  occasion  a  board  of  trade  investigation  disclosed  that 
grain  had  been  shipped  without  the  cancellation  of  receipts.  The 
obvious  result  of  these  conditions  was  the  adoption  of  a  policy  of 
outlawing  the  receipts  issued  by  warehouses  convicted  of  irregular 
practices.  The  resolution  adopted  December  20,  1873,  is  important 
as  indicating  the  inception  of  the  plan  of  declaring  certain  elevators 
‘‘regular”  for  the  tender  of  receipts  on  future  contracts.  The  board 
resolved — 

That  inasmuch  as  the  official  reports  of  the  chief  inspector  of  grain  and  the  ware¬ 
house  registrar  show  a  large  percentage  of  deficit  in  the  amount  of  corn  in  the  Chicago 
&  Alton  Elevator  as  compared  with  the  outstanding  receipts  for  the  same,  it  is  hereby 
declared  that  no  warehouse  receipts  for  grain  in  said  elevator  shall  hereafter,  until 
further  action  by  the  board,  be  considered  a  proper  tender  on  sale  or  contracts  for 
grain. 

The  position  of  the  board  was  greatly  strengthened  bt’  the  deci¬ 
sion  of  the  United  States  Supreme  Court  in  Munn  f.  Illinois  (1874)  • 
which  sustained  the  warehouse  law  of  1871.“ 

The  high  scale  of  elevator  charges  continued  to  be  a  subject  for 
recmTcnt  complaint  through  the  seventies  and  eighties.  In  fact  the 
matter  of  charges  was  referred  to  by  the  court  in  the  Munn  case : 

In  this  connection  it  must  also  be  borne  in  mind  that,  although  in  1874  there  were 
in  Chicago  14  warehouses  adapted  to  this  particular  business,  and  owned  by  about 
30  persons,  9  business  firms  controlled  them,  and  that  the  prices  charged  and  received 
for  storage  were  such  as  have  been  from  year  to  year  agreed  upon  and  established 
by  the  different  elevators  or  warehouses  in  the  city  of  Chicago,  and  which  rates  have 
been  annually  published  in  one  or  more  newspapers  printed  in  said  city,  in  the 

®  Ta3ior,  History  of  the  Board  of  Trade,  vol.  1,  p.  460. 

w  Taylor,  vol.  I,  p.  4S9. 

11  94  U.  S.,  11:3. 


96 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


month  of  January  in  each  year,  as  the  estal)lished  rates  for  the  year  then  next  ensu¬ 
ing  such  publication.  Thus  it  is  apparent  that  all  the  elevating  facilities  through 
which  these  vast  productions  “of  seven  or  eight  great  States  of  the  West”  must  pass 


The  elevator  charges  were  scored  by  Mr.  Wright,  president  of 
the  Board  of  Trade,  at  the  close  of  the  year  1887,  in  severe  terms: 

*  *  *  The  year  has  not,  however,  as  we  have  just  reason  to  hope,  witnessed  any 
reduction  in  the  exorbitant  and  excuseless  warehouse  charges  for  storing  bulk  grain 
in  Chicago  elevators.  It  is  a  humiliating  because  it  is  an  undeniable  fact,  that 
grain  storage  charges  are  extortionately  higher  in  Chicago  than  they  are  at  any  other 
port  on  the  Great  Lakes  or  in  any  other  city  in  the  United  States.  *  *  *  Is  this 
anomalous  attitude  of  Chicago  warehousemen  to  be  indefinitely  permitted  to  not 
only  imperil  but  to  actuall}"  drive  away,  as  it  every  day  is  doing,  the  commerce  of 
this  city?  *  *  *  12 

Dealing  in  grain  by  plblic  warehousemen. — Soon  after  1885 
there  were  certain  changes  of  ownership  among  the  warehousemen 
and  the  new  proprietors  began  to  combine  public  warehousing  and 
grain  buying.^^  They  acquired  control  of  many  country  warehouses 
along  lines  feeding  into  Chicago,  so  that  ^‘a  single  firm  acquired 
practically  the  control  of  the  entire  elevator  system  of  a  large  western 
trunk  line  terminating  in  Chicago,  and  five  or  six  firms  controlled  all 
such  elevator  facilities  of  these  large  grain-carrying  western  rail¬ 
roads.”  The  inspections  of  regular  warehouses  instituted  by  the 
Board  of  Trade  after  1891,  while  it  insured  the  validity  of  receipts, 
did  not  touch  this  newer  phase  of  the  controversy. 

Legislative  regulation  of  the  elevator  monopoly  was  recommended 
in  a  detailed  review  of  the  situation  by  William  T.  Baker,  president 
of  the  board,  at  the  opening  of  the  year  1895. 

Next  to  the  incubus  of  the  bucket-shops  is  the  tyranny  of  the  elevator  monopoly 
which,  from  a  fair  and  legitimate  beginning,  has  grown  to  such  proportions  within 
your  association  as  to  threaten  its  very  existence.  And  it  is  a  broader  question  than 
the  sur\dval  of  the  fittest  among  groups  of  business  men  and  interests  in  this  exchange. 
It  concerns  every  merchant  and  every  common  carrier  in  the  great  commerce  of 
this  city,  and  every  farmer  who  contributes  to  make  that  commerce  possible.  The 
warehousing  of  grain  is  only  an  incident  in  its  transit  from  producer  to  consumer. 
Its  natural  and  healthy  function  is  in  accepting  on  storage  the  overflow  of  the  season  of 
freest  movement  that  the  channels  of  commerce  may  not  be  clogged  or  obstructed, 
and  safely  caring  for  the  same  while  waiting  a  demand,  ✓^ut  in  Chicago  the  accumu¬ 
lation  and  storage  of  grain  has  come  to  be  the  chief  end  and  aim  of  potential  and  domi¬ 


nating  forces. /The  alliance  between  railroads  and  elevators  has  resulted  in  reaching 
out  after  millions  of  bushels  not  naturally  tributary  to  us,  and  when  gathered  here 


preventing  it  by  such  tricks  of  trade  as  you  are  familiar  with  from  ever  getting  way 
again  as  long  as  storage  can  be  collected  on  it. 


Report  for  year  ending  Dec.  31, 1887,  p.  60. 

13  Robbins  Memorandum  to  Legal  Advice  Committee  of  the  Board,  July  16,  1906 
“  Idem. 

n  Annual  report  for  the  year  ending  Dec.  31,  1892,  p.  53. 


THE  CHICAGO  MARKET  AND  THE  BOARD  OF  TRADE. 


97 


This  policy  has  resulted  in  such  congestion  of  grain  here  as  to  depress  prices  to  the 
lowest  point  in  history.  For  it  is  not  the  Chicago  stock  alone  that  this  market  has  to 
carry.  Its  very  volume  invites  dealers  in  every  market  in  the  world  to  make  sales 
here  against  holdings  elsewhere,  which  they  would  not  dare  to  do  but  for  abnormal 
accumulations  bought  and  held  here  by  unnatural  means.  Cargoes  of  wheat  bought 
on  European  account  in  Australia,  India,  Ilussia,  and  Argentina,  as  well  as  stocks 
at  all  other  points  of  accumulation,  are  sold  against  here,  so  that  our  market  feels 
the  weight  of  the  entire  world’s  surplus.  This  condition  is  only  made  possible  by 
the  enormous  and  unnatural  hoard  brought  and  retained  here  to  satisfy  the  avarice 
of  half  a  dozen  corporations,  the  largest  of  which  is  owned  in  London. 

A  system  that  permits  the  proprietors  of  public  elevators,  directly  or  indirectly, 
to  deal  in  the  property  of  which  they  are  custodians  is  essentially  immoral.  The 
temptation  to  reserve  for  themselves  the  best  of  a  grade  is  one  to  which  the  law  never 
contemplated  that  they  should  be  subjected.  Indeed,  the  principal  motive  of  the 
warehouse  law  was  to  prevent  their  ownership  or  control  of  grain  in  public  warehouses. 
Yet  it  is  notorious  that  during  the  past  year  the  proprietors  of  elevators  have  had 
for  sale  and  have  sold  millions  of  bushels  of  grain  at  a  large  premium  not  1  cent 
of  which  in  equity  belonged  to  them.  The  grain  bought  elsewhere  by  elevator  pro¬ 
prietors  is  promptly  sold  here  to  you  for  some  future  delivery,  so  they  become  the 
custodians  of  your  property,  which,  however,  you  can  only  get  on  payment  of  such 
premiums  as  the  urgency  of  the  demand  may  enable  them  to  exact.  *  *  * 

dhe  old-time  open  competition  of  thousands  has  been  superseded  by  new  condi¬ 
tions  under  which  each  railroad  terminating  in  Chicago  is  practically  controlled  by  a 
single  buyer.  Special  rates  are  made  to  favored  individuals  who  have  the  further 
advantage  of  elevator  control,  so  that  rates  charged  to  the  public  are  rebated  to  them¬ 
selves,  thus  enabling  them  to  outbid  or  undersell  all  competitors.  This  charge  of 
three-quarters  of  a  cent  per  bushel  for  the  first  term  of  storage  is  retained  only  as  a 
protection  to  elevator  managers  against  the  competition  of  legitimate  dealers  in  grain. 
It  is  a  charge  that  you  can  not  avoid,  but  which  is  ignored  by  them  in  their  own  trans¬ 
actions,  thus  forcing  every  one  to  sell  to  or  buy  of  them.  The  fact  that  this  charge  is  not 
bona  fide,  but  only  a  foil  to  competition,  proves  that  it  is  unjust  and  should  be  abol¬ 
ished.  While  elevator  proprietors  are  willing  to  pay  1  cent  per  bushel  more  for 
jn'ain  “to  go  to  store”  in  their  own  v/arehouses  than  the  market  price  of  the  same  grain 
in  store  (and  subject  to  the  charge  of  three-quarters  of  a  cent  per  bushel),  is  conclusive 
that  the  first  storage  charge  is  not  legitimate,  and  also  that  the  subsequent  terms  of 
storage  are  unduly  profitable.  The  charge  for  the  transfer  of  grain  from  cars  to  vessel 
a  flistance  of  perhaps  100  feet,  is  greater  than  the  average  rate  of  freight,  during  the 
past  season,  from  Chicago  to  Buffalo.  The  same  grain  is  transferred  on  track  by  the 
railroads  themselves  from  western  to  eastern  cars  for  nothing. 

A  proper  solution  of  our  difficulties  must  include  facilities  by  railroads  entering 
liere  for  free  warehousing  of  grain  on  arrival,  and  fair  rates  for  storage  on  naturally 
acquired  accumulations.  The  device  of  collecting  storage  in  advance  of  delivery  of 
grain  has  supplied  largely  increased  capital  to  elevator' proprietors  to  be  used  against 
you  in  the  unequal  competition  for  business.  There  is  no  legal  or  moral  right  in  this 
practice,  and  it  should  be  terminated  altogether.  Warehouse  receipts  for  grain  are 
made  current  by  your  rules.  These  rules  are  absolutely  binding  on  every  buyer 
in  your  market  whether  he  is  a  member  of  your  board  or  not.  It  therefore 
behooves  you  to  protect  the  innocent  purchaser  by  every  safeguard  within  your 
power.  It  is  not  only  your  right  but  your  imperative  duty  to  have  such  an  over¬ 
sight  of  elevator  management  as  will  assure  to  holders  of  warehouse  receipts  made 
regular  by  your  rules  that  their  receipts  represent  not  only  property  but  uncon¬ 
taminated  grades  and  condition.  In  providing  the  requisites  for  regular  receipts, 
it -may  be  possible  to  correct  some  of  the  abuses  complained  of,  as  well  as  give 
IG8G93'’— 20 - 7 


98 


TEEMIKAL  GEAIX  MARKETS  A^B  EXCHANGES. 


adequate  security  to  holders  of  warehouse  receipts.  But  the  legislatui’e  must  he 
a])pealed  to  to  so  amend  the  warehouse  law  as  to  make  it  impossible  for  public  ware- 
liousemeii  to  be  also  dealers  in  grain;  and  railroad  companies  having  terminals  here 
should  be  required  to  warehouse  their  grain  on  arrival  as  they  do  every  other  species 
of  merchandise.  With  this  purpose  in  view,  I  recommend  the  appointment  of  a 
committee  on  legislation  outside  the  Board  of  Directors,  to  promote  the  necessary 
legislation  at  Springfield.^® 

From  1895  on,  the  question  of  permitting  public  wareliousemen 
to  be  at  the  same  time  dealers  in  grain  stored  in  these  public  ware- 
Ixouses  became  more  acute,  and  the  old  complaints  wore  continually 
revived. 

On  March  8,  1895,  written  complaints  were  presented  by  the  ware¬ 
house  committee  of  the  exchange  to  the  Railroad  and  Warehouse 
Commission  of  the  State  of  Illinois  asking  the  revocation  of  the  licenses 
of  13  s3^s terns  of  public  elevators  of  class  A,  upon  the  ground  that 
such  elevators  were  violating  the  law  in  buying  and  selling  grain  and 
mixing  their  grain  with  that  of  other  depositors  in  their  warehouses. 

On  April  11,  1895,  the  commission  took  the  case  under  advisement 
until  the  27th  of  September,  1895,  when  they  decided  it  to  be  illegal 
for  warehousemen  to  deal  in  grain  in  their  own  warehouses  and  mix 
it  with  that  of  other  depositors,  and  accordingly  the  commission 
entered  an  order  revoking  the  licenses  of  nine  of  these  elevator  sys¬ 
tems.^® 

Mr.  Baker's  condemnation  of  the  situation  a  year  later,  can  not 
well  be  omitted. 

*  We  know  that  half  a  dozen  firms  and  corporations  have  a  monopoly  of 
the  business.  They  can  not  bring  grain  here  that  is  not  naturally  tributary  to  us, 
except  on  cut  rates  of  freight  denied  the  general  public  and  forbidden  by  law.  Nearly 
every  railroad  terminating  here  has  some  favored  elevator  system  under  its  protection, 
the  proprietors  of  which  are  given  such  profitable  concessions  as  to  enable  them  to 
control  the  business.  If  the  contention  of  this  board  is  sustained  each  railroad  will 
have  a  host  of  competing  patrons,  instead  of  one;  bankers  will  ha‘ve  a  thousand  active 
accounts  instead  of  the  small  group  of  large  borroAvers,  who  are  not  able  to  combine 
and  dictate  rates  while  the  short-rate  card  of  insurance  offices  Aviil  again*come  into 
use.  But  the  real  question  is  not  Avhether  it  may  add  to  the  traffic  of  railroads  or 
increase  the  profits  of  banking  or  insurance  capital,  but  Avhether  it  is  right  for  public 
custodians  of  grain  to  be  at  the  same  time  dealers  in  grain  and  enabled  to  select  and 
set  aside  for  their  own  purposes  the  best  of  what  may  come  under  their  charge.  No 
objection  is  made  to  all  the  grain  coming  to  Chicago  that  can  be  legitimately  brought 
here,  but  it  is  against  public  policy,  and  is  not  the  legitimate  function  of  a  public  ware¬ 
houseman,  operating  under  a  license  from  the  State  and  the  rules  of  this  board,  to  be 
so  engaged.  It  is  the  dual  capacity  that  we  object  to  and  that  is  prohibited  by  law. 
I^ast  spring  the  quality  of  millions  of  bushels  of  grain  stored  in  public  warehouses 
Avas  aspersed  by  interested  speculatoi’s.  This  board,  through  its  officers  sought  to  have 
such  an  investigation  made  as  Avould  refute  the  slander  against  grain  stored  in  public 
AA^arehouses  and  restore  the  confidence  of  buyers  and  holders  of  property  in  Chicago, 
joined  in  refusing  permission  to  your  representatiA'os  to  make  that  necessarj'  and 

’6  Annual  report  of  the  Chicago  Board  of  Trade  for  year  ending  Dec.  31,  1S91,  pp.  6C,  67,  6S,  and  69. 

’-V'tnnual  report  year  ending  Dec.  31,  1895,  p.  62. 

See  Address  of  President  Baker,  Chicago  Board  of  Trade  Report  for  year  ending  Dec.  31, 18%,  p.  86. 


99 


THE  CHICAGO  MAEKET  AKD  THE  BOARD  OF  TRADE. 

wholesome  examination.  They  knew  the  grain  was  above  the  average  in  quality  and 
coiidition  but  were  willing  to  have  it  suspected  in  order  to  increase  the  carrying 
charges.  The  present  monopoly  is  against  everything  and  everybody  but  themselves. 

By  the  rankest  and  most  brazen  manipulation  they  seek  to  control  the  price  and 
movement  of  our  commodities  and  force  every  buyer  and  every  seller  to  their  terms. 
A  year  ago  they  were  selling  spring  wheat  at  5  or  6  cents  premium.  Now  they  art* 
selling  winter  wheat  at  a  like  premium,  while  they  have  not  been  the  owners  of 
either.  Wliile  they  are  nominally  the  custodians  of  your  property  they  are  able,  in 
violation  of  the  laws  of  the  State,  to  set  aside  and  sell  at  a  premium  millions  of  bushels 
every  year,  not  owned  by  them,  but  in  their  custody  as  warehousemen.  Would  any 
comt  permit  a  trustee  of  an  estate  to  thus  handle  trust  funds  for  his  own  advantage? 
This  gain  is  not  the  legitimate  piofit  of  a  public  warehouseman.  It  belongs  to  you  or 
whoever  owns  the  grain.  The  lawful  profit  of  the  business  of  public  warehousing  has 
been  attractive  enough  to  create  an  enormous  system  of  elevators  here.  If  the  busi¬ 
ness  has  been  overdone  it  is  due  to  the  cupidity  of  those  engaged  in  it.  This  board 
will  cheerfully  concede  a  fair  return  on  capital  actually  employed  in  lawful  operation 
of  elevators  but  will  forever  resist  the  use  of  its  machinery  for  unjust  or  illegal  prac¬ 
tices.  If  it  is  possible  to  close  the  courts  against  us  we  have  remedies  within  our  own 
association  that  neither  money  nor  influence  can  buy.  (Annual  Report  of  the 
Cliicago  Board  of  Trade,  year  ending  Dec.  31,  1895,  pp.  71,  72,  and  73.) 

This  situation  continued  throughout  the  next  year.^*  It  appears 
that  the  board  carried  out  their  president’s  threat  and  invoked 
their  own  power  of  discipline  over  members.  As  a  concrete  instance 
the  Armour  elevators,  holding  one-third  of  the  wheat  and  one-fifth 
of  the  corn  then  in  store,  were  declared  irregular,  July  1,  1896.  This 
is  described  in  Taylor’s  History  (Vol.  II,  p.  917.) 

The  most  sensational  episode  of  the  year  (1896)  and  one  closely  connected  with  the 
whole  anti-elevator  campaign  was  the  trial  of  the  Armour  Elevator  Co.  on  cliarges  of 
dishonorable  conduct.  *  *  *  The  Armour  Elevator  Co.  was  charged  with  ha\iiig 
transferred  1,200,000  bushels  of  wheat  from  one  part  of  the  north  side  system  to  another, 
without  inspection,  on  such  dates  that  the  receipts  resulting  therefrom  were  just 
regular  on  delivery  day,  May  i  *  *  * 

As  a  result  of  the  trial  all  elevators  of  the  Armour  Elevotor  Co.  were  declared  irre<ni- 
lar  after  July  1,  the  receipts  becoming  irregular  at  once.  The  capacity  of  the  elevators 
was  10,500,000  bushels  and  the  grain  in  store  aggregated  4,925,000  bushels  of  wheat, 
1,636,000  bushels  of  corn,  430,000  bushels  of  oats,  and  250,000  bushels  of  rye.  Not  a 
bushel  of  the  No.  2  grade  was  deliverable  on  contracts  after  the  action  was  taken,  and 
this  was  of  great  importance  to  the  trade,  as  the  Armour  elevators  contained  about  one- 
third  of  the  wheat  and  one-fifth  of  the  corn  then  in  store  in  Chicago.  The  directors 
voted  these  elevators  irregular  by  a  vote  of  15  to  2,  and  the  action  was  based  on  sec¬ 
tion  1  of  rule  21,  which  stated  that  nothing  in  the  rules  should  prevent  the  directors 
from  declaring  any  ’warehouse,  or  the  receipts  thereof,  irregular  at  any  time  for 
violation  of  or  noncompliance  with  the  laws  of  the  State  of  Illinois  or  any  of  the 
rules  of  the  board  of  trade.  *  *  * 

The  Central  Elevator  Co.  case,  1898. — ^An  cfTort  was  also 
made  to  enforce  the  State  law.  Informations  were  filed  afrainst 
nine  elevators  whose  practices  were  considered  objectionable;^'’  and 
all  the  informations  prayed  for  perpetual  injunction  to  restrain 


18  See  Address  of  President  Baker,  Chicago  Board  of  Trade  Report  for  year  ending  Dec.  31,  189G,  p.  Sti. 
w  There  were  only  11  elevators  listed  as  regular  for  1897-08. 


100 


TERMIXAL  GRAIX  MARKETS  AXD  EXCHAXGES. 


defonOaiits,  as  warehousemen,  from  storing  grain  in  their  own  ware- 
hoiises.”^® 

The  elevator  operators  admitted  in  each  case  that  they  ‘Svere 
operating  public  warehouses  of  class  A,  in  which  grain  was  stored  in 
Chicago,  and  that  they  had  stored  grain  owned  by  them  in  their  own 
wareliouses  and  claimed  the  right  to  do  so.  The  answers  also  set  up  a 
general  custom  of  30  years’  standing,  under  which  the  proprietors  of 
})ublic  warehouses  were  accustomed  to  store  their  own  grain  and 
jnix  it  with  the  grain  of  their  customers,  and  also  that  the  warehouse 
commissioners  had  construed  the  act  of  1871  as  permitting  that  cus¬ 
tom,  and  that  such  purchases  of  grain  and  such  custom  had  a  bene- 
licial  effect  upon  producers,  shippers  of  grain,  and  dealers  in  grain 
throughout  Illinois  and  the  Northwest. The  lower  courts  entered 
decrees  in  each  case  granting  the  relief  pra^md  for,  and  the  cases 
were  all  appealed  to  the  Supreme  Court  of  Illinois  (1898)  on  identical 
briefs  and  arguments. 

The  opinion  of  the  court  {Central  Elevator  Co.  v.  People)  deserves 
consideration  not  only  for  its  bearing  upon  the  immediate  dispute 
but  as  a  description  of  terminal  warehouse  practice  20  years  ago, 
derived  from  an  exhaustive  mass  of  evidence: 

The  public  warehouses  established  under  the  law  are  public  agencies  and  the 
•lefendants,  as  licensees,  pursue  a  public  employment.  They  are  clothed  with  a  duty 
toward  the  public.  The  evidence  shows  that  defendants,  as  public  warehousemen 
storing  grain  in  their  own  warehouses,  are  enabled  to,  and  do,  overbid  legitimate 
grain  dealers  by  exacting  from  them  the  established  rate  for  storage,  while  they  give 
up  a  part  of  the  storage  charges  when  they  buy  or  sell  for  themselves.  By  this  practice 
of  buying  and  selling  through  their  own  elevators  the  position  of  equality  between 
them  and  the  public  whom  they  are  bound  to  serve  is  destroyed;  and  by  the  advan¬ 
tage  of  their  position  they  are  enabled  to  crush  out,  and  have  nearly  crushed  out, 
competition  in  the  largest  grain  market  of  the  world.  The  result  is  that  the  ware¬ 
housemen  own  three-fourths  of  all  the  grain  stored  in  the  public  warehouses  of  Chicago, 
and  upon  some  of  the  railroads  the  only  buyers  of  grain  are  the  warehousemen  on  that 
line.  The  grades  established  for  different  qualities  of  grain  are  such  that  the  grain  is 
not  exactly  of  the  same  quality  in  each  grade,  and  the  difference  in  market  price  in 
different  qualities  of  the  same  grade  varies  from  2  cents  per  bushel  in  the  better  grades 
to  15  cents  in  the  lower  grades.  The  great  bulk  of  grain  brought  by  rail  and  in  car¬ 
loads  and  is  ins])ected  on  the  tracks,  and  the  duty  of  the  warehousemen  is  to  mix  the 
carloads  of  grain  as  they  come.  Such  indiscriminate  mixing  gives  an  average  quality 
of  grain  to  all  holders  of  warehouse  receipts.  Where  the  warehouseman  is  a  buyer 
the  manipulation  of  the  grain  may  result  in  personal  advantage  to  him.  Not  only  is 
this  so  but  the  warehouse  proprietors  often  overbid  other  dealers  as  much  as  a  quarter 
f>f  a  cent  a  bushel  and  immediately  resell  the  same  to  a  private  buyer  at  a  quarter  of  a 
ccjit  less  than  they  paid,  exacting  storage,  which  more  than  balances  their  loss.  In 
this  way  they  use  their  business  as  warehousemen  to  drive  out  competition  with  them 
as  buyers.  It  would  be  idle  to  expect  a  warehouseman  to  perform  his  duty  to  the 
public  as  an  impartial  holder  of  the  grain  of  the  different  proprietors  if  he  is  permitted 
to  occupy  a  position  where  his  self-interest  is  at  variance  with  his  duty.  In  exercising 
the  public  employment  for  which  he  is  licensed  he  can  not  be  permitted  to  use  the 
advantage  of  his  position  to  crush  out  competition  and  to  combine  in  establishing  a 
monopoly  by  which  a  great  accumulation  of  grain  is  in  the  hands  of  the  warehousemen, 


“  Central  Elevator  Co.  v.  People,  174  III.,  203,  1898. 


21  Idem,  p.  205. 


THE  CHICAGO  MARKET  AND  THE  BOARD  OF  TRADE. 


101 


liable  to  be  suddenly  thrown  upon  the  market  whenever  they,  as  speculators,  see 
profit  in  such  course.  The  defendants  are  large  dealers  in  futures  on  the  Chicago 
Board  of  Trade  and  together  hold  an  enormous  supply  of  grain  ready  to  aid  their 
opportunities  as  speculators.  The  warehouseman  issues  his  own  warehouse  receipt 
to  himself.  As  public  warehouseman  he  gives  a  receipt  to  himself  as  individual,  and 
is  enabled  to  use  his  own  receipts  for  the  purpose  of  trade  and  to  build  up  a  monoply 
and  destroy  competition.  That  this  course  of  dealing  is  inconsistent  with  the  full  and 
impartial  performance  of  his  duty  to  the  public  seems  clear.  The  defendants  answer 
that  the  practice  had  a  beneficial  effect  upon  producers  and  shippers,  and  naturally 
were  able  to  prove  that  when,  by  reason  of  their  advantages,  they  were  overbidding 
other  dealers,  there  was  benefit  to  sellers,  but  there  was  an  entire  failure  to  show  that  ^ 
in  the  general  average  there  was  any  public  good  to  producers  or  shippers. 

The  answers  also  set  up,  and  it  is  claimed  here  that  there  was  at  the  time  of  the 
passage  of  the  warehouse  act  a  general  custom  of  warehousemen  to  deal  in  grain, 
and  to  store  it  in  their  warehouses,  and  that  the  law  was  passed  with  reference  to 
that  existing  custom.  The  evidence  fails  to  establish  any  such  custom.  The  amount 
so  bought  and  stored  or  dealt  in  up  to  the  year  1885  was  trifling,  and  the  first  time 
Avhen  there  was  any  material  increase  was  in  1890.  Many  witnesses  who  would  have 
known  if  such  a  practice  or  usage  existed  united  in  denying  all  knowledge  of  it,  and 
many  of  them  testified  that  they  never  knew  or  heard  of  any  elevator  owner  buying 
or  selling  grain  prior  to  1885.  There  w'as  no  such  custom. 

Finally,  it  is  claimed  that  there  has  been  a  practical  construction  of  the  law  by 
the  warehouse  commissioners,  peimitting  the  practice  complained  of.  There  was  a 
little  buffing  and  storing  of  grain  by  warehousemen  from  time  to  time,  but  it  was  so 
insignificant  as  to  call  no  attention  to  it  until  in  recent  years.  *  *  *  If  the  com¬ 
missioners  were  derelict,  it  would  not  bind  the  public,  and  indifference  on  their 
part  could  not  have  that  effect.  *  *  * 

The  decree  of  the  circuit  court  is  affirmed. : 

Even  while  the  appeal  was  pending  in  the  Central  Elevator  case 
an  attempt  was  made  to  render  the  court’s  action  nugatory  by  the 
passage  of  an  act  in  the  general  assembly  of  1897,  amending  the 
warehouse  act  of  1871  so  as  to  legalize  the  specific  practices  forbidden 
by  the  injunctions  of  the  circuit  court.  The  passage  of  this  act 
made  it  necessary  for  the  opponents  of  the  elevator  interests  to 
institute  new  proceedings.  Accordingly,  contempt  proceedings  were 
brought  against  a  member  of  the  firm  owning  the  Central  Elevator 
Co.  The  Circuit  Court  of  Cook  County  (Judge  Tuley  presiding)  held 
the  statute  of  1897  to  be  unconstitutional  and  fined  the  defendant 
$100  for  contempt  of  court.  This  case  was  reviewed  by  the  supreme 
court  of  the  State  in  Hannah  v.  the  Peojiler^ 

The  court  took  the  same  ground  as  in  the  provious  decision  and 
upheld  the  language  of  that  decision.  Proceeding  further,  they  said: 

It  was  manifestly  beyond  the  power  of  the  general  assembly,  by  th-e  enactment 
of  the  amendatory  act  of  1897,  to  relieve  public  warehousemen  of  a  duty  charged 
upon  them  by  the  provisions  of  the  constitution  of  the  State  or  to  remove  the  inhibi¬ 
tion  clearly  implied  by  the  organic  law. 

The  constitutional  remedy  of  protection  is  that  the  warehousemen  shall  act  only 
as  a  trustee  for  others,  and  the  producers  and  shippers  shall  not  be  subjected  to  the 
danger  of  loss  through  the  pressure  of  personal  interest  of  the  tnistee  to  wrong  them. 


‘2  51  N.  E.,  250-257. 


22  Illinois  Laws  1897,  p.  302. 


2<  198  Illinois,  77,  1902. 


102 


TER^kllNAL  GRATX  MARKETS  AKD  EXCHANGES. 


No  question  is  presented  by  this  record,  as  to  the  right  of  a  public  warehouseman 
to  store  his  own  grain  in  vacant  places  in  his  own  warehouse  where  the  space  so  vacant 
was  not  occupied  and  not  needed  for  the  storagb  of  grain  of  customers  of  the  ware¬ 
house.  That  which  the  warehouseman  here  seeks  to  do  and  which  the  court  ha.s 
prohibited  from  being  done  is  the  mixing  of  the  grain  of  the  keeper  of  a  public  ware¬ 
house  witli  that  of  his  customers,  and  issuing  and  dealing  in  certificates  or  warehouse 
receipts  representing  a  mass  of  grain  composed  of  that  of  the  keeper  of  the  warehouse 
and  of  his  customers.  No  question  of  an  infringement  of  a  right  secured  by  the  Con¬ 
stitution  of  the  United  States  is  involved  in  that  controversy. 

This  decision  estahlislied  the  present  practice  in  Chicago  whcre])y 
public  warehousemen  are  permitted  to  store  their  own  grain  in 
special  bins,  hut  arc  forbidden  to  mix  such  grain  with  that  of  their 
customers.  In  1899  approximately  25  per  cent  of  the  grain  received 
at  the  Chicago  market  was  handled  by  public  licensed  elevators,  the 
rest  passing  into  private  storage,^^  and  the  ratio  has  increased  in 
favor  of  the  private  elevators.  The  statutory  restrictions  upon 
mixing  and  conditioning  grain,  the  regulation  of  storage  charges,  and 
the  annulment  of  the  act  of  1897  led  many  elevators  (about  1899) 
to  cancel  their  licenses  and  operate  as  private  houses.  The  operators 
pointed  out  that  cleaning  machinery  was  allowed  in  public  elevators  in 
Minneapolis  and  Duluth  and  declared  that  unless  this  were  allowed 
in  Chicago  they  could  more  profitably  operate  on  a  private  basis."® 
There  has  been  a  corresponding  decline  in  the  number  and  capacity 
of  regular  elevators  until  in  1918  these  elevators  included  only 
about  20  per  cent  of  the  storage  capacity  of  the  market.  This  decline 
in  regular  elevator  storage  appears  in  the  table  below. 

Table  33. — Total  elevator  warehouse  capacity  at  Chicago,  relative  storage  capacity  of 
houses  declared  regular,  of  houses  operated  on  a  private^’  basis,  and  of  houses  operated 
wider  the  custodian  rules,  1902  to  1918,  inclusive. 

(In  I)usliels,  OOO’s  omitted.) 


Total 

Regular 

warehouses  (under  Board  of 
Trade  rules). 

elevator 

capacity 

Chicago 

district. 

Number 
of  ■ware¬ 
houses. 

Niunbcr 
of  oper¬ 
ating 
com¬ 
panies. 

Capacity, 

bushels. 

Per  cent 
of  total 
capacity. 

1902..  . 

57, 720 

17 

10 

27,250 

20,750 

21,950 

22,800 

22,000 

47.21 

1903 . 

57;  150 
03,480 
61, 655 

10 

11 

46.81 

1904 . 

13 

7 

34.58 

1905 . 

14 

8 

36.98 

1900 . . . 

53, 355 

13 

8 

41.23 

1907 . 

58, 645 
53,945 

13 

9 

22,500 
19,000 
18,100 
17, 100 
18,275 

38.37 

1908 . 

10 

7 

35.22 

1909 . 

5i;045 
50,845 
46,640 
'  45, 265 

9 

6 

35.46 

1910 . 

9 

5 

33.63 

1911 . . 

11 

5 

39. 13 

1912 . 

10 

5 

17;  730 
17,730 
17,730 
14,030 

14. 530 

12.530 
11,700 

39.17 

1913 . 

45,375 

10 

5 

39.07 

1914 . 

50,375 

10 

5 

35.20 

1915 . 

47, 135 

10 

5 

29.77 

1910 . 

50,420 

5.5,236 

57,305 

11 

5 

28.81 

1917 . 

9 

4 

22,68 

1918 . 

8 

4 

20.42 

2'  Report  of  U.  S.  Industrial  Commission,  Vol.  IV,  p.  408. 

24  Idem,  p.  411. 

103 


THE  CHICAGO  MARKET  AXD  THE  BOARD  OF  TRADE. 


Table  Total  elevator  u-archoiise  capaciUj  at  Chicago,  relative  storage  capacity  of 
houses  declared  regular,  of  houses  operated  on  a  ^^inivate’’’  basis,  and  of  houses  operated 
under  the  custodian  rules,  1902  to  1918,  inclusive — Continued. 


PriA’atc  AA'arehouses  (i.  e.,  not  declared 
regular). 

Number 
oi)eraled 
under 
custo¬ 
dian  rule. 

Number 
of  oper¬ 
ators. 

Capacity, 

bushel. 

Per  cent 
of  total 
capacit  y 

Number 
of  pri- 
A'ate  ware¬ 
houses. 

Number 
of  oper¬ 
ators 

Capacity, 

bushels. 

Per  cent 
of  total 
capacity. 

1902 . 

57 

45 

30, 470 

52. 79 

1[K)3  . 

52 

39 

1  30, 400 

53.19 

■  ■ 

190-1 

70 

51 

2  41'  530 

65. 42 

1905  . 

05 

49 

3  38'  855 

63.02 

. 

1 90(;  . 

58 

47 

<  31'  355 

58. 77 

U)07 

67 

52 

3  36'  145 

(;i.  63 

1908  . 

05 

51 

3  34, 945 

fd.78 

1909 _ 

63 

49 

32'  945 

64. 54 

1910  . 

62 

48 

33, 745 

66. 37 

1911  . 

57 

43 

28^365 

60. 82 

1912  . 

55 

39 

27'  535 

60.83 

1913 

51 

36 

27'  645 

60. 93 

1914  . 

54 

39 

32'  645 

64.80 

1915  . 

56 

41 

7  33'  105 

70.23 

1916 

72 

55 

35'  896 

71.19 

1917  . 

71 

54 

3  42'  706 

77. 32 

1918 . 

59 

26 

45;  605 

79.58 

31 

19 

32, 260 

50. 51) 

\ 

1  Three  private  elevators  with  an  aggregate  capacity  of  2,060,000  bushels  were  closed  during  1904  and  are 
not  included  in  this  total.  One  private  elevator  with  a  capacity  of  400,000  bushels  which  was  omitted 
from  the  tabulation  in  the  Chicago  Board  of  Trade  Year  Book  (1904)  is  included  here. 

2  Five  elevators  with  an  aggregate  capacity  of  2,290,000  bushels  closed  during  1905  arc  not  included  in 
this  total.  One  elevator  Avith  a  capacity  of  400,000  bushels  is  included  which  was  omitted  from  the 
published  list  in  Chicago  Board  of  Trade  Year  Book  1905. 

3  Eight  eleA'ators  with  a  total  capacity  of  5,365,000  bushels  closed  during  1906  not  included  in  total. 

<  Two  elevators  Avith  a  total  capacity  of  300,000  bushels  closed  diuing  1907  not  included  in  total. 

3  Two  elevators  Avith  a  total  capacity  of  300,000  bushels  closed  during  1908  not  included  in  total. 

« Includes  tAAm  elevators  with  a  total  capacity  of  365,000  bushels  for  which  no  operators  were  reported. 

'  One  elevator  Avith  a  total  capacity  of  150,000  bushels  for  which  no  operators  were  reported. 

«  One  eleA'-ator  Avith  a  total  capacity  of  550,000  bushels  for  Avhich  no  operators  Avere  reported. 

As  the  table  shows,  about  80  per  cent  of  the  elevator  storage 
capacity  at  Chicago  in  1918  was  operated  on  a  private  basis. 

Two  important  features  of  the  elevator  situation  have  been  (1)  the 
ownership  of  over  21,000,000  bushels  storage  (rated  capacity)  by 
Chicago  board  members  in  other  markets  and  (2)  the  fact  that  fully 
GO  per  cent  of  the  aggregate  private  storage  capacity  has  been 
included  in  houses  leased  from  railroads. 

The  CUSTODIAN  system. — A  unique  plan  to  provide  public 
storage  for  receivers  of  grain  was  inaugurated  in  Chicago  in  1911 
by  the  establishment  of  the  custodian  department.  Table  33  shows 
the  relative  increase  in  private  elevators  at  Chicago  during  recent 
years.  As  already  stated,  the  bulk  of  the  grain  placed  in  storage  has 
been  increasingly  handled  by  private  elevators,  with  the  consequence 
that  prior  to  1911  there  was  no  protection  to  the  seller  of  the  grain 
against  the  financial  failure  of  an  elevator  buyer  after  delivery  and 
before  he  had  paid  the  purchase  price.  The  condition  was  stated  by 
the  secretary  of  the  board  in  1914  as  follows: 

For  many  years  all  grain  arriving  liere  and  unloaded  in  elevators  was  stored  in 
public  eloA^ators,  Avhicli  Avere  bonded  to  and  licensed  by  the  State  and  tlieir  Avarc- 
liouse  receipts  registered  by  the  State.  Under  these  conditions  the  seller  retained 
full  control  of  the  grain  and  receiA  od  the  receipt  and  therefore  assumed  no  risk  of  failure 
of  the  buyer.  Some  years  ago.  hoAveA'er,  the  priAute  eleA  ator  industry  began  making 
very  large  inroads  on  this  business,  and  now  proliably  90  per  cent  at  least  and  perhaps 


104 


TEKMIXAL  GRAIX  AlARKETS  AXD  EXCHANGES 


more  of  all  grain  arriving  here  goes  into  private  elevators,  and  through  the  failure 
hrst  and  last  of  three  or  four  important  firms  operating  private  elevators  large  losses 
to  our  receiving  merchants  were  sustained. 

Furthermore  it  was  desired  to  secure  the  validitv  of  warehouse 

A/ 

receipts  issued  by  private  elevators  as  collateral  security.  Public 
elevators  had  been  under  bond  and  supervised  by  the  State;  and 
there  were  certain  guaranties  that  the  warehouse  receipt  repre¬ 
sented  a  delinite  quantity  and  grade  of  grain  held  in  safe  custody 
for  the  owner.  These  guaranties  were  lacking  in  the  case  of  eleva¬ 
tors  whose  operators  were  constantly  merchandising  the  grain 
Avhich  they  held  in  store. 

Accordingly  a  rule  was  adopted  by  the  association  in  1911 
authorizing  the  board  of  directors  to  establish  a  custodian  depart¬ 
ment  whereby  an  officer  of  the  Board  of  Trade  should  assume  trustee¬ 
ship,  as  agent  of  the  seller,  to  hold  possession  of  any  and  all  com¬ 
modities  placed  in  his  care  and  control  until  the  purchase  price  of 
the  same  is  paid.  *  *  *”• 

Under  this  authority  the  chief  weighmaster  was  made  custodian 
and  placed  under  a  bond  of  140,000.  His  assistants  were  also 
bonded  in  the  sum  of  $5,000. 

Detailed  regulations  were  adopted-®  including  the  form  of  cus¬ 
todian  certificate  to  be  issued  to  the  owner  of  the  grain: 


’7  Rule  IV,  sec.  22. 

2*  The  regulations  in  force  July  21,  1919,  were  as  follows: 

I.  A  custodian  duly  appointed  by  the  board  of  directors  shall  be  placed  at  such  private  elevators  or  other 
buildings  or  places  of  private  ownership  as  the  custodian  committee  shall  deem  necessary  and  such  custo¬ 
dian  shall  keep  a  daily  record  containing  the  official  board  of  trade  weights  of  all  commodities  dealt  in 
under  the  rules  of  the  association  and  weighed  by  the  official  board  of  trade  weighmaster  which  commodities 
have  been  unloaded  into  or  loaded  out  of  such  private  elevators  of  other  buildings  or  places  of  private  owner¬ 
ship. 

II.  When  any  of  such  commodities  shall  be  unloaded  as  above  provided,  the  custodian  shall  promptly 
issue  and  deliver  to  the  party  for  whose  account  the  same  is  unloaded  an  official  certificate  as  evidence  of 
such  unloading,  except  in  cases  where  the  commodity  is  loaded  out  in  whole  or  in  part  on  the  same  day  as 
received,  in  which  case  the  custodian  shall  procure  the  shipping  receipt  or  bill  of  lading  given  for  such 
property,  and  shall  deliver  the  same  to  such  party  with  a  certificate  for  such  quantity  that  is  not  loaded 
out— the  two  together  representing  the  entire  quantity  unloaded. 

III.  The  custodian  shall  not  allow  the  loading  out  of  any  commodity  from  such  private  elevators  or 
other  buildings  or  places  of  iwivate  ownership,  except  as  provided  in  the  second  of  these  regulations,  until 
the  proprietor  or  manager  thereof  shall  surrender  to  him  for  cancellation  official  certificates  properly  indorsed 
equal  to  the  amount  of  the  commodities  to  be  loaded  out  and  such  commodities  shall  be  weighed  by  the 
weighing  department  of  the  Board  of  Trade  of  the  City  of  Chicago. 

IV.  The  custodian  shall  estimate  daily  the  amount  of  shrinkage  incidental  to  the  handling,  cleaning,  or 
clipping  of  grain;  also  of  any  variation  between  the  “in”  and  the  “out”  weight  and  report  same  at  once 
to  the  proprietors  or  managers,  and  it  shall  be  their  duty  to  surrender  to  the  custodian  certificates  for  can¬ 
cellation  sufficient  to  cover  same.  It  fuqher  shall  be  the  duty  of  the  proprietors  or  managers  to  keep 
in  store  at  all  times  in  excess  of  all  outstanding  certificates  a  quantity  equal  to  at  least  .3  per  cent  of  the 
total  quantity  in  store  represented  by  outstanding  certificates  in  addition  to  the  estimated  amount  of 
shnnkage,  as  hereinbefore  provided. 

V.  In  such  places  where  the  commodities  herein  described  arc  manufactured  into  products  or  the  original 
commodity'  otherwise  changed  in  form,  the  custodian  may  permit  the  proprietors  or  managers  thereof  to 
use  such  commodities  without  the  surrender  of  custodian  certificates  for  the  same  whenever  the  said  pro¬ 
prietors  or  managers  shall  furnish  to  said  custodian  vritten  evidence  of  the  consent  to  such  use  by  the 
party  for  whose  account  the  said  commodities  were  unloaded:  provided,  however,  that  the  custodian  shall 
not  issue  any  certificates  for  commodities  used  under  such  circumstances. 

I.  It  shall  be  the  duty  of  the  custodian  to  require  the  official  weighing  of  all  commodities  in  each  and 
every  private  elevator  or  other  building  or  place  of  private  ownership  hereinbefore  described  by  the  board 
of  trade  weighmaster  as  often  as  in  his  judgment  may  be  needful  to  enable  him  to  accurately  determine  the 
<iuan1ity  of  commodities  stored  in  such  elevators  or  other  buildings  or  places  of  private  ownership  for  the 
purpo.se  of  verifying  the  correctness  of  hisontstanding  certificates;  or  the  custodian  committee  may  at  any 
time  in  the  exercise  of  its  discretion  order  the  weighing  of  such  commodities. 


THE  CHir  .GO  MARKET  AND  THE  BOARD  OF  TRADE 


105 


Ori'ICIAL  CEKTIFICATE  OF  THE  CUSTODIAN  DEPARTMENT  OF  THE  BOARD  OP  TRADE  OF 

THE  CITY  OF  CHICAGO. 

No . 


Chicago,  III., 


m.. 


I  hereby  certify  that  this  day  at  . under  tlie  siiperYision  of 

1)iis  Department  . pounds  of  .  were  unloaded  from 

. Car  No . which  will  not  be  loaded  out  except  upon  sur¬ 
render  of  this  receipt  for  cancellation  as  provided  in  the  rules  and  regulations  of  the 
board  of  trade  of  the  city  of  Chicago  governing  the  custodian  department. 


Tills  scheme  seems  to  have  met  the  approval  of  traders,  hanks, 
and  elevator  operators.  Adequate  security  is  given  to  the  seller 
until  he  has  received  the  purchase  price  of  the  grain.^® 

Agents  of  the  custodian  supervise  the  loading  and  unloading  of 
grain,  inspect  the  condition  of  the  elevators,  weigh  over  the  grain 
wlien  stocks  are  low  enough  to  make  it  advisable,  and  even  seal  the 
elevators  at  the  close  of  business  hours.  A  blanket  insurance  policy 
is  carried  by  the  custodian  to  cover  the  grain  while  in  the  process 
of  unloading. 


VII.  Whenever  in  the  judgment  of  the  custodian  or  of  the  custodian  committee  it  shall  be  deemed 
advisable  the  proprietor,  or  manager,  of  such  private  elevators,  other  buildings,  or  places  of  private  owner¬ 
ship  shall  be  required  to  increase  his  ordinary  line  of  fire  insurance  upon  such  private  elevators,  other 
buildings,  or  places  of  private  ownership  and  the  contents  thereof  for  which  custodian  certificates  have  not 
been  surrendered  for  cancellation,  to  such  an  amount  as  may  be 'determined  by  the  committee  or  the  cus¬ 
todian;  and  such  proprietor,  or  manager,  shall  allow  an  inspection  of  the  amount  and  character  of  said  in¬ 
surance  carried  by  such  proprietor,  or  manager,  whenever  requested  !)y  the  custodian  committee  or  by  the 
custodian. 

VIII.  Whenever  such  a  course  shall,  in  the  judgment  of  the  custodian  committee,  be  deemed  necessary 
it  is  hereby  empowered  to  impose  upon  such  proprietors  or  managers  the  duty  of  preserving  the.  identity  of 
all  grain  thereafter  unloaded  into  such  private  elevators,  or  other  buildings,  or  places  of  private  ortuiership, 
or  in  lieu  thereof,  the  adoption  of  such  measure  or  measures  as  in  the  judgment  of  the  custodian  committee 
may  be  adequate  to  protect  the  parties  for  whose  accounts  the  commodities  aforesaid  were  unloaded. 

IX.  The  buyers  of  commodities  sold  and  delivered  as  hereinbefore  provided  shall  tender  in  payment 
certified  checks  whenever  the  party  for  whose  account  such  commodities  have  been  imloaded  shall  give 
reasonable  notice  of  his  intention  to  demand  the  same,  and  the  latter  may  retain  in  his  possession  the  cus¬ 
todian’s  certificate  until  such  certified  check  is  thus  tendered. 

X.  It  shall  be  the  duty  of  the  custodian  at  such  private  elevator  or  other  liuilding  or  place  of  private 
o'.vnership  at  the  close  of  each  day  to  seal  the  engine,  shipping  bins,  or  other  bins,  or  to  adopt  any  other 
measures  which  in  the  judgment  of  himself  or  the  custodian  committee  are  necessary  to  prevent  the  re¬ 
moval  of  grain  or  other  commodities  from  such  private  elevator  or  other  building  or  place  of  private  owner¬ 
ship  during  the  absence  ol  such  custodian. 

XI.  All  such  commodities  unloaded  as  aforesaid  shall  be  hold  in  such  private  elevator  or  other  building 
or  place  of  private  ownership  and  shall  not  be  released  therefrom  except  in  accordance  with  the  rules  and 
regulations  of  this  association  governing  the  custodian  department,  but  the  custodian,  his  assistants  or 
subordinates  shall  not  be  liable  in  their  official  bonds  or  otherwise  for  any  losses  unless  such  losses  are  di¬ 
rectly  attributable  to  the  negligence  of  said  custodian,  his  assistants  or  subordinates  in  issuing  cei  tificates 
for  commodities  not  in  fact  unloaded  or  in  allowing,  during  the  hours  when  such  private  elevator  or  other 
building  or  place  of  private  ownership  is  open  for  business,  such  commodities  to  be  loaded  out  without  ro- 
riuiring  the  surrender  of  official  certificates  for  the  same,  and  nothing  herein  or  any  custom  or  private  agree¬ 
ment  to  the  contrary  shall  be  construed  to  extend  such  liability;  provided,  however,  that  the  board  of 
trade,  of  the  city  of  Chicago  shall  in  no  case  be  liable  for  any  losses  except  to  the  extent  that  such  losses 
are  due  to  its  failure  to  keep  in  force  a  good  and  reasonable  Ixind  for  the  honesty  and  fidelity  of  said  custo¬ 
dian,  his  assistants  or  subordinates-. 

29  However,  receipt  of  the  custodian  certificate  does  not  constitute,  necessarily,  a  reservation  ol  title  by 
the  seller.  It  was  provided  in  the  rule  authorizing  this  department  “that  nothing  in  the  said  section, 
or  the  regulations  passed  in  conformity  thereto,  shall  be  construed  as  a  reservation  of  title  by  the  seller 
to  any  and  all  commodities  in  the  possession  of  the  custodian,  if,  in  the  absence  of  this  section,  the  ogreement 
between  parties,  or  the  custom  of  trade  shall  contemplate  the  transfer  of  title  thereto  to  the  buyer.” 


106  '  TEPvMIXxVL  GKAIX  MAIlKETS  AXD  EXC""^AXGES. 

The  ])anks  require  custodian  certificates  from  private  warehouse 
])orrowers  and  also  require  the  segregation  in  separate  bins  of  grain 
])aid  for  so  that  they  may  have  a  prior  lien  on  this  property.  On 
this  basis  the  custodian  system  has  greatly  reduced  the  risks  attached 
to  loans  made  on  grain  paper. 

Tlie  custodian  svstem  has  no  relation  to  the  futures  market  and 
docs  not  provide  additional  ‘^contract”  grain. 

In  1918,  31  out  of  the  59  elevators  not  declared  regular  were 
authorized  to  receive  grain  under  the  custodian  rule,  and  the  total 
([uantity  of  grain  registered  and  held  in  trust  by  the  custodian 
during  the  year  was  reported  as  follows: 


Bushels. 

Wheat . 42,197,983 

Corn .  44,798,609 

Oats .  77,512,505 

Rye .  3,347,539 

Rarlcy .  4, 104, 397 

Malt  / .  277, 182 

Kaftir .  328,  581 


Total....... .  172,360,910 

/ 

Section  8.  The  Chicago  cash  market. 

It  has  been  shown  that  Chicago  is  definitely  a  forwarding  market 
and  that  the  cash  business  is  divided  among  two  more  or  less  coherent 
groups — the  receivers  and  the  terminal  elevator  o^Derators.  The 
wire  houses  which  operate  a  cash  commission  business  may  be  con¬ 
sidered  a  separate  section  of  the  receivers’  group. 

Approximately  57  per  cent  of  all  grains  handled  by  Chicago  traders 
during  the  5-year  period  1913-1917^^  were  received  on  consignment; 
and  approximately  43  per  cent  was  bought  direct  from  outside  points, 
mostly  ‘Ao-arrive”  grain  from  the  country. 

The  major  proportion  of  consigned  grain  sold  in  Chicago  (about 
64.1  per  cent)  went  to  terminal-elevator  buyers.  This  amounted  to 
about  36  per  cent  of  the  total  receipts.  Of  the  direct  purchases, 
nearly  half  (about  46  jier  cent,  or  20  per  cent  of  the  total  receipts) 
was  taken  by  the  elevator  group. 

In  summary,  the  cars  of  the  grain  marketed  at  Chicago  as  first 
sold  were  distributed  roughly  as  follows: 

Per  cent. 


Sold  to  local  elevators .  50 

Sold  to  local  consumers .  22 

Sold  to  local  receivers . .  13 

Sold  to  local  dealers . .  9 


For  definition  of  terms  see  appendix. 

SI  Based  on  individual  reports  to  the  Commission  aggregating  558,797  cars  for  the  period.  (Sec  Vol.  IV.) 


THE  CHICAGO  MARKET  AND  THE  BOARD  OF  TRADE. 


107 


On  secondary  sales  about  6  per  cent  more  of  the  total  grain 
received  was  sold  to  consumers  (by  elevators,  receivers,  or  dealers), 
so  that  28  per  cent  was  locall}^  consumed  and  72  per  cent  (of  all 
receipts)  was  ultimately  shipped  out  of  the  market. 

Cku'tain  conclusions  may  be  made  from  this  rather  com|)lex 
analysis : 


(1)  The  receivers  constitute  the  largest  and  most  active  selling  group,  while  the 
elevator  men  are  the  most  influential  cash  buyers. 

(2)  Allhough  the  consumers  (millers,  converters,  and  feeders)  are  represented  )jy 
40  members  on  exchange,  they  constitute  only  a  minor  element  in  Chicago  ca.sh 
trading.  They  include  for  the  most  part  the  mill  buyers  of  malting  and  corn  products 
concerns. 

(  3)  About  75  per  cent  of  the  grain  marketed  in  Chicago  is  eventually  forwarded  to 
other  points.  (This  does  not  include  the  considerable  through-billed  movement.) 

Section  9.  The  futures  market. 


Origin  of  future  trading. — There  is  little  question  but  that 
trading  in  ''options”  or  "futures”  was  the  outgrowth  of  sales  for 
deferred  shipment.  Taylor’s  History  of  the  Board  of  Trade  quotes 
the  Chicago  Daily  Journal  to  the  effect  that  sales  of  corn  to-arrivc 
were  made  as  early  as  1848,  just  after  the  organization  of  the  board. 
"Several  sales  of  corn  'to-arrivc’  were  made  in  Mav,  and  in  the  fol¬ 
lowing  September  it  is  said  that  ‘what  (corn)  arrives  is  principally 
on  contracts.’”  To  quote  further: 

The  trade  in  futures  began  in  a  perfectly  natural  way.  Tlie  storage  capacity  of 
Chicago  was  limited.  It  frequently  happened  that  a  northeast  wind  brought  in  a 
large  fleet  of  vessels  when  there  was  little  grain  in  Chicago,  but  plenty  of  corn  and 
oats  in  storehouses  along  the  line  of  the  canal  or  Illinois  River,  and  in  later  years 
along  the  railroads.  Under  these  circumstances  it  was  a  convenience  to  the  a'csscI 
OAvner,  and  to  the  Chicago  grain  merchant  as  well,  if  some  holder  of  grain  in  the 
country,  or  some  Chicago  agent  of  such  country  owner,  Avould  agree  to  deliver  it  in 
Chicago  Avithin  a  specified  time,  i.  e.,  “to  aiThm  in  5  days,”  or  “to  arrive  in  10  days.” 
Sometimes  the  local  market  Avas  unduly  stimulated  by  a  demand  to  complete  cargoes 
of  vessels  under  charter,  and  country  holders  who  could  not  ship  their  grain  in  time 
to  sell  on  such  a  “bulge”  might  be  glad  to  accept  something  less  for  shipment  the 
next  AA'eek  or  the  next  month. 


A  speculative  market  in  futures  in  the  modern  sense  was  mani¬ 
festly  impossible  without  a  system  of  inspection  and  established 
standard  grades,  and  without  more  frequent  price  information  from 
the  other  markets  of  America  and  Europe.  As  early  as  1855  the 
Chicago  papers  published  a  daily  market  telegram  from  Ncav  York 
describing  the  trading  in  wheat.  And  while  the  futures  trading  in 
New  York  rapidly  declined,  the  practice  of  buying  'Tong”  and' sell¬ 
ing  "short”  on  contract  became  more  frequent  in  Chicago.  Accord- 

’2  For  dennition  of  terms  see  Appendix. 

“  The  History  of  the  Board  of  Trade  of  the  City  of  Cliicago,  3  vois.,  edited  by  Charles  If.  Taylor  (a  mem¬ 
ber),  while  written  in  the  interest  of  the  board  and  lacking  scientific  characteristics,  is  none  the  less  a 
valuable  narrative  of  events  in  the  historj'  of  the  market,  including  the  year  1917. 

Idem,  p.  193. 


108 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


iiig  to  tile  Democratic  Press  for  August  1,  1856,  single  lot  of 
15,000  within  two  days  passed  tlirough  14  hands,  and  in  these  trans¬ 
fers  there  were  settled  contracts  for  some  200,000  bushels.”  The 
telegraph  service  had  become  effective  by  this  time,  but  no  quotations 
could  be  reliable  guides  for  Chicago  selling  until  the  establishment  of 
a  system  of  standard  grades  and  a  regular  inspection  system.  Such 
a  system  was  established  in  1858.  Quotations  from  New  York  and 
other  eastern  markets  were  posted  on  the  exchange  bulletin  daily 
during  that  year.  The  annual  statement  of  the  board  in  1860  pub¬ 
lished  a  comparative  table  of  the  weekly  prices  of  wheat  in  Chicago, 
Buffalo,  and  New  York  for  the  vear  1859. 

Testimony  shows  that  before  future  trading  was  recognized  as  a 
distinct  practice  in  the  rules  of  the  market  it  was  the  custom  for  grain 
to  be  sold  on  the  Board  of  Trade  at  10,  20,  30,  or  even  60  days,  de¬ 
li  veiy.^®  This  was  known  as  option  selling,”  and  delivery  within 
the  period  could  be  at  seller’s  option  or  at  buyer’s  option  according 
to  the  contract.  The  seller’s  option  was  the  more  usual  although 
the  bu3mr’s  option  commanded  a  higher  price  from  shippers  in  the 
market.^^  The  deliveiy  periods  just  enumerated  involved  consider¬ 
able  bookkeeping  and  led  to  disputes,  so  that  rules  were  later  drawn 
up  to  regulate  future  trading  and  monthly  deliverv"  periods  were 
substituted.^^ 

A  marked  increase  in  future  trading  ensued  during  the  Civil  War 
when  there  was  a  stead}^  demand  for  oats  by  the  Quartermaster’s 
Department  of  the  United  States  Army.^^ 

It  is  true  that  speculation  lias  been  too  much  the  order  of  the  day,  and  buyers  and 
sellers  of  “long,”  “short,”  and  “spot”  have  passed  through  all  the  gradations  of 
fortune,  from  the  lower  to  the  higher  round,  and  in  many  instances  have  returned  to 
the  starting  point,  if  not  to  a  step  lower,  but  it  is  to  be  hoped  that  with  the  return  of 

^  Quoted  in  Taylor,  vol.  1,  p.  217. 

Alfio  eoufirmod  by  Taylor  from  newspaper  files,  op.  cit.,' Vol.  I,  p.  317. 

S’  Described  by  Taylor  as  follows:  As  the  grain  was  deliverable  on  contract  only  when  it  had  arrived  in 
Chicago,  and  as  the  number  of  days  required  to  bring  it  to  this  city  could  not  be  foretold  with  absolute 
certainty,  and  as  the  seller  desired  to  make  the  delivery  as  soon  as  his  grain  arrived  in  order  to  prevent 
demurrage  charges,  he  was  allowed  the.  “option”  of  making  a  tender  of  the  grain  in  fulfillment  of  his  contract 
on  any  bu.siness  day  during  the  specified  teim.  Thus  if  the  contract  was  “seller’s  option  five  days,”  the 
seller  could  make  the  tender  on  any  one  of  the  days  at  his  option,  but  must  make  it  on  the  fifth  day.  Grad¬ 
ually,  for  the  convenience  of  sellers,  numerous  “options’’  were  dealt  in,  “seller  10  days,”  “seller  15  days,” 
“seller  30  days, ’’“seller  first  half,”  or  “seller  last  half”  of  some  specified  month,  and  somewhat  later,  after 
grain  had  accumulated  in  Chicago  warehouses,  there  was  a  trade  in  “buyers’  options.”  These  differed 
from  “sellers’  options,”  only  in  this:  That  the  buyer  could  demand  delivery  of  the  grain  contracted  for  at  any 
time  during  the  life  of  the  contract,  but  must  take  it  and  pay  for  it  on  the  last  day  of  the  term.  The  right 
to  demand  delivery  at  any  time  was  a  valuable  one  to  a  shipper  of  grain,  and  therefore  a  “buyer’s  option” 
always  commanded  a  higher  premium,  depending  largely  upon  the  length  of  time  covered  by  the  contract 
(Vol.  II,  p.  .S97.) 

Interview  wdth  W.  H.  Rogers,  member  of  the  Board  of  Trade  since  1862. 

Annual  report  issued  1864,  p.  34:  “  The  shipments  of  oats,  during  the  year,  amount  to  9,909,175  bushels, 
which  is  more  than  three  times  the  amount  ever  before  shipped  from  this  city  in  a  single  year.  Not  only 
have  we  shipped  more  largely  by  Lake  than  during  any  previous  year  of  our  history,  but  there  is  not  a 
railioad  running  south,  southwest,  or  southeast  but  has  been  taxed  almost  to  its  utmost  capacity  in  for¬ 
warding  oats  to  the  various  armies  in  the  field.  The  principal  contracts  let  all  over  the  United  States  have 
beo]i  filled  chiefly  at  Chicago  by  our  own  merchants,  acting  either  as  principals  or  agents.”  Also  see  Taylor, 
Vol.  I,  p.  317. 


THE  CHICAGO  MARKET  AKD  THE  BOARD  OF  TRADE.  109 

1 

peace  this  fever  of  speculation  will  abate,  and  trade  will  be  conducted  on  a  more 
thoroughly  legitimate  basis.'*® 

After  dedicating  the  new  exchange  liall  in  1865  a  set  of  general 
rules  and  by-laws  was  adopted  which  incorporated  three  rules  for 
tlie  protection  of  buyers  and  sellers  operating  on  the  future-contract 
basis. 

(1)  The  rules  provided  that  ^^satisfactory  margins  may  be  de- 
]>ia tided  by  either  party,  not  to  exceed  10  per  cent  on  the  value 
tlie  property  bought  or  sold  on  the  day  such  margin  is  dema.nded, 
said  margin  to  be  deposited  with  the  treasurer  of  the  association 
unless  otherwise  agreed  upon.’’*^  Either  party  was  made  liable  to 
a  call  for  additional  margin  from  time  to  time  as  deemed  necessary 
from  the  condition  of  the  market.  In  fact,  this  initial  rule  embodied 
the  features  which  appear  in  greater  elaboration  in  Kule  XX  of  the 
C’hicago  board  to-day. 

(2)  On  ^Tailure  to  deliver  on  contracts’’  the  average  market 
price  of  the  next  business  day  was  to  be  used  to  determine  the  value 
of  the  property. 

(3)  The  third  rule  defined  the  time  limits  for  delivery  after  a 
“cah”  was  made. 

By  these  rules  the  exchange  formally  adopted  trading  in  futures 
as  a  regular  market  practice.  The  matter  of  adjusting  balances 
and  settlements,  especially  on  defaulted  contracts,  was  a  vexatious 
question  for  many  years.  Prior  to  1875 — 

it  was  in  the  power  of  combinations  or  of  an  individual,  under  circumstances  which  1 
were  found  quite  too  frequently  to  exist,  to  extort  damages  on  account  of  the  non-  ^ 
fulfillment  of  a  contract  entirely  out  of  ])roportion  to  the  damages  really  sustained,  j 
The  practice  of  manipulating  our  markets  to  effect  these  selfish  ends  had  in  some  | 
cases  developed  to  such  proportions  that  it  had  come  to  threaten  the  good  name  of'^ 
our  association  *  * 

In  1875  the  rules  applicable  to  the  deposit  of  margins  and  the 
adjustment  of  balances  were  modified  more  in  conformity  with 
present  practice  (see  Ch.  V,  sec.  17)  and  less  trouble  was  experienced. 

Opposition  to  future  trading. — Chicago  future*  traders  were 
first  called  upon  to  defend  their  practices  in  1867  when  certain  an¬ 
tagonistic  clauses  were  inserted  in  the'  warehouse  act  (presumably  hy 
representatives  of  the  elevator  interests  whose  operations  had  been 
condemned  by  exchange  traders) : 

All  contracts  for  the  sale  of  grain  for  future  delivery,  except  in  cases  where  the 
seller  is  the  owner  or  agent  of  the  owner  of  such  grain  at  the  time  of  making  the  con¬ 
tract  and  in  actual  possession  thereof,  are  hereby  declared  void  and  gambling  con¬ 
tracts,  and  all  money  paid  in  settlement  of  differences  on  any  such  contracts  may  be 
recovered' back  in  the  same  manner  as  other  money  lost  in  gambling. 

<9  Seventh  annual  statement,  p.  7. 

Published  in  appendix  to  annual  report,  April,  1869,  p.  1G3. 

«  Quoted  in  Taylor  Vol.  I,  p.  331. 

«  Directors’  report,  Jan.  1,  1876,  p.  23. 


# 


110  TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 

All  parties  to  any  such  gambling  contract  shall  be  deemed  guilty  of  a  misdemeanor, 
and  upon  conviction  thereof  shall  be  fined  one  thousand  dollars  and  imprisoned  not 
exceeding  one  year  in  the  county  jail,  and  one-half  of  said  fine  shall  go  to  the  informer, 
who  is  hereby  declared  to  be  a  competent  witness  on  the  trial  of  parties  indicted 
under  this  act/^ 

On  the  advice  of  counsel  these  sections  were  ignored  by  the  hoard 
members  and  trading  in  futures  j^roceeded  as  usual.  This  was  fol¬ 
lowed  by  the  spectacular  arrest  of  nine  traders  on  a  charge  of  gam- 
hlinof.'^^  Prosecution  was  withdrawn,  however,  and  the  sections  re- 
ferred  to  were  repealed  at  the  next  session  of  the  legislature.^® 

The  present  legal  status  of  future  trading  is  discussed  in  Volume 
V,  Chapter  VII. 

Corners."*^ — An  ineffectual  attempt  to  regulate  cornem  was  made 
in  1868  when  the  board  passed  the  following  resolution: 

Resolved,  That  the  practice  of  '‘corners,”  of  making  contracts  for  the  pui'chase  of  a 
commodity,  and  then  taking  measures  to  render  it  impossible  for  the  seller  to  fill  his 
contract,  for  the  purpose  of  extorting  money  from  him,  has  been  too  long  tolerated  by 
this  and  other  commercial  bodies  in  the  country  to  the  injury  and  discredit  of  legiti¬ 
mate  commerce;  that  these  transactions  are  essentially  improper  and  fraudulent, 
and  should  any  member  of  this  board  hereafter  engage  in  any  such  transactions,  the 
directors  should  take  measures  for  his  expulsion,  under  the  provisions  of  rule  5,  for 
the  preA'ention  of  improper  and  fraudulent  practices.^® 

Corners  were  also  prohibited  and  severely  penalized  by  the  law  of 
1874,  but  this  act  failed  of  enforcement.  According  to  Taylor,  there 
was  ^  ‘  almost  a  corner  a  month during  the  latter  half  of  1874.  No  less 
than  four  members  were  alluded  to  by  the  press  during  that  year  as 
violators  of  the  law  against  corners.-®  In  1875  the  rules  were  amended 
so  as  to  prevent  the  collection  of  extortionate  damages  on  defaulted 
contracts.®®  Since  that  date,  however,  corners  and  attempted  cor¬ 
ners  liavc  occurred  repeatedly^  on  the  Chicago  Board  of  Trade  without 
a  move  on  the  part  of  anyone  to  invoke  the  statute  of  1874.®^ 

The  history  of  the  anticorner  rule  at  the  close  of  1882  was  reviewed 
by  the  Chicago  Tribune  as  follows: 

The  first  attempt  at  preventing  the  reoccurrence  of  disastrous  corners  was  made  in 
1873.  The  rule  then  adopted  provided  substantially  that  the  committee  called  in  cases 
of  default  should  fix  the  price  by  reference  to  the  value  in  other  markets.  This  was 
found  to  be  unfair  to  the  buyer  of  property,  tending  to  an  undue  lowering  of  prices, 
and  July  24,  1879 — three  and  a  half  years  ago — the  board  adopted  the  well-known 
"Rule  27,”  after  having  A'oted  it  down  in  April,  1878.  That  rule  increased  the 

■n  Public  Laws  of  Illinois,  1867,  p.  181. 

Taylor,  Vol.  I,  p.  352. 

<6  Ibid.,  p.  352. 

For  detailed  discussion  of  economic  aspects  see  Vol.  V. 

<8  Taylor,  Vol.  I,  p.  371. 

Taylor,  Vol.  I,  p.  506. 

80  See  directors’  report,  year  ending  Dec.  31,  1875,  p.  23. 

81  See  in  this  connection  Wells  v.  McGeocli,  71  Wis.  196,  (1888),  in  which  the  Supreme  Court  of  'Wisconsin 
said:  “AYe  hai'e  no  doubt  the  county  court  ruled  coiTcctly  that  the  wheat  deal  of  1882  and  the  lard  deal 
of  1883  were  illegal  transactions  imder  the  statutes  of  the  State  of  Illinois.” 


THE  CHICAGO  MAIIKET  AND  THE  BOAKD  OF  TRADE. 


Ill 


power  of  the  committee  by  authorizing  them  to  take  into  consideration  (also)  the 
value  of  the  property  for  other  purposes,  meaning  its  value  as  determined  by  a 
demand  to  fill  contracts.  The  rule  was  equitable  enough  in  spirit,  and  was  interpreted 
fairly  enough  till  within  the  last  12  months.  *  *  * 

One  great  evil  connected  with  this  matter  has  been  the  holding  back  in  numerous 
cases,  refusing  to  cancel  trades,  because  a  committee  might  possibly  be  called,  and 
award  a  more  favorable  basis  of  settlement.  This  as  well  as  the  construction  of  the  rule 
by  committees,  involved  much  loss  to  innocent  traders.  Many  parties  lost  money 
standing  in  the  gap  on  deliveries  long  after  they  had  balanced  the  transaction  witli 
customers.  Nobody  was  certain  that  anyone  else  was  going  to  deliver  what  he  had 
agreed  to,  and  uncertainty  led  to  the  paying  of  rather  large  premiums  on  spot  stuff 
which  was  delivered  as  agreed,  the  demoralization  not  having  extended  to  this  class  of 
transactions. 

The  second  sense  of  the  board  seems  to  be  opposed  to  the  blotting  out  of  corner  rules. 
It  is  desirable  that  there  should  be  some  means  of  protection  accorded  for  men  who  arc 
not  to  blame  for  omitting  to  deliA'cr.  But  there  should  be  no  inducement  to  default 
deliberately.  *  *  *  52 

The  validity  of  the  statute  of  1874  with  reference  to  corners  was 
tested  in  1894  in  the  case  of  Cummings  v.  Foss.  Foss  was  a  member 
of  the  board  who  had  formed  a  syndicate  with  several  others,  in¬ 
cluding  Cummings,  whereby  they  expected  to  control  the  corn  market 
and  run  up  the  price. Foss,  Strong  &  Co.  were  given  powers  of 
attorney  by  several  of  the  parties  to  manage  and  control  the  contracts 
of  purchase.  The  agreement  was  as  follows: 

Grand  Pacific  Hotel, 

Chicago,  April  4,  18SS. 

This  agreement,  made  and  entered  into  this  4th  day  of  April,  1888,  between  C.  M  • 
Hartley,  Hall  &  Ross,  S.  B.  Walton,  R.  F.  Cummings,  Moore  &  Bushnell,  Union 
Grain  Co.,  O.  Barnard,  Curtis  &  Bowman,  D.  A.  Fredericks,  W.  8.  Rankin,  J.  Shonk- 
wiler  and  the  Rice  Elevator  Co.,  in  which  the  parties  herein  named  agi’ee  to  and  with 
each  other  to  form  a  sjmdicate,  for  the  purpose  of  buying  cash  corn  and  May  options 
in  corn  in  Chicago,  from  time  to  time  as  the  majority  may  decide;  each  of  the  above- 
named  parties  agree  to  advance  the  sum  of  $5,000,  for  each  full  share  or  a  fractional 
part  of  same  for  a  fraction  of  a  share,  by  cash  or  certified  check,  for  the  purpose  of  pro¬ 
tecting,  carrying  or  otherwise  handling  said  purchases  of  cash  corn  and  May  options 
in  corn  from  time  to  time,  it  being  further  agreed  that  C.  W.  Hartley,  Tim  Ross, 
H.  L.  Bushnell,  and  S.  A.  Brown  act  as  an  executive  committee  for  said  syndicate, 
and  that  we  shall  be  responsible  only  for  the  amounts  subscribed  by  each  of  us  from 
time  to  time;  that  all  gains  or  losses  shall  be  divided  pro  rata  to  each  share  or  a  fractional 
part  of  a  share;  that  said  executive  committee  shall  have  full  authority  to  act  for  us  and 
purchase  cash  corn  and  May  options,  and  sell  same  to  the  extent  of  the  authority  given 
to  them  by  us  from  time  to  time,  for  which  we  are  to  be  held  responsible  only  for  a 
share,  or  a  fractional  part  of  a  share  pro  rata.  A  majority  vote,  vive  voce,  or  telegraph, 
shall  constitute  valid  instructions. 

The  enterprise  was  unsuccessful  and  Foss  et  al.  became  plaintiff- 
appellants  in  an  action  before  the  Illinois  Afipellate  Court  for  the  First 
District,  “  to  recover  mone3^s  alleged  to  have  been  advanced,  and  serv- 


Quoted  in  Taylor  II,  pp.  GoO-051, 


M  40  Ill.  App.  521. 


^<40  Ill.  App.  52.3. 


112 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


ices  rendered  in  aid  of  such  a  combination/^  The  court  made  the 
following  finding  of  facts: 

^  *  all  the  immense  amount  of  corn  owned  by  these  parties  was  put  into  the  hands 

of  the  plaintiffs;  they  were  to  control  all,  and  thus  by  united  holding,  united  purchases, 
and  no  sales,  save  such  as  should  be  for  the  benefit  and  the  interest  of  all,  the  market 
was  to  be  controlled,  the  price  of  a  staple  commodity,  one  of  the  prime  necessities  of 
life,  enhanced,  and  it  was  expected  great  gains  would  be  made  by  the  parties  to  the 
combination,  while  he  who  had  corn  to  buy  for  food  would  be  compelled  to  pay,  not 
the  price  of  a  free  market,  but  the  sum  to  which,  by  such  combination,  such  united 
holding  and  withholding,  the  market  might  be  forced.  (40  Ill.  App.  530). 

It  was  held  that  there  had  been  created  a  combination  against 
])ublic  policy  which  was,  therefore,  void.  ‘'The  law,’^  said  the 
appellate  court,  “will  not  attempt  to  adjust  differences  which  arise 
out  of  transactions  it  condemns.’’ 

This  decision  was  affirmed  by  the  court  of  last  resort  in  the  State. 
The  lower  court  had  not  found  it  necessary  to  construe  the  anti¬ 
corner  law  of  1874  in  declaring  the  contracts  in  question  void  and 
unenforceable.  The  Supreme  Court  of  Illinois,  however,  while  holding 
that  there  was  a  combination  “to  advance  the  price  of  corn  beyond 
the  natural  market”  which  “the  law  condemns  as  against  public 
right  and  void,”  also  took  occasion  to  invoke  the  statute  of  1874: 

Our  statute  makes  it  a  penal  offense  to  “corner  the  market,  or  to  attempt  to  do  so,’^ 
in  relation  to  any  grain  or  other  commodity,  and  declares  all  contracts  made  for  that 
purpose  void.  (Rev.  Stat.  Sec.  130,  c.  38.)  We  are  unable  to  distinguish  the  combi¬ 
nation  between  these  parties,  as  found  by  the  appellate  court,  from  an  attempt  to 
corner  the  Chicago  market  in  relation  to  corn.  Practically,  it  is  that,  and  nothing 
else.^“ 

In  spite  of  court  decisions,  and  exchange  regulations,  corners  were 
effected  on  the  Board  of  Trade  during  practically  every  market  season, 
'ITe  decline  in  regular  (public)  storage  capacity  in  recent  years  has 
of  course  operated  to  the  advantage  of  market  manipulators.  The 
difficulties  of  the  situation  ajDpear  in  a  description  of  one  of  the 
1909  deals,  taken  from  Taylor’s  History:” 

The  Armour  and  Peavey  elevator  interests  were  long  large  lines  of  September  oats 
and  continued  buying  until  the  shorts  became  panic-stricken,  notAvithstanding  the 
largest  crop  ever  raised  had  just  been  harvested.  The  bull  leaders,  however,  bought 
the  cash  oats  as  fast  as  they  Avere  offered  in  the  sample  markets  and  buoyed  up  cash 
A'aliie.  During  the  last  few  days  of  September  the  situation  became  extremely  acute, 
and  prices  Avere  forced  up  rapidly,  the  shorts  paying  a  heavy  penalty  for  their  temerity 
in  staying  short.  Excitement  in  the  oats  pit  on  the  final  day  was  at  fever  heat.  The 
Peavey  and  Armour  interests  stood  pat  on  their  remaining  holdings  until  shorts  bid 
the  price  up  to  50  cents,  at  AAdiich  figure  they  Avere  accommodated.  Later  the  price 
eased  off  to  48  cents,  Avhere  it  closed  after  lluctuating  erratically  during  the  latter 
part  of  the  session.  All  the  trades  settled  up  in  good  shape,  there  being  no  defaults 
recorded.  Complaints  were  made  to  the  directors  of  the  board  of  this  eleventh  hour 
squeeze,  and  a  committee  was  appointed  to  investigate.  This  special  committee 


«  40  HI.  App.  .')32. 


•^30  N.  E.  Reporter,  .wo. 


Vol.  II,  p.  1148. 


113 


THE  CHICAGO  MARKET  AND  THE  BOARD  OF  TRADE. 

jeported  near  the  end  of  October,  but  made  no  recommendations  to  the  directors, 
merely  laying  before  them  the  information  they  had  got.  After  considering  the 
report  of  this  committee,  the  directors  posted  for  vote  of  the  members  an  amendment 
providing  for  the  expulsion  of  members  from  the  board  who  engineered  corners  or 
manipulated  the  markets,  but  this  ‘‘anticorner”  amendment  was  defeated,  and  so 
the  directors,  on  December  21,  as  an  example  of  their  disapproval  of  corners,  sus¬ 
pended  from  the  board  for  one  day  Mr.  George  E.  Marcy,  president  of  the  Armour 
Grain  Co.,  and  Mr.  James  Pettit,  president  of  the  Peavey  Elevdtor  Co. 

In  1911  there  was  adopted  a  drastic  amendment  to  Rule  23  designed 
to  protect  the  short  interests  in  a  market  manipulation. 

*  *  *  It  provided  that  the  principals  in  any  big  deal  on  the  board  of  trade 
be  allowed  to  collect  not  less  than  5  per  cent,  nor  more  than  10  per  cent  of  the  true 
'commercial  value  of  the  commodity  dealt  in,  thus  preventing  a  squeeze  when  con¬ 
ditions  did  not  justify  high  prices  and  giving  the  shorts  the  right  to  settle  at  the  fair, 
market  price,  plus  the  liquidated  damages  of  not  more  than  10  per  cent.  The  rule 
provided  that  the  settling  price  should  be  fixed  by  a  committee  of  three,  appointed 
by  the  president,  the  members  of  which  should  take  into  consideration  the  cash 
price  in  Chicago  on  the  last  day  of  the  month,  prices  in  other  markets  for  cash  grain, 
and  also  for  futures;  whereas,  theretofore,  the  rules  had  provided  that  the  average 
price  of  a  future  should  be  the  settling  price  for  the  day.®® 

This  is  the  rule  in  force  to-day.®^ 

Trading  in  privileges — puts  and  calls — indemnities — bids 
AND  OFFERS.®® — The  buying  and  selling  of  ''privileges/’  sometimes 
referred  to  as  "puts  and  calls/’  or  "indemnities/’  was  denied  recog¬ 
nition  in  the  very  rules  which  established  trading  in  futures  in  1865.®^ 
This  prohibition  was,  however,  dropped  from  the  rules  as  published 
in  1869.®2 

Such  trading  was  declared  unlawful  by  State  law  and  a  Federal 
court  in  1874.  The  law  of  1874  declared  that: 

Whoever  contracts  to  have  or  give  to  himself  or  another  the  option  to  sell  or  buy,  at 
a  future  time,  any  grain,  or  other  commodity,  stock  of  any  railroad  or  other  company, 
or  gold,  or  forestalls  the  market  by  spreading  false  rumors  to  influence  the  price  of 
commodities  therein,  or  corners  the  market,  or  attempts  to  do  so  in  relation  to  any 
of  such  commodities,  shall  be  fined  not  less  than  $10  nor  more  than  $1 ,000*  or  con¬ 
fined  in  the  county  jail  not  exceeding  one  year,  or  both;  and  all  contracts  made  in 
violation  of  this  section  shall  be  considered  gambling  contracts,  and  shall  be  void.®® 

In  Ex  parte  Young, decided  by  the  Federal  district  court  for  the 
northern  district  of  Illinois  (1874)  a  motion  was  made  by  an  assignee 
in  bankmptcy  to  expunge  certain  claims  derived  from  the  sale  of 

Taylor,  Vol.  II,  p.  1164. 

Rule  23,  sec.  1;  rules  of  the  Board  oT  Trade,  in  force  July  21,  1919. 

“  See  definition  on  p.  332. 

*'>  According  to  Taylor  (I,  p.  332)  the  last  paragraph  of  Rule  XI  was  as  follows:  “Privileges  bought  or 
sold  to  deliver  or  call  for  grain  or  other  property  by  members  of  the  Association  shall  not  be  recognized 
as  a  basiness  transaction  by  the  directors  or  committee  of  arbitration.” 

«  See  appendix  to  Annual  Report  of  vhe  Board  of  Trade  for  1869. 

Revised  Statutes,  Ill.,  1874,  p.  372. 

6  Bissell’s  Reports,  p.  53. 

108603°— 20— —8 


114 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


^ Splits”  Oil  the  ground  that  they  were  wager  contracts  and  so  void 
under  the  gaming  laws.  The  court  ruled  in  favor  of  the  assignee: 

"  *  *  It  seems  to  me  that  the  contracts  in  question  partake  of  all  the  character¬ 
istics  of  a  wager.  It  is  in  substance  an  assertion  by  the  seller  of  the  ‘‘put”  that  oats 
can  not  be  purchased  on  that  market  before  3  o’clock  p.  m.  of  the  30th  of  June  for 
less  than  41  cents  a  bushel,  and  an  undertaking  to  pay  the  difference  between  41 
cents  and  any  market  price.  If  he,  Chandler,^’^  sustains  the  price  at  41  cents  or  aboAn*, 
he  wins  the  half-cent  a  bushel  paid  for  the  “  put,  ”  because  the  holder  Avill  not  deliver, 
Avhile  if  the  price  goes  t)elowdhat  named  he  is  to  pay  the  difference.  This  is  prac¬ 
tically  the  contract. 

It  is  as  manifestly  a  bet  upon  the  future  price  of  the  grain  in  (question  as  any  which 
could  be  made  upon  the  speed  of  a  horse  or  the  turn  of  a  card.  The  evidence  in  this 
case  shows  that  in  nearly  all  the  cases  of  settlements  on  “put”  or  “option”  contracts 
the  grain  is  never  delivered,  nor  expected  to  be  delivered,  but  the  parties  simply 
pay  the  difference  as  settled  by  the  prices.  But,  if  that  were  not  so  in  all  cases,  it  i.s 
clear  that  in  this  case  no  delh'ery  of  the  grain  Avas  intended  by  these  “put”  holders, 
because  they  kneAV  that  Chandler  controlled  all  the  oats  in  the  market  and  fixed 
the  price,  and  that  their  only  expectation  for  success  depended  on  their  being  able 
to  break  the  market  before  their  time  for  deln’ery  expired.  -  *  * 

In  AA'liat  I  luiA’e  said  I  do  not  intend  to  A'indicate  Chandler.  His  conduct  Avas  as 
reprehensible  as  that  of  the  claimants.  All  A\'ere  engaged  in  an  immoral  and  illegal 
transaction,  and  this  court  ought  not  to  alloAv  its  poAvers  to  be  prostituted  to  the 
enforcement  of  these  contracts  for  either  party.  Money  lost  at  play  or  in  gaming 
can  not  be  recoA^ered  except  Avhere  an  action  is  given  by  statute,  but,  as  I  liaA'c 
already  intimated,  my  opinion  that  these  cases  are  Avithin  the  statute  of  this  State 
on  the  subject  of  gaming,  under  which  money  paid  may  be  recoA'ered  back,  I  shall 
allow  the  claimants  to  prove  their  claims  for  the  amounts  actually  paid  by  them 
respectHcly,  Avhich  is  a  half  cent  per  bushel  on  the  grain  named  on  their  tickets. 

The  statute  of  1874  in  its  application  to  ^^piits’^  and  calls”  was 
scarcely  enforced  at  all;  although  the  directors  of  the  board  liad 
adopted  at  least  one  resolution  to  prohibit  the  buying  or  selling  of 
Splits”  or  ^^calls”  on  the  exchange  floor.®®  However;  in  February, 
1885;  privilege  trading  was  placed  definitely  within  the  prohibitions 
of  the  statute  by  the  decision  of  the  Illinois  Supreme  Court  in  the 
case  of  Pearce  v.  Foote. 

Action  was  brought  to  recover  the  value  of  a  promissory  note  from 
the  assignee  of  a  broker  to  whom  the  note  had  been  transferred  in 
payment  of  losses  incurred  in  the  execution  of  an  optional  contract,” 
i.  e.;  one  involving  privilege  trading.  The  trial  court  held  that  the 
broker  was  a  ^Svinner”  within  the  statute  of  1874  (section  130  of 
the  Criminal  Code),  and  that  action  would  lie.  This  judgment  Avas 
affirmed .  on  subsequent  appeals  to  the  appellate  and  supreme 
courts  of  Illinois. 

The  opinion  of  the  supreme  court  served  to  define  more  clearly 
trading  in  ^ Options”  or  ”'puts  and  calls”  and  showed  the  illegitimate 
status  of  such  trading  in  Illinois  laAAX 


The  bankrupt, 


Taylor,  A’ol.  I,  p.  530. 


115 


THE  CHICAGO  MARKET  AXD  THE  BOARD  OF  TRADE. 

It  is  pliiin  that  uiidor  the  contract  between  plaintiff  and  the  firm  of  Hooker  &  Co., 
it  was  not  in  the  contemplation  of  the  parties  any  actual  purchases  or  sides  of  grain 
or  other  commodities  should  be  made  for  plaintiff,  or  on  his  behalf.  Indeed,  it  wa.s 
expre.ssly  agreed  none  should  bo  made.  All  the  speculating  that  was  to  ))e  done  was 
to  be  in  differences  in  options — or,  as  the  parties  termed  it,  '"betting  on  the  market.” 
Of  course  it  was  exj)ected  hy  the  parlies  that  such  purchases  and  sales  of  grain  or 
other  commodities  that  should  be  made,  were  to  be  made  oji  the  board  of  trade.  As 
was  said  by  this  court  in  Pixlej/  v.  Boynton,  79  Ill.  351,  the  true  idea  of  an  option  is 
what  are  called,  in  the  ])eculiar  language  of  the  dealers,  “puts”  and  “calls.”  A 
“])ut  ”  is  defined  to  be  the  “privilege  of  delivering  or  not  delivering”  the  thing  sold, 
and  a  “call”  is  defined  to  be  the  “privilege  of  calling  for  or  not  calling  for”  the  thing 
bought.  “Optional  contracts,”  in  this  sense,  are  usually  settled  by  adjusting  market 
value.s,  as  the  party  having  the  “option”  may  elect.  It  is  simply  a  mode  adopted 
for  speculating  in  differences  in  market  values  of  grain  or  other  commodities.  It 
must  have  been  in  this  sense  the  term  “option”  is  u.sed  in  the  statute. 

“  *  It  needs  no  illustration  to  make  it  apparent  the  contract  between 

plaintiff  and  Hooker  &  Co.,  as  the  trial  court  must  have  found  it  from  the  evidence, 
comes  exactly  within  the  meaning  of  section  130  of  the  Criminal  Code,  that  declares; 
“Whoever  contracts  to  have  or  to  give  to  himself  or  another  the  option  to  sell  or  buy 
at  a  future  time  any  grain  or  other  commodity,”  shall  be  subject  to  a  fine  or  imprison¬ 
ment,  and  “all  contracts  made  in  violation  of  this  section  shall  be  considered  gambling 
contracts,  and  shall  be  void,”  It  is  seen  this  statute  forbids  anyone  to  contract  to 
have,  or  to  give  to  himself,  or  to  contract  to  give  to  another,  the  privilege  to  deal  in 
options.  That  is  precisely  what  hlooker  &  Co.  did.  They  contracted  to  give  to 
plaintiff  the  privilege  to  deal  in  oj)tions  and  settle  with  them  upon  differences,  as 
indicated  or  determined  by  the  fluctuations  of  the  market.  That  is  one  of  the  offenses 
against  which  the  statute  is  leveled.  Of  course  the  party  who  contracts  to  liore  the 
option  is  equally  guilty  with  the  party  who  contracts  to  (jkc  it. 

*  *  *  Legithnate  transaction.-^  on  the  board  of  trade  are  of  the  utmost  importance 
in  c'ommerce.  Such  contracts,  whether  for  immediate  or  future  delivery,  are  valid 
in  law,  and  receive  its  sanction  and  all  the  support  that  can  be  giA'cn  to  them.  It  is 
only  against  unlawful  “gambling  contracts”  the  penalties  of  the  laws  are  denounced, 
and  no  subtle  finesse  of  construction  ought  to  be  adopted  to  defeat  the  end  it  is  to 
be  hoped  may  be  ultimately  accomplish ed.^''^ 

Another  resolution  forbidding  tlie  practice  was  adopted  by  the 
directory  of  1887  and  a  member  was  suspended  for  15  days  for  viola¬ 
tion  of  the  rule.  It  was  learned  that  members  were  resorting  to  the 
Open  Board  of  Trade  for  this  sort  of  trading,  where  it  was  then 
permitted.  The  regular  board  assumed  jurLsdiction  of  the  conduct 
of  members  even  when  operating  on  the  open  board  and  seven 
members  were  suspended  (for  from  20  to  90  days),  among  tliem, 
the  president  of  the  Open  Board. A  rule  declaring  irregular  any 
trades  made  after  adjournment  was  then  posted  and  adopted  by  the 
regular  board. 

Again,  in  1888,  when  tlie  directors  proceeded  to  suspend  three 
traders  for  dealing  in  puts  and  calls  ^‘it  was  found  that  it  would  be 
im])o.ssiblc  to  punish  all  without  disrupting  the  exchange.”  Accord¬ 
ingly,  twenty-nine  members  were  reprimanded,  the  suspended 


Pearce  v.  Foote,  11.'!  III.  2!-l. 
Idem,  p.  2I.j. 


Taylor,  vol.  II,  7!1. 
Idem. 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


lib 

members  were  restored  and  secret  committees  were  appointed  to 
report  further  violations,  which  were  to  be  punished  by  expulsion.’’^- 

However,  trading  in  privileges  off  the  exchange  floor,  it  seems, 
liad  never  entirely  ceased,  and  it  increased  with  the  failure  to  enforce 
the  rule.  Taylor,  in  commenting  upon  the  market  in  1892,  states 
that  ^Tor  a  time  the  market  was  dull  and  privilege  trading  grew  to 
such  an  extent  that  there  was  serious  consideration  of  a  project  to 
establish  a  clearing  house  especially  for  these  deals,  but  outside  the 
])oard  of  trade,  which  did  not  recognize  such  transactions.'^^ 

In  his  inaugural  address  in  1895  Mr.  Baker,  president  of  the  board, 
advocated  immediate  enforcement  of  the  rules  against  trading  in 
privileges: 

Trading  in  privileges  has  become  so  common  outside  of  exchange  hours  as  to  impair 
the  good  name  of  the  association.  These  transactions  are  outside  the  law  and  are 
distinctly  obnoxious  to  your  own  rules.  They  can  not  be  enforced  either  in  the  courts 
or  under  the  rules  of  this  b  3ard,  and  anybody  can  sue  at  any  time  and  recover  for  even 
consequential  losses.  The  Illinois  statute  prescribes  penalties  of  fine  and  imprison¬ 
ment  for  making  such  contracts,  and  specifically  declares  that  all  such  contracts 
“shall  be  considered  gambling  contracts  and  shall  be  void.”  It  is  claimed  that  the 
dull  state  of  trade  makes  these  transactions  necessary,  but  do  they  not  contribute  to 
an  important  extent  to  the  very  stagnation  you  complain  of?  By  coopering  prices 
within  a  iiarrow  limit  day  after  day,  do  you  not  discourage  busine.ss  that  you  would 
count  on  in  a  free  and  unrestricted  market?  The  risks  assumed  by  you  as  commission 
merchants  are  beyond  computation,  and  more  than  all  else  in  making  these  transactions 
we  violate  the  law.  I  sincerely  urge  that  means  may  be  taken  to  put  an  end  to  the 
practice  at  once.'^ 

The  posting  of  a  proposed  rule  to  define  trading  in  privileges  as 
uncommercial  conduct  provoked  a  sharp  controversy  within  the 
exchange  membership.  The  defeat  of  this  rule  was  followed  by  the 
resignation  of  two  directors  and  also  of  Mr.  Baker.  These  resigna¬ 
tions  were  withdrawn  and  the  directorate  finally  succeeded  in  enforc¬ 
ing  the  rule  against  trading  after  hours;  but  it  was  very  apparent 
that  a  substantial  number  of  traders  were  still  interested  in  privilege 
trading."^ 

Booth  v.  People. — -Trading  in  privileges  persisted  with  varying 
frec[uency  among  members  of  the  board  (usually  off  exchange)  for 
many  years.'^® 

In  1900  there  had  been  such  a  change  of  sentiment  with  regard  to 
this  trading  that  ‘‘by  a  vote  of  623  to  373  the  directors  were  em¬ 
powered  to  prevent  trading  in  puts  and  calls  and  to  suspend  or  expel 
a  member  found  dealing  in  them.  ”  This  ruling  might  have  had 

'2  Taylor,  vol.  11,  771. 

23  Vol.  II,  p.  856. 

"i*  Annual  report  for  1894,  p.  69. 

23  See  Taylor,  vol.  II,  895-897. 

2®  See  Taylor,  Vol.  II,  p.  977:  ‘'A  .somewhat  extensive  trading  in  privileges  had  again  grown  up  (1899) 
but  this  was  largely  confined  to  operations  after  the  close  of  the  board ’s  session  in  a  room  at  28  Sherman 
Street.” 

22  Taylor,  vol.  II,  p.  1002. 


THE  CHICAGO  MARKET  AND  THE  BOARD  OF  TRADE. 


117 


as  little  force  as  previous  pronouncements  had  it  not  been  for  a  de¬ 
cision  obtained  in  the  ’supreme  court  construing  the  law  of  1874  in 
application  to  a  specific  privilege  transaction.  It  had  been  previously 
alleged  by  opponents  of  regulation  that  privilege  trading  was  no  crime 
in  other  States  and  the  Chicago  rule  had  never  been  tested  in  the 
courts.  This  deficiency  was  now  met  in  the  case  of  Booth  v.  People.'^^ 
Phe  facts  involved  and  the  contentions  ‘of  the  plaintiff  in  error  were 
as  follows: 

The  plaintiff  in  error  was  convicted  and  adjudged  to  pay  a  fine  of  $100  under 
an  indictment  which  charged  that  he,  on  the  16th  day  of  August,  1899,  in  said 
county  of  Cook,  in  the  State  of  Illinois,  aforesaid,  unlawfully  did  contract  in 
writing  with  the  Weare  Commission  Company,  a  corporation,  to  then  and  there  have 
to  himself,  to  wit,  to  said  Alfred  V.  Booth,  a  certain  o])tion  to  buy  at  a  future  time, 
to  wit,  on  or  before  the  26th  day  of  August,  1899,  a  certain  commodity,  to  wit,  grain, 
to  Avit,  10,000  bushels  of  corn,  from  the  said  Weare  Commission  Company,  a  corpora¬ 
tion  as  aforesaid,  which  said  contract  is  in  the  words  and  figures  as  follows,  to  wit: 

‘‘Alfred  V.  Booth,  Grain  and  Provision  Broker. 

“Chicago,  Aug.  16,  1899. 

“Sept.  Corn,  1899. 

“10  Weare  Com.  Co.  C  31  1-2  Paid. 

“Good  till  close  of  change.  Sat.,  Aug.  26,  1899. 

Weare  C.  Co. 

J.  J.  C.,” 

— contrary  to  the  statute,  and  against  the  peace  and  dignity  of  the  same  people  of 
the  State  of  Illinois.  The  evidence  explained  the  Avriting  set  out  in  the  indictment 
to  constitute  an  agreement  giving  defendant  the  option  to  buy  10,000  bushels  of  corn, 
at  31^  cents  per  bushel,  from  the  Weare  Commission  Company,  at  any  time  withim 
10  days  after  the  16th  day  of  August,  1899.  The  allegations  of  fact  set  forth  in  The 
indictment  were  fully  established  by  the  evidence. 

*  *  *  Counsel  for  defendant  in  error  do  not  question  the  position  thus  taken 
by  counsel  for  plaintiff  in  error  as  to  the  facts  proven  on  the  hearing.  Counsel  for 
plaintiff  in  error  admits  the  facts  so  charged  in  the  indictment,  and  established  by 
the  evidence  in  support  thereof,  justified  the  conviction,  under  the  provisions  of 
section  130  of  the  Criminal  Code,  as  interpreted  by  this  court  in  Schneider  v.  Turner, 
130  Ill.  28,  22  N.  E.  497,  6  L.  E.  A.  164,  but  insists — First,  said  section  130  is  in  con¬ 
travention  of,  the  provision  incorporated  in  the  Constitution  of  the  United  States, 
and  also  in  the  constitution  of  the  State  of  Illinois,  that  “no  person  shall  be  deprived 
of  life,  liberty,  or  property  without  due  process  of  laAv;”  and,  second,  that  said  section 
is  violative  of  the  pro\dsion  of  section  1  of  the  Fourteenth  amendment  of  the  Constitu¬ 
tion  of  the  United  States,  which  provides  that  no  State  shall  “deny  to  any  person 
within  its  jurisdiction  the  equal  protection  of  the  laAvs.” 

The  court  affirmed  the  validity  of  the  statute  even  though  it 
might  ‘infringe  in  a  degree  upon  the  property  rights  of  citizens.” 

*  *  *  The  prohibition  of  the  right  to  enter  into  contracts  Avhich  do  not  contem- 
l>late  the  creation  of  an  obligation  on  the  part  of  one  of  the  contracting  parties  to  accept 
and  pay  for  the  commodity  which  is  the  purported  subject  matter  of  the  contract, 
but  only  to  invest  him  Avith  the  option  or  privilege  to  demand  the  other  contracting 
party  shall  deliver  him  the  grain  if  he  desires  to  purchase  it,  tends  materially  to  the 
suppression  of  the  very  eAul  of  gambling  in  grain  options  AAdiich  it  Avas  the  legislative 


ra  57  N.  E,  798  (Ill.,  1900). 


118 


TERMINAL  GRATIS  MARIvETS  AND  EXCHANGES. 


intent  to  extirpate,  for  the  reason  such  evil  injuriously  affected  the  welfare  and  safety 
of  the  public.  The  denial  of  the  right  to  make  such  contracts  tended  directly  to 
advance  the  end  the  legislature  had  in  view,  and  was  not  an  inappropriate  measure 
of  attack  on  the  evil  intended  to  be  eradicated.  So  far  as  that  point  is  concerned  the 
act  must  be  deemed  a  ^'alid  law  of  the  land,  and  as  such  must  be  enforced,  though  it 
infringe  in  a  degree  upon  the  property  rights  of  citizens.  To  that  extent  private  right 
must  be  deemed  secondary  to  the  public  good. 

As  to  the  allegation  that  equal  protection  of  the  laws  was  denied 
the  court  pointed  out: 


The  prohibition  need  not  embrace  all  contracts  for  options  to  buy  or  sell,  but  only 
all  of  such  contracts  as  lie  at  the  root  of  the  evil  which  threatens  the  public  safety 
and  welfare. 

The  prevailing  niajority  was  now  opposed  to  privilege  trading  in 
Chicao-o  and  the  bulk  of  such  transactions  were  carried  on  in  Mil- 

o 

waukee  by  telegraph."'’  In  1903  a  vigorous  attempt  was  made  to 
secure  the  enactment  of  legislation  favorable  to  trades  in  privileges. 
A  sharp  division  occurred  on  the  board  in  which  the  directorate  ap¬ 
peared  as  advocates  of  the  existing  law  whereas  those  in  favor  of  its 
repeal  obtained  a  petition  with  1,000  signatures  'Avhich  was  for¬ 
warded  to  the  legislature  by  telegraph.’’'^'’  To  quote  from  Taylor: 
'‘'With  the  Board  of  Trade  thus  divided  it  is  not  surprising  that  no 
important  legislation  relative  to  the  board  was  enacted.” 

The  question  of  privilege  trading  continued  to  appear  as  a  peren¬ 
nial  dispute.*^  Such  a  method  of  trading  was  defended  by  the  presi¬ 
dent  of  the  board  in  1900.^-  However,  an  amendment  was  approved 
by  the  directorate  and  adopted  in  that  year,  which  prohibited  trading 
in  privileges  in  outside  markets  based  on  Chicago  receipts  (applying 
especially  to  Milwaukee).^'’  This  position  was  warranted  by  addi¬ 
tional  court  decisions  in  support  of  the  act  of  1874. 

Indemnities. — To  meet  the  demands  of  advocates  of  privilege 
trading — especially  the  small  traders — a  committee  of  the  board 
outlined  a  new  scheme  in  190()  which  met  the  approval  of  counsel  as 
not  prohibited  by  the  law  of  1874.  This  scheme  proposed  certain 
contracts  to  be  known  as  indemnity  of  sale  or  indemnity  of  purchase 
on  the  theory  that  there  would  be  no  implied  wager'as  to  the  course 
of  the  market  but  rather  a  contract  made  to  protect  specific  future 
trades  from  loss  through  price  fluctuations.  The  contracts  were  to 
terminate  at  the  close  of  the  regular  session  of  the  exchange  on  tlie 
day  following  the  date  of  issuance.  Mdien  the  holder  of  cither  form 
of  contract  should  elect  to  make  a  demand  on  account  of  such 
contract  he  must  make  a  sale  to  (or  purchase  of)  the  maker  of  the 
contract  at  the  regular  closing  price  and  the  market  difference  thus 
determined  was  to  be  immediately  payable. 


79  Taylor,  op.  cit.,  Vol.  II,  p.  1033. 
to  Idem,  p.  105S. 

St  Idem,  pp.  1081  and  1088. 


82  Idem,  p.  1100. 

83  Rule  IV,  sec.  8,  rules  in  force  June  1, 1907. 


I 


THE  CHICAGO  MARKET  AKD  THE  BOARD  OF  TRADE. 


119 


The  rule  in  detail  was  as  follows: 

Six'.  10.  Any  member  or  firm,  or  corporation,  making  or  receiving  contracts  of 
indemnity,  shall  confirm  the  same  by  memorandimis  through  the  clearing  house  in 
sanu?  manner  and  under  the  same  regulations  and  requirements  as  are  provided  for 
contracts  of  purchase  and  sale  in  and  by  the  other  sections  of  this  rule. 

Sec.  20.  In  the  absence  of  special  agreements  in  relation  thereto  contracts  of  in¬ 
demnity  shall  be  understood  to  be  in  substance  in  the  following  forms  and  terms; 

INDEMNITY  OP  SALE. 

‘'Chicago, - ,  190 — , 

■‘In  consideration  of  the  receipt  of - dollars,  I  hereby  agree  to  indemnify - - 

and  save  him  harmless  from  loss  on  the  sale  of - bushels  of  Mdieat  for - delivery 

through  an  advance  in  the  market  to  above  the  price  of - cents  per  bushel.” 

Tliis  contract  terminates  at  the  close  of  the  exchange  on  the  regular  business  session 
following  the  date  hereof.  Any  and  all  claims  for  payment  of  indemnity  hereunder 
must ‘be  made  and  established  in  the  manner  and  in  accordance  with  the  rules  and 
regulations  of  the  exchange  providing  therefor  and  relating  thereto. 

“indemnity  of  PUnCHASE.  ' 

“Til  consideration  of  the  receipt  of  — —  dollars,  I  hereby  agree  to  indemnify - - 

and  save  him  harmless  from  loss  on  the  purchase  of  • — —  bushels  of  Mdieat  for  delivery 
through  a  decline  in  the  market  to  below  the  price  of - cents  per  bushel.” 

This  contract  terminates  at  the  close  of  the  exchange  on  the  regular  business  session 
following  the  date  hereof.  Any  and  all  claims  for  payment  of  indemnity  hereunder 
must  be  made  and  established  in  the  manner  and  in  accordance  -with  the  rules  and 
regulations  of  the  exchange  providing  therefor  and  relating  thereto. 

Sec.  21.  'When  the  holder  of  a  contract  of  indemnity  of  purchase  desires  to  make 
a  demand  on  account  of  said  contract,  he  shall  so  notify  the  maker  of  said  contract  at 
or  before  the  close  of  the  session  on  the  day  on  which  said  contract  terminates;  he  shall 
also  notify  him  ndiether  his  demand  extends  to  all  the  property  covered  by  the  con¬ 
tract,  and  if  apart  only,  he  shall  name  such  part;  he  shall  sell  to  the  maker  of  such 
contract  and  the  maker  of  such  contract  shall  buy  from  him  all  or  such  part  of 
such  property  at  the  oflicial  closing  price  of  the  exchange  of  that  date.  Any  loss 
between  such  closing  price  and  the  price  named  in  the  contract  of  indemnity  shall  lie 
due  and  payable  by  the  maker  of  the  contract  at  once  and  shall  be  in  full  of  all  claims 
under  such  contract. 

rrovided,  lioicever,  That  should  the  maker  of  said  contract  refuse  to  so  buy  from 
the  holder  of  said  contract  such  property  as  hereinbefore  provided,  then  the  holder 
of  such  contract  shall  during  the  first  hour  of  the  next  session  of  the  exchange  sell  the 
same  in  the  open  market  “for  account  of  ndioni  it  may  concern;”  he  shall  at  onci; 
notify  the  maker  of  said  contract  of  said  sale,  the  price,  the  parties  to  whom  sold,  and 
the  loss  shown  beDveen  the  price  or  prices  of  such  sale  and  the  price  named  in  tlu‘ 
contract  of  indemnity  shall  then  be  due  him  from  the  maker  of  said  contract  and  shall 
bo  payable  at  once. 

When  the  holder  of  a  contract  of  indemnity  of  sale  desires  to  make  a  demand  on 
account  of  said  contract  he  shall  so  notify  the  maker  of  said  contract  at  or  before  the 
close  of  the  session  on  the  dav  on  ndiich.said  contract  terminates;  he  shall  also  notif\' 
him  whether  his  demand  extends  to  all  the  property  covered  by  the  contract  and 
if  a  part  only,  he  shall  name  such  part;  he  shall  buy  from  the  maker  of  such  contract 
and  the  maker  of  such  contract  shall  .sell  to  him  all  or  such  part  of  such  property 
at  the  oflicial  closing  price  of  that  date.  Any  loss  beHveen  such  closing  price  and  the 
price  named  in  the  contract  of  indemnity  shall  be  due  and  payable  by  the  maker  of 
the  contract  at  once  and  shall  be  in  full  of  all  claims  under  such  contract 


120 


TERMINAL  GRAIN  AIARKETS  AND  EXCHANGES. 


Provided,  however,  That  should  the  maker  of  said  contract  refuse  to  so  sell  to  the  holder 
of  said  contract  such  property  as  hereinbefore  provided,  then  the  holder  of  such 
contract  shall  during  the  first  hour  of  the  next  session  of  the  exchange  buy  the  same 
in  the  open  market  for  account  of  “whom  it  may  concern;”  he  shall  at  once  notify 
the  maker  of  said  contract  of  said  purchase,  the  price,  the  parties  of  whom  bought,  and 
the  loss  shown  between  the  price  or  prices  of  such  purchase  and  the  price  named  in 
the  contract  of  indemnity  shall  then  be  due  him  from  the  maker  of  said  contract 
and  shall  be  payable  at  once.^ 

The  above  indemnity  rule  was  in  force  until  1910.  In  that  year 
the  board  was  under  Federal  investigation,  and  for  various  reasons 
tlie  directors  voted  to  abolish  such  trading  as  being  substantially 
identical  with  that  in  ^‘puts’^  and  “calls.”  To  quote  from  Taylor: 

A  lively  controversy  immediately  arose  over  the  amendment  recommended  by  the 
directors,  and  John  Hill,  jr.,  announced  a  few  days  later  that  unless  trading  in  in¬ 
demnities  was  no  longer  practiced,  he  would  ask  the  courts  to  stop  it.  The*next 
day  most  of  the  big  houses  agreed  to  discontinue  the  objectionable  form  of  trading, 
and  after  a  consultation  Avith  Attorney  H.  S.  Robbins  the  directors  voted  to  abolish 
it,  the  new  rule  to  take  effect  immediately.  However,  in  September  an  amendment 
was  passed  by  a  vote  of  550  to  105  providing  for  trading  in  indemnities  under  cer¬ 
tain  restrictions  and  was  said  to  be  legally  sound. 

The  restriction  made  was  to  insert  in  ettch  indemnity  contract 
and  confirmation  of  the  same  a  stiiiulation  that  “the  said  indemnity 
against  loss  is  bought  to  protect  an  existing  and  legitimate  insurable 
interest  in  the  commodities  forming  the  subject  matter  of  this  risk 
not  otherwise  protected  by  contract  made  under  this  rule.®®  It  fol¬ 
lowed  that  dealers  in  “indemnities”  who  had  had  no  “existing  and 
legitimate  insurable  interest”  were  engaged  in  gambling  and  nothing 
else. 

So  the  rule  stood  until  the  legislative  session  of  1913.  In  that 
year,  supported  by  a  majority  of  the  Board  of  Trade,®^  the  Illinois 
Legislature  passed  an  amendment  to  the  law  of  1874  whereby  such 
contracts  were  forbidden  only — 

^  *  where  it  is  at  the  time  of  making  such  contract  intended  by  both  parties 

thereto  that  the  option  whenever  exercised  or  the  contract  resulting  therefrom  shall 
be  settled,  not  by  the  receipt  or  delivery  of  such  property,  but  by  the  payment  only 
of  differences  in  prices  thereof.  “  * 


Lhider  this  sanction  the  board  immediately  adopted  the  present 
rule  which  authorizes  trading  in  “bids”  and  “offers.”  Under  this 
rule  the  trader  agrees  to  buy  or  sell  a  given  quantity  at  a  given 
price  subject  to  deferred  acceptance  prior  to  a  given  date.  (See 
Ch.  V,  sec.  17.)®® 


Rules  ot  the  boaixl  in  force  June  1,  1907,  p.  52. 

^  Vol.  II,  p.  1155. 

Rules  of  the  board  in  force  Feb.  10,  1911,  pp.  5G  and  57. 

Taylor,  op.  cit.,  Vol.  II,  p.  1188. 

**8  Laws  of  Illinois,  1913,  p.  256. 

88  Rules  of  the  board  in  force  April  25,  1914,  pp.  59-GO.  (See  Vol.  V  for  detailed  discussion.) 


THE  CHICAGO  MARKET  AND  THE  BOARD  OF  TRADE. 


121 


No  qualifying  definitions  with  respect  to  ''legitimate  trading 
interest’^  were  inserted  in  the  new  rule.  Commissions  of  5  per  cent 
cliarged  to  nonmembers  and  3  per  cent  charged  to  members  are 
allowed,  based  on  the  consideration  paid  or  received. 

Section  10.  The  quotation  service  and  the  bucketshops. 

Interchange  of  market  quotations  with  other  cash  and  speculative 
markets  began  prior  to  1860.^*^  The  telegi'aphic  quotation  service  has 
always  been  fundamental  to  the  futures  market.  Beginning  with 
daily  telegraphic  reports  posted  on  the  exchange  bulletins  each  day, 
the  system  has  been  extended  until  to-day,  during  exchange  hours,  it 
amounts  to  a  practically  continuous  transmission  of  prices  from  the 
Chicago  pits  to  the  markets  of  the  world.  The  invention  of  the 
"ticker”  shortly  before  1880  accelerated  this  development.  The 
groAvth  of  the  system  has  been  well  described  in  an  opinion  of  th« 
Illinois  Supreme  Court: 

For  many  years  prior  to  August,  1883,  the  board  of  trade  permitted  iheM’estern  Union 
Telegraph  Co.,  by  its  agents  and  servants  in  that  behalf,  to  occupy  and  use  its  ex¬ 
change  hall,  and  there  collect  and  transmit,  without  any  restrictions  whatever,  reports 
of  the  dealings,  fluctuations,  and  changes  of  the  market  on  the  board.  This  informa¬ 
tion  was  sent  by  telegraph  throughout  the  country,  and  delivered  without  discrim¬ 
ination  to  all  persons  who  desired  and  would  pay  for  the  same.  There  were  numerous 
customers  of  this  commercial  news  department  of  the  business  of  the  telegraph  com¬ 
pany,  and  they  were  scattered  over  the  land,  wherever  the  business  of  buying  and 
selling  grain  and  provisions  was  followed.  The  tVestern  Union  Telegraph  Co.  then 
had,  and  still  has,  a  lease  upon  and  control  of  the  Gold  &  Stock  Telegraph  Co.,  which 
latter  corporation,  in  turn,  had  and  has  a  mo\.opoly  of  the 'telegraphic  instruments 
known  as  “tickers.”  Telegraphic  circuits  \tere  established  by  the  Western  Union 
‘Telegraph  Co.  in  Chicago,  and  in  other  principal  cities,  and,  by  means  of  Morse  in¬ 
struments  and  these  tickers,  market  infoimation  passed  to  every  office  and  place  of 
business  connected  by  wire  wdth  one  oi  these  circuits,  and  was  automatically  regis¬ 
tered,  so  that  every  merchant  or  dealer  provided  with  these  instrumentalities, 
wherever  his  place  of  business  might  be,  was  instantaneously,  and  from  minute  to 
minute,  and  from  hour  to  houi,  during  the  business  sessions  of  the  board  of  trade, 
informed  of  all  fluctuations  and  changes  in  the  market  prices  of  grain  and  other  prod¬ 
ucts  as  they  occurred.^^ 

It  is  notable  that  prior  to  1884  no  revenue  was  derNed  from  the 
distribution  of  market  quotations.--  The  report  for  that  year,  how¬ 
ever,  showed  that  the  quotation  department  which  had  been  organ¬ 
ized  to  conduct  this  service  received  $11,201  and  disbursed  $9,224.75, 
giving  the  board  a  net  income  of  $1,976.25  from  its  quotations. 

This  was  made  possible  by  the  adoption  of  a  rule  in  1883  author¬ 
izing  the  directors  to: 

Provide  an  efficient  corps  of  market  reporters,  whose  duty  it  shall  be  *  *  *  to 
ascertain  the  current  market  prices  of  such  commodities  as  are  dealt  in  by  members 
of  the  association  during  the  hours  for  trading  prescribed  by  these  rules,  the  reporting 


On  June  17,  1S58,  the  board  voted  to  have  market  reports  from  Oswego,  Buffalo,  Montreal,  and  Xew 
York,  posted  on  the  bulletin  board  daily  at  noon.  (Taylor,  Vol.  I,  p.  241.) 

N.  Y.  and  Chi.  Grain  &  Stock  Exchange  v.  Board  of  Trade,  19  N.  E.  837). 


122 


TERIVriXAL  GRATX  MARKETS  AXD  EXCHANGES. 


of  which  may  be  desired  by  any  considerable  number  of  correspondents,  and  also  all 
changes  which  may  occur  in  the  same  from  time  to  time;  such  reports  to  be  frequently 
communicated  by  telegraph  to  such  approved  correspondents,  in  the  city  of  Chicago 
or  elsewhere,  as  may  desire  the  same  and  are  willing  to  pay  necessary  charges  for 
compiling  and  transmitting  them  by  telegraph,  under  such  arrangements  as  may  be 
made  by  the  board  of  directors  with  any  telegraph  company  for  the  performance  of  the 
service  of  transmission. 

The  methods  followed  in  distributing  these  quotations  are  well 
knowji  and  are  described  in  a  comparative  way  in  Chapter  VIL  The 
controversies  which  arose  as  to  the  property  interest  in  these  quota¬ 
tions  possessed  by  the  board,  their  right  to  control  the  distribution 
of  price  information  or  to  withhold  it,  and  the  effect  of  these  contro¬ 
versies  upon  the  maintenance  of  a  futures  market  as  a  legitimate 
business  enterprise  are  discussed  below.  All  of  these  c|uestions  were 
raised  in  the  prolonged  fight  against  bucketshops,  which  has  only 
recently  come  to  a  close. 

The  AXTiBUCKETsiioP  CRUSADE. — Bucketsliops  began  to  operate 
in  Chicago  in  1878.®^  Many  attempts  were  made  tlirough  the  eighties 
to  obtain  court  orders  restraining  them  from  using  board  of  trade 
quotations,  but  without  permanent  success.®^  The  loss  of  country 
orders  for  futures  through  the  bucketshop  competition  was  so  keenly 
felt  at  times  that  there  were  several  movements  to  reduce  the  scale  of 
commission  charges, and  the  penalty  for  cutting  commission  rates  was 
in  fact  repealed  in  1885.  ^^One  result  of  the  action,’^  says  Taylor, 
‘Avas  to  greatl}"  lessen  the  value  of  memberships  and  toward  the 
close  of  the  year  it  was  said  that  30  memberships  were  for  sale,  mostly 
by  men  who  traded  through  brokers,  as  the  repeal  of  the  rule  practi- 
callv  destroved  the  differential  w^hich  had  hitherto  existed  in  the 

^  kJ  , 

commission  charged  to  members  and  nonmembers.  ' ’ 

A  statute  passed  by  the  Illinois  Legislature  in  1887  furnished  an 
entering  wedge  for  the  fight  against  these  organizations.  This  law 
imposed  severe  penalties  against  gambling  in  market  fluctuations. 

The  first  step  taken  by  the  board  in  the  antibiicketshop  crusade 
which  followed  this  legislation  was  do  authorize  the  establishment  of 
a  department  of  market  records  and  reports  (1887).  The  resolution 
adopted  for  this  purpose  recited  also  that — 

“The  records  and  reports  which  may  be  prepared  and  compiled  by  said  department 
shall  be  considered  and  treated  as  portions  of  the  ofhcial  records  of  the  association, 
and  the  said  records,  or  parts  thereof,  may  be  disseminated  in  such  manner  and  under 
such  conditions  and  restrictions  as  may  be  prescribed  by  the  board  of  directors.”  Fol- 

*>2  Taylor,  op.  cit.,  p.  565. 

The  annual  report  for  1883  slates;  *  *  There  were  also  several  suits  pending,  resulting  from  an 
endeavor  to  suppress  those  monstrosities  called  ‘Riicket  shops.’  These  suits  have  been  concluded  during 
the  year,  resulting  in  establishing  the  right  of  this  board  to  control  its  own  market  quotations.  Under 
this  right,  now  clearly  defined,  your  directors  have  entered  into  negotiations  with  the  ^'arious  tolegra}>h 
companies,  to  furnish  them  with  our  market  quotations,  under  such  I'cstrictions  as  will  enable  them  to 
dictate  where  and  to  whom  the  market  quotations  shall  be  sent.  *  * 

S'*  t-’ce  Taylor,  op.  cit.,  pp.  6-18,  663. 

Idem,  p.  719. 


123 


THE  CHICAGO  MARKET  AXI)  THE  BOARD  OF  TRADE. 

lowing  this  action,  President  Wright  inaugurated  a  still  more  active  campaign  against 
the  bucket  shoj^s.  He  first  persuaded  the  Western  Union  Telegraph  Co.  to  agree  to 
take  its  wires  out  of  all  bucket  shops,  and  next  made  the  same  proposition  to  the  Postal 
Telegraph  Co.  and  the  Baltimore  &  Ohio  Co.  They  refused  to  comply,  and  there 
was  great  excitement  on  change  when  the  instruments  of  these  two  companies  were 
literally  thrown''out  of  the  board  of  trade  building.  Both  companies  came  to  terms 
immediately;  their  wires  were  taken  from  the  bucket  shops,  and  they  were  reinstated 
on  the  exchange.  At  the  close  of  the  day  there  was  not  a  bucket  shop  within  the 
Chicago  circuit  which  had  an  excuse  to  live.  Action  was  also  taken  at  Cincinnati, 
St.  Louis,  and  Kansas  City,  and  the  Chicago  city  authorities  cooperated  by  cutting 
all  bucket-shop  wires  which  w’'erc  above  ground. 

As  a  result  the  directors  confidently  reported  in  January,.  1S8S: 

■K-  w’itnessed  the  practical  extinction  of  the  bucket-shop 

evil  in  Chicago  and  the  South  and  West.  The  evil  is  also  greatly  mitigated  in  the 
East  and  in  the  iwovinces.  This  has  all  been  brought  about  by  the  cooperation  of  the 
telegraph  companies  with  other  agencies,  and  without  the  aid  of  the  courts  of  justice. 
Several  of  these  courts  still  hamper  the  board  of  trade  and  the  telegraph  companies 
with  their  injunctions,  but  the  w'ork  of  suppression  hasstillgone  forward  *  ^  *  'J' 

Yet  the  success  obtained  by  President  Wright  in  1887  was  short¬ 
lived.  The  secretary  of  the  board  in  his  annual  report  two  years 
later  stated  that: 


*  *  *  The  blighting  and  pernicious  influence  of  the  bucket  shops  has  been 
apparent  throughout  the  year.  IMany  persons  from  all  parts  of  the  country  have  been 
decoyed  by  their  plausible  pretensions,  only  to  meet  wdth  financial  destruction. 
This  business,  or  rather  this  gauzy  pretension,  has  deluded  thousands  and  spread 
demoralization  over  every  man  and  industry  which  it  has  touched.  It  is  an  unmiti¬ 
gated  evil,  and  thrives  not  upon  the  receipts  and  shipments  of  commodities,  upon 
the  movement  or  carrying  of  merchandise,  but  solely  upon  (piotalions  from  bona  fide 
markets,  posted  upon  blackboards. 


The  public  interest. in  exchange  quotations. — A  question  of 
law  which  was  fundamental  to  the  whole  agitation — ami  wdiich  is 
not  fully  settled  to-day — was  placed  before  the  Supreme  Court  of 
Illinois  in  1889.  Granting  that  the  board  was  within  its  rio’hts  in 
cutting  off  quotations  from  concerns  doing  an  illegal  business,  and 
Avhose  existence  depended  upon  an  illegal  use  of  such  quotations,  would 
it  be  warranted  in  withholding  them  from  any  applicant  whatso¬ 
ever  on  the  ground  that  they  were  private  property  or,  at  least,  tlnit 
their  transmission  was  a  wholly  voluntary  aiid  private  affair  ? 

The  New  Aork  &  Chicago  Grain  &  Stock  Exchange,  which  figured 
in  this  case,  was  not  demonstrably  a  bucketsho]).  It  was  “organ¬ 
ized  under  the  laws  of  the  State  of  Illinois  for  the  purpose  of  doing 
business  in  buying  and  selling  grain  on  commission;  and  on  the  29tii 
of  April,  1885,  its  place  of  business  was  at  No.  140  Monroe  Street, 
Chicago,  and  it  had  in  use  at  said  place,  in  its  business  of  bindng  and 
selling  grain  on  commission,  one  Morse  instrument  and  two  tickers, 


'6  Taylor,  Vol.  IJ,  p.  744. 

”  Report  for  calendar  year  1SS7,  p.  .59. 

•8  Chicago  Board  of  Trade,  report  for  year  endin  '  Dec.  31,  1SS\  p.  31. 


124  TERMINAL  GRAIN  AIARKETS  AND  EXCHANGES.  | 

which  were  connected  with  the  wires  of  the  Western  Union  Telegraph  i 
Co.,  and  by  means  of  which  the  market  information  in  relation  to 
the  changes  and  fluctuations  of  the  market  on  the  Board  of  Trade 
of  C'hicago  was  transmitted  and  delivered  to  it  instantaneously  and  | 
continuously  during  business  hours,  and  which  information  it  was  ] 
using  in  and  about  its  business.  *  *  *  I 

A  move  on  the  part  of  the  board  of  trade  to  remove  the  market 
and  telegraph  instruments  from  the  offlce  of  this  concern  was  pre-  | 

vented  by  a  preliminary  injunction  issued  by  the  circuit  court  of  ; 

(hok  County.  i 

It  was  admitted  that  the  business  the  appellant  was  doing  did  not 
violate  the  law.  The  board  rather  asserted  its  own  private  right  to 
control  the  quotations: 

The  contention  of  the  board  of  trade  is  that  it  is  strictly  a  private  corporation,  and 
that  both  the  individual  and  aggregate  business  of  its  members  is  essentially  private 
business,  and  that  the  market  news  and  statistics  collected  and  compiled  at  the  expense 
of  the  association  are  the  private  property  of  the  association,  and  that  it  has  a  legal 
right  to  control  such  market  news  and  statistics  and  determine  what  telegraphic  , 
dispatches  touching  the  same  it  will  send  directly  from  the  floor  of  its  exchange  during  ; 
business  hours,  and  to  whom  they  shall  be  sent,  or  whether  it  will  send  any  such 
dispatches  whatever.  •  i 

The  court  held,  on  the  contrary,  that  such  price  information  was  ; 
impressed  with  a  public  interest : 

X ) 

The  question  is,  can  the  board  so  conduct  its  affairs  for  a  long  term  of  years  as  to  ';! 
create  a  standard  market  for  agricultural  products,  and,  acting  in  concert  or  combina- 
tion  with  the  telegraph  companies,  build  up  a  great  system  for  the  instantaneous  and  A\ 
cominuous  indication  of  that  market  and  its  fluctuations,  until  the  public  and  all 
persons  dealing  in  such  products  conform  their  business  to  this  system,  and  until  by 
the  usage  and  custom  of  merchants,  thus  advanced  by  the  methods  adopted  by  the 
board  and  telegraph  companies,  such  instantaneous  quotations  become  necessary  to  h 
the  successful  and  safe  transaction  of  business,  and  until  such  system  has  become  ^ 
impressed  and  affected  with  a  public  interest,  and  then  be  allowed  to  discriminate 
between  persons  and  parties,  and,  where  all  alike  are  willing  to  conform  to  reasonable 
rules  and  requirements,  and  pay  for  the  information  desired,  say  that  one  shall  and 
another  shall  not  have  such  information?  i 

If  the  board  has  such  right,  and  these  corporations  are  lawfully  permitted  so  to  do,  a 
then  they  have  the  power  to  create  monopolies,  and  dictate  who  shall  deal  in  the  agri- 
cultural  products  of  the  country,  and  at  will  impoverish  or  enrich  merchants,  shippers, 
and  producers. 

It  was  clear,  then,  that  the  board  might  withhold  quotations  from 
bucketshops  only  so  long  as  injury  was  not  done  to  bona  fide  dealers. 

This  was  not  always  easy,  since  the  bucketshop  appeared  under  so  ?| 
many  different  guises;  and  there  were  technical  difficulties  involved  $! 
in  proving  to  a  court  that  the  practices  condemned  were  clearly  dis-  .i  i 
tinguishable  from  forms  of  speculative  trading  as  carried  on  by  certain  . 
members  of  the  exchange.  In  spite  of  vigilant  work  on  the  i)art  of 
the  membership  and  market  reports  committees,  bucketshop  oper-  ^ 


Mi9N.  E.,  p.  837  (Ill.,  18S3). 


100  19  N.  E.,  p.  859. 


125 


THE  CHICAGO  MARKET  AND  THE  BOARD  OF  TRADE. 

ators  continued  to  gain  access  to  exchange  quotations.  The  direc¬ 
torate  earnestly  appealed  to  the  association  in  1895  to  make  a  decided 
stand  against  these  organizations: 

*  *  *  The  bucket-shop  evil,  injurious  alike  to  producer  and  consumer,  still 
menaces  legitimate  business.  The  general  public  interest  is  aroused  upon  this  subject 
and  your  directors  recommend  that  the  board  cooperate  with  the  civil  authorities  for 
the  destruction  of  these  gambling  shops.  No  commercial  transactions  are  connected 
\M’th  these  institutions,  and  the  whole  system  is  founded  upon  pretense  and  not  upon 
reality.  This  system  is  nefarious,  fraught  only  with  evil,  and  is  utterly  demoralizing, 
it  is  so  contagious  and  infectious  in  its  character  that  it  is  a  moral  and  commercial 
pestilence.  *  *  * 

Bucket-shop  dealing  has  so  honeycombed  the  trade  as  to  seem  ineradicable,  though 
tnis  association  is  furnishing  to  bucket  shops  that  without  which  they  never  could  have 
started  and  ^\dthout  which  they  can  not  exist.  *  *  *  i  ask  you  for  an  expression 
on  this  subject  at  the  meeting  and  recommend  that  your  directors  be  airthbrized  to 
discontinue  the  present  plan  of  supplying  continuous  official  quotations  of  our  mar¬ 
kets.  *  *  *  1 

July  1,  1897,  an  Illinois  act  to  suppress  bucketshops  went  into 
effect.  In  construing  this  law  the  supreme  court  of  the  vState  said: 
'^It  is  manifest  that  the  object  of  the  statute  was  to  suppress  and 
prevent  gambling  in  grain  and  other  commodities.^^  ^  This  act  gave 
the  board  a  legal  advantage  which  it  in’oceeded  to  use  during  the 
next  years  with  increasing  effect. 

The  fight  still  continued  in  the  courts  and  in  the  market  place; 
but  as  late  as  1900  a  president  of  the  board  complained  that  the 
'‘more  insidious  eviP’  consisted  of  "bucketshop  method  within  our 
own  organization,  as  revealed  by  recent  disclosures.^’  ^ 

During  the  same  year  two  well-known  members  of  the  Chicago 
board  were  expelled  and  three  others  were  suspended  on  bucketshop 
charges.  This  measure  of  reform  was  provoked  by  indictments  found 
against  these  five  members  by  a  Federal  grand  jury. 

Although  by  the  court  decree  in  the  Grain  and  Stock  Exchange 
case  the  board  was  forced  to  continue  the  distribution  of  its  quota¬ 
tions,  the  regular  telegraph  companies  declined  to  submit  to  a  super¬ 
vision  of  their  subscribers.  In  order  to  continue  the  distribution 
of  quotations  and  yet  withhold  them  from  bucketshops  the  board 
therefore  granted  to  an  organization  known  as  the  Cleveland  Tele¬ 
graph  Co.  an  exclusive  contract  (July  1,  1900)  to  distribute  quota¬ 
tions  through  the  business  district  of  Chicago,  and  one  month  latoi’ 
removed  the  wires  of  the  Western  Union  and  Postal  companies  from 
the  exchange  hall.  ^ 

1  Annual  Report  for  the  year  ending  Dec.  31,  1894,  pp.  59,  65,  and  66. 

‘Van  Rensselear  v.  Wright.  121  N.  Y.  626,  25  N.  E.,  3. 

3  Annual  Report  for  j-ear  ending  Dec.  31,  1899,  p.  82. 

<See  Taylor,  Vol.II,  pp.  999-1001.  Sec  also  Annual  Report  for  calendar  year  1900,  p.  68:  “*  *  * 
The  board  having  fixed  upon  August  1st  for  the  date  of  putting  into  effect  its  new  regulations  respecting, 
the  distribution  of  its  quotations  to  bucket  shops,  the  Central  Stock  and  Grain  Exchange  lust  prior 
thereto  obtained  an  ex  parte  injunction,  which  seemed  a  serious  obstacle  to  the  board,  but  this  was 
overcome  by  the  substitution  of  the  Cleveland  Telegraph  Co.  for  the  Western  Union  Co.  and  the  board 
was  thus  enabled  to  carry  out  its  purposes  on  the  1st  of  August.  *  *  *” 


126 


TEPwMINiVL  GFvAIIs  MARKETS  AKD  EXCHAKGES. 


Agreement  with  the  telegraph  companies. — No  agreement  was 
reached  with  the  Western  Union  and  Postal  Companies  during  1900, 
the  chief  obstacle  being  the  exclusive  contract  held  by  the  Cleveland 
Telegraph  Co.  for  distribution  in  Chicago.  It  was  not  until  April  15, 
1901,  that  the  continuous  quotation  service  was  resumed.  Under 
the  new  contract,  which  is  still  in  force,  the  telegraph  companies  pay 
S2,500  per  month  for  the  quotations  which  the  board  collects  on  the 
floor  of  the  exchange  and  transmits  from  a  single  Morse  instrument 
in  the  exchange  liall.^  Kepresentatives  of  the  companies  are  allowed 
full  access  to  the  permanent  records  of  quotations.  The  telegraph 
companies  also  agree  ^That  they  will  not  knowingly  furnish  or  sell, 
directly  or  indirectly,  said  continuous  quotations  to  any  person,  firm, 
or  corporation  conducting  a  bucketshop,  or  other  similar  place 

^  n 

The  ])urden  of  determining  the  character  of  an  applicant  is  not 
assumed  by  the  telegraph  companies,  but  a  stipulated  agreement  must 
1)0  signed  by  each  applicant  for  the  coutinuous  quotations,  to  which 
agreement  one  of  the  companies  and  the  Board  of  Trade  are  parties. 
The  applicants  agree  (among  other  things) — • 

that  we  are  not  keeping  or  causing  to  l)e  kept,  and  will  not  keep,  or  cause  to  be  kept, 
any  bucketshop,  or  any  office,  store,  or  other  place  wherein  is  conducted  or  permitted 
the  business  of  making,  or  offering  to  make,  contracts,  agreements,  trades,  or  transactions, 
respecting  the  purchase,  or  sale,  or  purchase  and  sale  of  any  grain,  provisions,  or  other 
commodity,  or  property  wherein  both  parties  thereto  or  the  undersigned  contemplate 
or  intend  that  such  contracts,  agreements,  trades,  or  transactions  shall  be,  or  may  bo, 
closed,  adjusted,  or  settled  accordingly,  or  with  referenc'c  to  the  public  market  quota¬ 
tions  of  prices  made  on  any  board  of  trade  or  exchange  upon  which  the  commodities 
or  securities  referred  to  in  said  contracts,  agreements,  trades,  or  transactions  are  dealt 
in,  and  without  a  bona  fide  transaction  on  such  board  of  trade,  or  exchange,  or  wherein 
both  parties  or  the  undersigned,  shall  contemplate  or  intend  that  such  contracts,  agree¬ 
ments,  trades,  or  transactions  shall  be,  or  may  be,  deemed  closed  or  terminated  when 
the  public  market  quotations  of  prices  made  on  such  board  of  trade  or  exchange  for 
the  articles  or  securities  uiamed  in  said  contracts,  agreements,  trades,  or  transactions 
shall  reach  a  certain  figure,  and  we  agree  that  we  will  not  use  or  allow  any  one  else  to 
use  such  quotations,  or  any  of  them,  for  any  such  purpose  or  in  such  bucketshop. 


At  the  close  of  1901  the  secretary  of  the  board  reported  that  not  a 
bucketshop  remained  in  Chicago,  ^huid  even  elsewhere  these  commer¬ 
cial  pests  have  but  a  precarious  and  disreputable  existence.”* 
During  1902  injunctions  were  obtained  against  70  bucketshops, 
variously  located  in  Illinois,  Milwaukee,  and  Kansas  City.  Two 
years  later  it  was  stated  that  the  litigation  conducted  had  ^ Resulted 
in  the  entire  suppression  of  this  irresponsible  institution  with  its  large 
private  wire  system  and  numerous  branches.”  ^ 

The  expenses  of  this  litigation  was  more  than  offset  by  the  income 
from  quotation  contracts  with  telegraph  companies.  In  January, 


^  Local  companies  still  distribute  the  quotations  in  Chicago  and  Milwaukee. 
®  Annual  report  for  the  year  1901,  p.  73. 

'  Annual  report  for  the  year  1903,  p.  61. 


THE  CHICAGO  JIARKET  AND  THE  BOARD  OF  TRADE. 


127 


1904,  it  was  reported  that  such  legal  expenses  for  the  four  years 
previous  had  totaled  $50,946.70.  The  gross  income  from  sale  of 
quotations  since  April  15,  1901,  however,  had  been  $100,552.46.® 

Yet  the  ^irresponsible  institution^’  did  not  remain  suppressed. 
Although  bucketshops  had  been  eliminated  in  Chicago  they  con¬ 
tinued  to  operate  in  other  cities  and  were  only  stamped  out  by  the 
nation-wide  campaign  which  set  in  some  years  later. 


Quotations  aiie  piioteiity  within  the  control  of  the  ex¬ 
change. — The  Illinois  decision  in  the  Grain  and  Stock  Exchaiiire 
case  (p.  124)  was  invoked  in  1900  in  the  case  of  Board  of  Trade  v. 
Christie  Grain  cO  StocC  Co.,  which  was  finally  reviewed  by  the  United 
States  Supreme  Court  in  1904.  In  this  case  it  was  alleged  that  the 
defendant  was  operating  a  bucketshop  and  was  surreptitiously  ob¬ 
taining  the  quotations  of  the  Board  of  Trade.  Defendant  maintained 
that  regardless  of  how  the  quotations  were  obtained  by  them,  such 
(piotations  were  legally  regarded  as  impressed  with  a  public  use 
^‘and  the  lioard  is  estopped  from  discriminating  with  reference  to 
such  use.”  ^ 

This  the  Supreme  Court  denied.  They  did  not  consider  that  the 
case  at  bar  came  within  the  Jiieaning  of  the  Illinois  decisions,  since 
in  the  former  case  the  plaintiff  had  offered  to  pay  for  the  quotations 
and  to  submit  to  reasonable  rules. 


*  *  *  It  is  not  necessary  to  consider  whether  we  are  bound  by  that  decision,  or, 
if  not,  should  follow  it,  since  in  thes<i  cases  the  claim  is  not  qualified  by  submission  to 
reasonable  rules  or  an  offer  of  payment.  It  is  a  claim  of  independent  rights  and  a 
denial  that  the  plaintiil’  has  any  right  at  all.  The  Supremo  Court  of  Illinois  gave  no 
sanction  to  such  a  claim  as  that.’" 

The  court  held  that  the  quotations  were  property  regardless  of  the 
nature  of  the  transactions  wliich  they  represented,  and  declared — 

*  *  *  The  plaintiff’s  collectioii  of  quotations  is  entitled  to  the  protection  of  the 
law.  It  stands  like  a  trade  secret.  The  plaintiff  has  the  right  to  keep  the  work  which 
it  has  done,  or  paid  for  doing,  to  itself.  *  *  The  plaintiff  does  not  lose  its  rights 

.  by  communicating  the  result  to  persons,  even  if  many,  in  confidential  relations  to 
itself,  under  a  contract  not  to  make  it  public',  and  strangers  to  the  trust  will  be  re¬ 
strained  from  getting  at  the  knowledge  by  inducing  a  breach  of  trust  and  using  knowl¬ 
edge  obtained  by  such  a  breach.” 

• 

Tiie  bucketshops  then  resorted  to  ingenious  technicalities  for  evading 
the  law.  In  one  case  in  1906  the  quotations  were  surreptitiously 
obtained,  increased  by  a  uniforin  fraction  (usually  one-eighth  or  one- 
^  quarter  of  a  cent)  and  then  were  transmitted  to  customers  as  the 
quotations  of  the  concern  (the  O’Dell  vStock  &  Grain  Co.).’" 

During  the  same  year  it  was  alleged  that  quotations  had  ))een 
counterfeited  by  bogus  ^‘exchanges”  maintained  at  Superior,  Wis., 
and  Kansas  Citv,  Mo. 


Annual  report  for  the  5'ear  1903,  p.  62. 
S198U.  S.,  p.  243. 


10  198  U.  S.,  p.  232. 

11  198 XT.  S.,  p.  251 


1-  Annual  report  for  1908,  p.  12. 


128 


TERMTXAL  GEAIN  AEAEKETS  AND  EXCHANGES. 


Federal  prosecution  of  bucketsliops  was  instituted  on  a  national 
scale  during  1909-10,  with  the  reported  result  that  ^‘substantially 
every  bucketshop  in  the  country  w^as  put  out  of  business/^  Yet 
bucketshops  are  of  such  mushroom  growth  and  appear  under  so 
many  different  guises  that  even  as  late  as  1913  they  were  a  subject 
of  complaint  by  tJie  Chicago  Board  of  Trade, and  further  Federal 
prosecution  was  solicited.  A  consistent  campaign  of  prosecution 
in  the  equity  courts  has  borne  its  results  in  more  recent  years.  The 
general  counsel  of  the  board,  in  announcing  his  success  in  obtaining 
a  judgment  of  ouster  against  the  Consolidated  Stock  &  Produce  Ex¬ 
change  at  Pittsburgh  in  1916,  stated  tliat  “at  no  time  before  since  the 
bucketshop  campaign  started  lias  the  country  east  and  west  been  so 
free  from  bucketshops.^’ 

Section  11.  The  Open  Board  of  Trade. 

The  Chicago  Open  Board  of  Trade  was  organized  by,  and  recruited 
from,  certain  malcontents  of  the  regular  board  in  the  year  1877. 
It  was  incorporated  in  1880  and  offered  such  facilities  for  unrestricted 
option  or  privilege  trading  that  its  membership  in  three  years 
reached  180  and  a  surplus  capital  of  $30,000  was  claimed.  The 
membership  jumped  to  400  in  1884,^^  at  an  initiation  fee  of  $250. 

The  campaign  against  bucketshops  brought  the  two  organizations 
into  open  conflict,  and  direct  quotations  from  the  regular  board 
were  cut  off  in  1883,^®  and  again  in  1887,  when  the  bucketshops 
<leclared  their  intention  of  operating  through  the  Open  Board. 
The  latter  succeeded  in  obtaining  “what  passed  for  the  markets,’' 
and  its  chief  function  in  those  5"ears  seems  to  have  been  in  afford¬ 
ing  a  resort  for  trading  in  privileges.  During  January,  1887,  12 
members  of  the  regular  board  were  summoned  before  the  directors 
on  charges  of  trading  in  privileges  on  the  Open  Board  and  7  of 
tliem,  including  the  president  of  the  Open  Board,  were  suspended 
for  sliort  periods.  According  to  Taylor,  the  volume  of  trading  in 
privileges  on  the  Open  Board  during  year  1887  had  amounted  to 
3,000,000  bushels  daily. 

The  name  “Open  Board”  implies  a  policy  of  not  restricting  the 
trading  floor  to  members.  Customers  may  give  their  orders  to 
commission  men  and  brokers  directly  on  the  floor.  The  present 
Open  Board  has  some  160  members  and  operates  a  pit  in  chambers 
across  the  street  from  the  larger  body.  It  has  been  designated  by 
oflicials  of  the  regular  board  as  “a  small  affair,  a  sort  of  blood-sucker 

^8  Report  of  the  Attorney  General  for  the  year  ended  June  30,  1910,  p.  24.  The  Attorney  General 
reported  that  350  bucketshops  had  been  closed  as  a  result  of  litigation  and  that  many  more  had  closed 
voluntarily. 

Amiual  report  for  the  year  1913,  p.  35. 

^8  Taylor,  op.  cit.,  Vol.  II,  j).  061.  Also  correspondence  on  file  with  the  Commission. 

56  Idem,  P..660.  , 

Idem,  p.  741. 


THE  CHICAGO  MARKET  AND  THE  BOARD  OF  TRADE. 


129 


on  this  association,  '  especially  since  they  neither  receive  nor  ship 
actual  grain. 

At  present  there  exists  a  contract  between  the  two  associations 
wiiereby  tlie  Open  Board  is  allowed  to  receive  the  quotations  of  the 
regular  exchange,  provided  there  shall  be  at  all  times  seven  persons 
holding  memberships  on  both  boards  (these  members  being  known 
as  ''changers”)*  This  contract  was  drawn  up  by  the  counsel  of  the 
regular  board,  representing  both  parties,  and  is  subject  to  termination 
on  notice  by  either  party.  Final  settlement  of  Open  Board  trans¬ 


actions  is  generally  made  through  a  trade  on  the  floor  of  the  larger 
body.^®  It  is  evident  that  the  Open  Board  has  no  standing  among 
the  major  exchanges  and  exists  as  a  rather  unwelcome  satellite  of 
the  older  institution. 


Section  12.  Publicity  and  promotion  of  exchange  interests. 

Although  the  Chicago  Board  of  Trade,  like  the  other  grain  ex¬ 
changes,  does  not  buy  and  sell  in  its  own  name,  yet  it  does  maintain 
an  active  and  continuous  publicity  service  (1)  for  the  promotion 
of  the  trade  of  its  members  and  (2)  for  the  furtherance  of  exchange 
interests  before  the  public  and  before  governmental  agencies. 

The  "crusade  of  acquaintance”  among  country  shippers. — 
The  exchange  takes  the  position  that  something  more  than  favor¬ 
able  freight  rates  is  necessary  to  attract  a  constant  volume  of  ship¬ 
ments  to  the  market.  Furthermore,  certain  judicious  advertising  of 
the  facilities  of  the  futures  market  is  considered  desirable.  Conse¬ 
quently  delegations  have  been  appointed  yearly  to  conduct  "  crusades 
of  acquaintance”  through  the  tributary  areas.  Also  representatives 
are  sent  to  country  grain  dealers’  meetings  and  conventions  to 
present  the  terminal  point  of  view,  and  adzertising  space  is  utilized 
in  grain  journals  and  farmers’  publications. 

The  general  promotion  committee  has  been  very  active  in  recent 
years  and  has  been  allowed  about  $10,000  annually  by  the  associa¬ 
tion.  As  an  example,  on  March  30,  1915,  they  asked  for  authority 
to  expend  $500  per  month  for  the  balance  of  the  year  "for  promo¬ 
tive  work  in  papers  outside  the  city  of  Chicago  backing  up  the  work 
that  has  been  done  by  the  committee  in  the  past.”  The  request  was 
granted. 

Newspaper  publicity. — The  board,  through  its  secretary,  main¬ 
tains  that  the  publicity  purchased  in  Chicago  newspapers  has  not  been 
of  the  nature  of  advertising  "so  much  as  for  the  purpose  of  evidencing 
our  good  will  toward  the  city  press.” 

Correspondence  in  office  of  secretary  of  the  regular  hoard,  Mar.  24,  1915. 

See  Vol.  V. 

20  Letter  to  Secretary  Bigelow  of  the  Kansas  City  Board  of  Trade  July  24, 1918. 

168093'^— 20 - 9 


130 


TERMINAL  GRAIN  AIxVRKETS  AND  EXCHi\:^GES. 


''It  has  been  our  practice  for  some  years/'  states  the  secretary, 
"to  pay  $200  to  $250  each  to  the  Tribune  and  the  Herald  and  $150 
or  so  to  each  of  the  evening  papers,  ordinarily  providing  them  Avith 
copy  Avhicli,  under  the  law,  must  have  captions  in  display  type  and 
double-faced  column  lines  or  some  other  distinguishing  mark,  indi¬ 
cating  that  it  is  a  paid  article,  or  in  lieu  thereof,  the  Avord  ^advertise¬ 
ment.'  " 

1  have  written  many  of  these  articles,  indeed,  I  am  about  “pumped  out”  in  pro¬ 
viding  material  of  this  kind,  having  written  from  almost  every  angle  Avhich  in  my 
j  udgment  would  be  useful  to  the  grain  trade  of  the  country.  I  have  always  prepared  an 
economic  study  of  some  important  feature  of  the  grain  trade. 

On  scA^eral  occasions  the  neAA^spapers  have  been  severely  rebuked 
for  printing  the  Avord  "advertisement"  above  the  space  utilized  by 
the  exchange.  The  folloAving  extracts  are  in  point: 

*  *  *  I  want  to  impress  upon  you  the  importance  of  not  allowing  your  foreman 
of  the  pressroom,  or  any  other  person  connected  with  its  publication,  to  place  the 
word  “advertisement”  in  any  form  whatever  either  at  the  top  or  bottom.  You  will 
recall  that  I  expressed  my  willingness  to  have  it  inclosed  in  heavy  border  lines, 
which  complies  with  the  law  as  fully  as  if  the  word  “advertisement  ”  Avas  used.  I  am 
careful  to  emphasize  this  because  our  article  published  in  the  Post  lately  was  pub¬ 
lished  under  the  word  “advertisement,”  notwithstanding  I  had  expressly  forbidden 
its  use. 

The  foreman  of  the  pressroom  Avas  responsible  for  the  error,  taking  it  upon  himself 
to  insert  the  Avord  Avithout  referring  the  matter  to  the  manager.  The  publication  of 
the  article  Avith  the  word  “ adA'ertisement  ”  is  more  injurious  than  beneficial,  and.  this 
association  Avill  not  pay  your  bill  if  the  instructions  herein  given  are  not  obsei'A'cd. 
(Letter  from  secretary  of  the  board  to  the  Chicago  Herald  July  16,  1914). 


CuicAGO,  June  27,  1914. 

Adveiitising  Manageu, 

Chicago  Evening  Post. 

Dear  Sir:  I  obseiwe  that  in  Thursday's  issue  of  your  paper  you  published  the 
board  of  trade  article. 

I  beg  to  inform  you  that  it  AA^as  most  thoroughly  and  distinctly  understood  Avith  your 
representative,  that,  under  no  circumstances  Avas  the  Avord  “adA'ertisement”  to  appear 
in  connection  with  this  article,  that  the  display  type  at  its  head  and  lieaA'y  border 
lines  should  be  used,  Avhich  Avould  fully  comply  AV'ith  the  postal  laAv.  In  spite  of  this 
positive  injunction  on  my  part  and  the  posith'e  assurance  on  his  part  that  the  AA'ord 
“advertisement”  should  not  appear,  you  published  the  article  Avith  this  Avord  most 
conspicuously  displayed  at  the  top.  I  beg  to  say  that  the  publication  of  the  article 
Avas  a  distinct  injury  to  the  association  rather  than  a  benefit,  and  I  would  much  rather 
have  paid  you  the  agreed  price  Avithout  publishing  anything  than  to  have  had  you 
publish  it  the  AA'ay  you  did,  and  I  shall  be  interested  in  knoAA*ing  what  your  justifica¬ 
tion  of  such  a  complete  violation  of  an  agreement  will  be.  *  *  * 

Yours  very  truly, 


Secretanj. 


THE  CHICAGO  MARKET  AND  THE  BOARD  OF  TRADE.  131 


CincAGO,  May  18,  1914. 

;^[l^  Victor  Polactiek, 

Managing  Editor  Chicago  Examiner,  Chicago,  III. 

Dear  Sir:  A  copy  of  this  morning’s  edition  of  the  Examiner,  containing  the  article 
furnished  by  me  for  publication  is  now  on  my  desk.  I  can  not  conceive  of  why  you 
should  worse  than  nullify  its  publication  by  putting  the  three  words  “advertisement 
over  the  top  of  it  without  submitting  such  a  proposition  to  me  *  *  *. 

Very  truly  yours. 


Secretary  Board  of  Trade  of  the  City  of  Chicago. 

The  following  letter  illustrates  the  method  of  purchasing  the  space 
for  exchange : 

Chicago,  December  24,  1913. 

Mr.  John  M.  Hodge, 

Financial  Advertising,  Chicago  Daily  News,  Chicago. 

DtAR  Sir:  Referring  to  the  proof  of  the  article  I  furnished  you,  I  beg  to  inquire  if 
it  is  clearly  understood  that  the  cost  to  this  association  is  to  be  $150.  I  have  had  the 
lines  counted  and  am  wondering  if  the  matter  is  thoroughly  understood.  This  asso¬ 
ciation  would  rather  not  have  the  article  published  at  all  than  to  exceed  this  amount. 
Yours  very  truly, 


Secretary.-^ 

Country  newspapers  and  journals. — Publicity  through  the 
country  press  has  boon  design-ated  as  ''giving  them  support  in  the 
way  of  advertising.” 

This  policy  is  outlined  in  the  following  letters: 

Chicago,  Jime  12,  1917. 

Mr.  Geo.  S.  Carkener, 

President  Kansas  City  Board  of  Trade, 

Kansas  City,  Mo. 

Dear  ]\[r.  Carkener:  As  you  are  probably  aware,  the  American  Cooperative 
Manager  is  virtually  the  official  organ  of  the  farmers  of  the  United  States.  Formerly 
its  attitude  was  very  antagonistic  to  the  exchanges.  I  am  pleased  to  say  that  under 
its  present  editor,  Mr.  M.  R.  Meyers,  its  attitude  has  changed,  and  recently  they 
not  only  liave  been  friendly  but  very  helpful  to  exchanges  in  many  matters,  including 
pending  legislation  in  Washington. 

J  ])eliove  their  consideration  for  the  exchanges  in  regard  to  this  should  be  rec¬ 
ognized,  and  to  that  end  here  in  Chicago  we  are  giving  them  support  in  the  way  of 
advertising.  In  consistency  with  your  views,  I  would  like  to  suggest  that  your 
inemljcrs  show  them  the  same  consideration. 

Very  truly  yours. 


President. 


*1  Correspondence  of  the  secretary’s  office  for  1917  disclosed  the  same  policy. 


132 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


That  such  publicity  has  not  been  confined  to  the  Northwest  appears 
in  the  correspondence  had  in  1914  between  the  president  of  the  board 
and  one  E.  J.  Best,  of  Columbia,  S.  C.,  viz: 

Chicago,  October  29,  1914. 

Board  of  Trade  City  of  Chicago, 

Secretary's  Office. 

Mr.  E.  J,  Best, 

Columbia,  S.  C. 

Dear  Sir:  1  inclose  a  memorandum  statement  of  the  amount  of  grain  received 
in  and  shipped  from  Chicago  during  the  month  of  September.  Please  have  one  of 
your  papers  print  this  as  a  news  item,  as  I  think  it  will  be  of  interest  to  many  of  their 
readers  who  are  not  informed  in  regard  to  the  commerce  in  grain  which  passes  through 
this  market. 

1  also  inclose  copy  of  an  article  from  the  New  York  Times  on  the  grain  exchange' 
question,  which  may  be  of  interest  to  you. 

I  inclose  check  with  voucher,  which  please  receipt  and  return. 

Anything  which  you  write  which  is  published  in  your  papers  please  send  me  a 
copy,  as  we  are  very  anxious  indeed  to  educate,  or  rather  to  inform  southern  senti¬ 
ment,  in  regard  to  the  situation  surrounding  the  transaction  of  business  in  this  great 
market.  The  one  point  we  lay  stress  upon  is  this,  that  attempts  to  restrain  or  which 
impair  the  freedom  of  trade  in  a  very  large  percentage  of  instances  prove  harmful. 

Very  truly  yours. 

President. 


Chicago,  October  26,  1914. 

Mr.  E;  F.  Be.st, 

Columbia,  S.  C. 

Dear  Sir:  I  note  your  telegram  of  this  date.  In  a  day  or  two,  as  soon  as  our 
finance  committee  and  our  other  committee  that  has  the  matter  in  charge  has  a  meet¬ 
ing,  I  will  see  that  a  check  is  sent  you  for  your  services.  Matters  of  this  kind  all 
take  a  few  days  to  fix,  as  they  must  go  through  routine  channels.  I  remain, 

Very  truly  yours, 

J 

President, 


Chapter  IV. 

DEVELOPMENT  OF  OTHER  MARKETS  AND  EXCHANGES. 

Section  1.  Milwaukee. 

Origins. — Milwaukee  claims  to  have  been  in  its  early  days  the 
principal  primary  gi*ain  market  of  the  country.  The  origins  of  the 
market  were  quite  similar  to  that  at  Chicago.  The  first  recorded 
shipment  of  wheat  consisted  of  4,000  bushels  carried  across  the  lake 
to  a  Canadian  port  in  1841.  With  the  advent  of  the  railroads  after 
1850  Milwaukee  did  become  for  a  time  the  largest  western  wheat 
market.  This  supremacy  continued  up  to  the  Civil  War.  The  fifth 
annual  statement  of  the  chamber  of  commerce  (1862)  claimed  that 
the  market  was  “now  the  greatest  primary  wheat  market  of  the 
world.”  The  following  tabulation  of  receipts  and  shipments  of  wheat 
in  1862  showed  its  superiority  over  Chicago: 


Milwaukee. 

Chicago. 

Wheat  received . . 

Bushels. 
15, 613, 995 
1,826,931 

Bushels. 
13, 978,116 
1, 855, 902 

On  hand  at  beginning  of  year . 

Total . . . 

17, 440, 926 

15,834,018 

Forwarded . 

14,915,680 

1,113,645 

13,808,898 

1,304,800 

Ground  bv  city  mills . 

On  hand  Jan.  1.  1863 . 

1,411,601 

720,220 

Chicago  receipts  of  wheat  rarely  exceeded  those  of  Milwaukee 
until  1879  when  the  former  market  received  34  million  as  compared 
with  17.8  million  bushels  at  Milwaukee.  Since  that  date  the  Mil¬ 
waukee  wheat  market  has  remained  in  a  static  condition,  at  times 
struggling  for  existence,  while  the  receipts  at  other  markets  have 
continued  to  expand.  The  receipts  of  wheat  for  the  5-year  period 
1912-1917  averaged  less  than  those  for  1860-1864. 

In.  receipts  of  corn  and  other  coarse  grains  Milwaukee  has  never 
exceeded  Chicago,  although  the  competition  for  rye  has  been  close 
and  a  steady  volimie  of  barley  (see  p.  22)  has  been  attracted  by  the 
breweries  and  malt  industries. 

The  question  may  well  be  raised  why  Milwaukee  with  a  natural 
harbor  superior  to  that  at  Chicago,  and  lying  nearly  100  miles  nearer 
Buffalo  along  the  lake  route,  was  surpassed  by  Chicago  in  quantity 
of  grain  marketed.  The  railroad  map  of  1877  (p.  134)  offers  the 
primary  explanation.  It  will  be  seen  that  whereas  Chicago  was 
already  a  terminal  for  western  and  eastern  trunk-line  railroads, 
Milwaukee  was  situated  off  the  main  routes  and  could  make  all-rail 
shipments  only  via  Chicago. 


133 


'!  « 


J(Omn  8  DAl^H.  WASHINGTON  ,  0.  C 


DEVELOPMENT  OF  OTHER  MARKETS  AND  EXCHANGES.  135 


The  jMiLWAtTKEE  Chamber  of  Commerce.— Out  of  a  group  of 
grain  dealers  and  millers  who  had  met  customarily  to  transact  busi¬ 
ness  in  the  railroad  yards  the  Milwaukee  Chamber  of  Commerce  was 
organized  in  1858.  The  association  was  incorporated  10  years  later 
under  a  special  act  of  the  Wisconsin  Legislature. 

From  that  time  on  the  ^lilwaukec  chamber  operated  a  trading 
floor,  regulated  the  sampling,  inspection  and  delivery  of  grain,  and 
performed  the  recognized  functions  of  a  grain  exchange.^  Its  charter, 
however,  did  not  differ  substantially  from  those  of  other  general  com¬ 
mercial  bodies  (see  p.  191)  and  sundry  packers  and  other  business  con¬ 
cerns  were  represented  in  the  membership. 

MembersJii'p. — ^The  association  started  with  99  members,  increased 
to  365  by  1868  (the  year  of  incorporation),  and  reached  the  maximum 
of  630  in  1883.  Since  then  there  has  been  a  progressive  decline  in 
numbers,  owing  to  the  absorption  of  the  futures  business  by  Chicago 
operators  and  the  efforts  of  the  Milwaukee  chamber  to  eliminate  un¬ 
used  membership  certificates. 

As  with  the  majority  of  grain  exchanges,  memberships  are  acquired 
by  the  transfer  of  a  certificate  from  a  retiring  or  deceased  member. 
The  transfer  fee,  which  is  $10,  is  comparatively  low.  During  recent 
5^eai*s  the  active  grain  trade  has  constituted  a  mmority  of  the  mem- 
berehip  and  the  commercial  value  of  certificates  prior  to  1919  had 
not  exceeded  $100.  Under  present  conditions  it  is  doubtful  whether 
the  ^‘initiation  fee'^  of  $5,000  will  have  to  be  increased  to  prevent  the 
issuance  of  additional  memberships.  The  present  annual  dues  are  $70. 

Table  34,  which  follows,  shows  the  trading  groups  dealing  in  grain 
on  the  Milwaukee  Exchange. 


Table  34. — Classificaiion  of  resident  members  in  the  grain  trade,  Milieaulcee  Chamber  of 

Coanmerce,  1917. 


Engaged 

exclu¬ 

sively. 

Engaged 

prima¬ 

rily. 

Total. 

Engaged 

second¬ 

arily. 

Resident  members; 

(3ash  commission . 

8 

48 

56 

32 

Terminal  elevators . 

S 

27 

35 

8 

Other  dealers  o . 

17 

1 

18 

(Consumers  & . 

43 

6 

49 

T.ine  elevators  . 

16 

Shippers  c . 

«•> 

o 

3 

27 

F  uture  commission  d . 

19 

2 

21 

55 

95 

87 

182 

138 

Out-of-tovra  members; 

Member^;  of  other  fivchan res  .  . 

86 

Afemhers  iri  sairronniiTTip  territ.orv  t . 

58 

144 

Net  in  grain  lousiness . . . 

208 

534 

«  Feeders,  and  all  not  included  in  other  ola.sses.  '■i  Including  wier  houses. 

^  Millers,  maltsters,  etc.  «  Several  county  elevators  included, 

c  Operating  without  terminal  elevat'JF-hwilitie.^. 

I  As  provided  in  the  charter  of  1SG8. 


136  terminal  grain  markets  and  exchanges. 

As  the  foregoing  table  shows,  a  majority  of  the  members  of  the  Mil¬ 
waukee  exchange  are  not  actively  interested  in  the  grain  trade. 
Tliere  are  over  200  nonresident  members,  most  of  whom  have  no 
active  interest  in  trading  at  Milwaukee.  The  advantages  of  a  mem¬ 
bership  on  the  near-by  Chicago  exchange  are  so  much  greater  that 
there  has  been  no  great  demand  for  Milwaukee  memberships.  Con¬ 
sequently  the  market  price  (prior  to  1919)  has  not  exceeded  $100  for 
several  years,  and  memberships  sold  for  $80  during  1916-17.  The 
present  nominal  price  of  memberships  not  only  affects  the  character 
of  applicants,  hut  lessens  the  discijilinary  power  of  the  board  of 

directors.  ^  . 

Several  expedients  have  been  tried  with  a  view  to  enhancing . 

membership  value.  The  secretary  states  that  in  1906  it  was  dis¬ 
covered  that,  an  enterprising  broker  was  urging  country  shippers 
through  ’  the  West  to  buy  seats  at  Milwaukee  with  a  view  to  taking 
advantage  of  the  reduced  commission  rates  for  members.  Conse¬ 
quently  %he  rule  2  was  adopted  whereby  ‘'only  active  members 
engaged  in  business  in  the  Milwaukee  market”  are  allowed  one-half 
commission  rates  (nonresident  members  who  are  also  members  of 
the  Chicago  and  Minneapolis  exchanges  being  allowed  three-fourths 
rates).  There  has  also  been  an  effort  to  buy  in  as  many  certificates 
as  the  chamber  could  afford  ^  and  thus  enhance  their  value.  Fifty 
seats  were  eliminated  from  September  30,  1914,  to  April  1,  1918. 
It  was  reported  in  1918  that  out  of  the  550  memberships  16  were  the 
certificates  of  deceased  members,  and  15  were  ‘‘additional”  member¬ 
ships.  Three  memberships  had  been  forfeited  during  the  preceding 
year  for  nonpayment  of  the  annual  assessment. 

The  term  “additional  membership”  has  a  peculiar  meaning  at 
Milwaukee.  It  is  provided  (rule  12,  sec.  7)  that  any  member  in  good 
standing  may  purchase  (without  payment  of  transfer  fee)  one  or 
more  additional  certificates,  such  additional  memberships  to  entitle 
him  to  no  greater  or  additional  rights  and  privileges  on  the  exchange, 
and  to  be  indorsed  “Additional  certificate  held  for  redisposition 
only.”  On  other  exchanges  the  term  “additional  membership” 
refers  to  a  certificate  acquired  through  payment  of  the  “initiation 

f  ee.^^ 

In  1919,  possildy  because  of  improved  shipping  facilities,'* *  the  price 
of  memberships  suddenly  rose  a^id  one  was  sold  for  $480.® 

Operating  revenues. — The  only  reliable  source  of  revenues  to  the 
Milwaukee  chamber  is  the  membership  assessments.  There  is  no  real 
estate  investment  and  the  inspection  and  weighing  departments, 

2  Rule  32,  sec.  7. 

3  Cf.  St.  I.ouis  practice,  p.  171. 

*  The  city  is  now  engaged  in  extensive  water-front  terminal  improvements. 

•  American  Elevator  and  Grain  Trade,  Oct.  15,  1919,  p.  356. 


DEVELOPMENT  OP  OTHER  MARKETS  AND  EXCHANGES.  137 

wliile  practically  self-sustaining,  provide  no  dependable  net  income. 
The  freight  bureau  is  wholly  an  expense. 

On  this  basis  the  net  operating  gain  ®  for  1917-18  was  $7,11.3.49. 

Weighing  and  Inspection. — The  weighing  and  inspection  of  grain 
in  Milwaukee  has  never  been  assumed  by  State  agencies.^  The 
Milwaukee  chamber  has  maintained  an  inspection  department  since 
1S60,  and  except  for  the  present  Federal  supervision,  this  is  the  only 
•  inspection  service  at  that  market.  There  seem  to  be  few  appeals 
from  the  findings  ol  tlie  exchange  inspectors  and  both  receivers  and 
sliippers  are  apparently  satisfied  with  the  present  system. 

Elevator  facilities. — As  appears  from  Table  14  (p.  28),  the 
business  of  public  warehousing  has  scarcely  been  developed  at  Mil¬ 
waukee.  The  distinction  between  public  and  private  elevators  exists 
onl}^  by  reason  of  exchange  rules  defining  and  regulating  regular 
warehouses.'^  (See  p.  245.) 

The  private  warehouses  are  operated  mainly  for  transfer  purposes 
or  to  maintain  a  manufacturing  surplus.  Very  little  consigned  grain 
goes  into  storage  for  commission  men;  the  grain  in  store  is  for  tho 
most  part  the  property  of  the  warehouse  owners. 

Transportation  bureau. — The  transportation  bureau,  operated 
by  the  Milwaukee  chamber,  is  one  of  the  most  important  agencies  of 
the  exchange.  Since  Milwaukee  is  a  milling  and  transfer  point  for 
the  grain  trade,  the  transit  privileges  which  can  be  obtained  from 
the  railroads  have  an  important  effect  on  the  market.  Also,  because 
of  its  situation  off  the  major  trunk  lines,  it  is  possible  for  freight-rate 
adjustments  to  have  a  disastrous  effect  upon  Milwaukee  receipts. 
For  this  reason  the  traffic  expert  in  charge  of  this  bureau  is  con¬ 
tinuously  busy.  This  bureau  costs  the  chamber  approximately  $7,000 
a  year. 

Price  quotations  and  market  reports. — The  Milwaukee  exchange 
has  made  no  collection  and  distribution  of  price  information  except 
as  to  the  transactions  in  its  own  futures  pit.  These  quotations  are 
recorded  and  made  public  daily  and  filed  with  the  secretary- treasurer 
of  the  exchange.  The  telegraphic  service  of  the  exchange  costs 
about  $5,000  a  year.  By  contract  with  the  telegraph  companies 
future  quotations  are  received  from  the  Chicago  Board  of  Trade  and 
posted  immediately  on  a  bulletin  in  the  trading  room.  Quotations  are 
no  longer  received  from  Minneapolis  since  this  does  not  seem  to  be 
warranted  by  the  volume  of  future  trading.  General  statistics  of 
the  grain  movement  and  crop  conditions  are  received  and  posted 
daily  as  on  the  other  exchanges.  • 

The  cash  market. — Although  consumption  of  barley  by  Milwaukee 
brewers  was  (prior  to  1918)  relatively  high,  the  local  consumption 
of  all  grains  has  been  considerably  less  than  the  volume  shipped. 


*  As  reported  in  treasurer’s  statement,  report  for  1917-18,  p.  32. 
^The  act  of  1905  (see  p.  156)  applied  to  Superior  only. 


138 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


The  wheat  market  is  primarily  related  to  the  forwarding  business 
(see  Table  8,  p.  24).  An  estimate  based  on  about  175,000  cars 
"of  all  grains  received  at  Milwaukee  during  the  5  years  1013-1917 
showed  that  60  per  cent  of  the  receipts  were  shipped  out  and  sold  in 
other  markets.® 

During  this  period  the  bulk  of  the  grain  (82.5  per  cent)  w'as  brought 
in  on  consignment  by  commission  men.  Of  the  total  cars  of  grain 
reported  as  received,  the  local  elevators  bought  slightly  more  than 
the  consumers,  the  ratio  being  46.5  per  cent  to  35.7  per  cent. 

The  futures  market. — -The  inauguration  of  active  future  trading 
occurred  in  March,  1901,  when  a  number  of  Chicago  grain  dealers 
transferred  their  hedging  and  speculative  activities  to  Milwaukee, 
r^his  was  a  result  of  (1)  the  effective  prohibition  of  trading  in  privileges 
I  at  Chicago  and  (2)  the  disaffection  of  the  Chicago  elevator  interests 
(see  Ch.  III).  Among  these  Chicago  traders  on  the  Milwaukee  ex¬ 
change  were  representatives  of  several  of  the  large  Chicago  terminal 
elevator  companies,  including  the  Armour  Grain  Co.  As  a  result 
of  a  conference  between  the  board  of  directors  of  the  Milwaukee  ex¬ 
change  and  such  dealers,  provision  was  made  in  the  rules  of  the  Mil¬ 
waukee  Chamber  of  Commerce  for  future  trading,  and  a  clearing 
house  was  organized.  Trading  in  a  very  short  time  became  so  active 
!  that  the  price  of  memberships  rose  from  $40  to  about  $1,100  within 
\  a  few  days.  This  future  trading  was  on  the  basis  of  warehouse  re- 
\  ceipts  issued  by  the  licensed  warehouses  of  Illinois. 

^  The  Chicago  Board  of  Trade  passed  measures  of  retaliation  against 
the  Milwaukee  Chamber  of  Commerce  by  the  enactment  of  (1)  a  rule 
prohibiting  members  from  executing  orders  either  as  principal  or 
agent  on  any  market  outside  Chicago  where  the  contracts  were 
predicated  on  Chicago  warehouse  receij^ts,®  and  (2)  a  regulation  that 
any  Chicago  warehouse  which  made  application  to  have  its  receipts 
declared  regular  on  any  other  exchange  would  thereby  become 
< ‘irregular’’  for  deliveries  on  future  contracts  on  the  Chicago  Board 
of  Trade.^°  The  board  of  directors  of  the  Milwaukee  chamber  have 
endeavored  at  various  times  to  have  the  Chicago  Board  of  Trade 
cancel  these  restrictions  but  without  success. 

Tlie  period  of  active  future  trading  in  Milwaukee  was,  therefore, 
of  comparative!}"  short  duration.  This  appears  in  the  following 
statement  of  clearing  by  the  Milwaukee  Chamber  of  Commerce 
Clearing  House: 


BuslieJs. 

1904  . 2,790,718,000 

1905  . 2,033,854,000 

1900 .  324,552,000 

]907 . 190,848,000 

1908  .  141,548,000 

1909  .  127,014,000 


8  See  Geiieral  Tables,  Vol.  IV'. 

9  Amendment  to  Rule  IV,  sec.  8. 

10  Requirements  £or  Grain  Warehouses,  par.  10, 1918  rules. 


DEVELOPMENT  OF  OTHER  MARKETS  AND  EXCHANGES.  139 


Subsequently  the  Milwaukee  Chamber  of  Commerce  endeavoroxl 
to  maintain  future  trading  on  the  basis  of  local  warehouse  receipts. 
But  the  lack  of  public  warehouse  facilities  under  State  super¬ 
vision,  and  the  proximity  to  the  Chicago  futures  market,  seriously 
handicapped  such  trading.  Accordingly  the  Milwaukee  commission 
houses,  on  December  23,  1912,  reverted  to  the  use  of  Chicago  ware¬ 
house  receipts  for  Milwaukee  future  trading.  The  yearly  volume  of 
this  trading,  as  shown  in  the  accompanying  statement  furnished 
by  the  clearing  association,  is  considerably  less  than  that  of  cash 
transactions  in  the  same  commodities. 


Table 


35. — Transactions  in  bushels  cleared  through  the  Milwaukee  Clearing  Association 
for  the  three  crop  years  1915-16,  1916-17,  and  1917-18. 


Auf:upt.... 
Soptember 
Ociohev. . . 
>s  ovember. 
J^ocember. 
January. . . 
Febrnarj'.. 

March . 

April . 

May . 

June . 

July., . 


Total 


1915-16 

1916-17 

191 7-1 S 

1,871,000 
1,901,000 
2, 153,000 

1.730.500 

2. 152.500 
2,062,000 
2, 810,000 
2, 739,000 
3,090,000 
3,238,000 
3,037,000 
2, 146, 000 

3,584,000 
2,306,000 
3,203,000 
3,611,000 
3,489,000 
4,058,000 
2,777,000 
5, 449,000 
4,701,000 
3,362,000 
2,595,000 
3,676,000 

3, 105,000' 

3,553,000 

2,636,000 

3,206,000 

3,585,0(XJ 

2,976,000 

3,220.000 

3,050,000 

2,993,000 

4,700,000 

2, 142,000 

2,490,000 

28, 930, 000 

42, 811,000 

37,656,000 

It  is  estimated  by  the  manager  of  the  Milwaukee  Chamber  of  Com¬ 
merce  Clearing  Association  that  normally  40  per  cent  of  the  trans¬ 
actions  in  the  pit  of  the  exchange  are  made  in  wheat,  30  per  cent  ill 
corn,  and  30  per  cent  in  oats.  The  individual  items  usually  are  in 
amounts  of  from  1,000  to  5,000  bushels  and  it  is  very  rare  that  any 
concern  executes  a  single  trade  of  more  than  5,000  bushels.  Usually 
in  order  to  close  out  a  future  transaction  in  Milwaukee  it  is  necessary 
to  execute  a  transaction  through  an  order  on  a.  Chicago  commission 
house.  The  future  contracts  are  for  the  most  part  hedged  through 
Chicago  operators  at  full  commission  rates.  There  are  on  the  Mil¬ 
waukee  board  a  few  pit  traders,  known  as  changers, ’’  who  buy  or 
sell  a  future  at  a  fractional  difference  over  or  under  the  current  price 
on  the  Chicago  Board  of  Trade  and  protect  themselves  by  ordern 
executed  in  the  Chicago  pits.  A  ^'changer’’  who  buys  a  future  in 
the  Milwaukee  pit  usually  gives  an  order  to  sell  a  future,  in  like 
quantity,  in  the  Chicago  pit.  When  he  wishes  to  close  out  the 
transaction  in  Milwaukee,  he  sells  his  commitment  in  Milwaukee  and 
at  the  same  time  buys  the  future  through  a  Chicago  trader.  These 
spreading  operations^  arc  described  elsewhere  (Vol.  V),  and  only 
serve  to  illustrate  the  insignificance  of  the  Milwaukee  futures  market. 

Publicity  and  promotion. — Milwaukee  has  played  a  less  promi¬ 
nent  part  than  the  larger  exchanges  in  promoting  exchtinge  interests 


140  TEKMIXAI^  GRAIN  MARKETS  AND  EXCHANGES. 

throughout  the  country.  A  small  reserve  fund  is  maintained  for 
publicity,  but  this  is  insufficient  to  carry  on  any  serious  campaign. 
A  membership  is  held  in  the  National  Council  of  Grain  Exchanges 
and  it  is  assumed  that  the  contribution  to  this  association  will  suffici¬ 
ently  protect  the  interests  of  the  chamber  in  a  national  way. 

Local  interest  in  the  grain  trade  is  stimulated  by  a  journal  entitled 
'^Doings  in  Grain  at  Milwaukee,’'  which  has  been  published  monthly 
from  the  secretary’s  office  since  1912. 

Section  2.  Minneapolis. 

Origin  of  the  Minneapolis  market.— The  grain  market  at 
Minneapolis  originated  and  developed  around  the  flour  milling  in¬ 
dustry  at  the  Falls  of  St.  Anthony  in  the  upper  Mississippi  River. 
Flour  was  first  produced  in  this  market  at  the  Government  mill  which 
was  established  in  1823,  but  not  operated  on  a  commercial  basis. 
Tlie  first  merchant  mill  was  constructed  in  1854,  and  in  less  than  25 
years  the  number  increased  to  20.  These  milling  facilities,  located 
on  the  eastern  edge  of  the  great  grain  growing  area  of  the  North¬ 
west,  have  continued  to  be  the  primary  factor  in  the  attraction  of 
grain  to  the  Minneapolis  market.  The  presence  of  mill  buyers  ready 
to  pay  premium  prices  on  occasion  has  given  Minneapolis  an  advan¬ 
tage  found  in  no  other  market. 

During  the  period  from  1860  to  1880,  practically  the  only  demand 
for  wheat  at  Minneapolis  had  been  to  supply  the  requirements  of  the 
rapidly  expanding  milling  industry.  The  development  of  a  for- 
war<ling  business  in  the  market  followed  immediately  upon  the  or¬ 
ganization  of  the  chamber  of  commerce  in  1881.  This  appears  from 
the  following  table  of  receipts  and  shipments. 


Table  36. — Receipts  and  shipments  at  Minneapolis,  1876  to  1883. 


• 

Received. 

For¬ 

warded. 

1876  . 

BuaheJs. 
5,0.37,575 
4,500,000 
4,591,000 
7,514,364 
10,264,100 
16.317,250 
18,927,500 
22, 124, 715 

Bushels, 
48,0.30 
20,200 
195,300 
177,400 
133,600 
514, 750 
2, 105,000 
2, 125, 728 

1877  . 

1878  . . . 

1879  . 

1880  . : . 7’. 

188i  . 

1883 . . 

188.1  . . . 

The  Minneapolis  Chamber  of  Commerce. — Prior  to  1881  the 
millers  had  organized  the  Minneapolis  Millers’  Association  as  a  pur¬ 
chasing  agency  to  insure  an  adequate  supply  of  wheat  from  the 
sparsely  settled  areas  of  the  Northwest.  Their  agents  purchased 
grain  from  the  country  elevators  which  had  been  established  by  line 
companies  along  the  railroads  penetrating  the  Northwest.  In  order 
to  insure  adequate  supplies  to  the  mills,  agents  of  this  association 


5 


DEVELOPMENT  OF  OTHER  MARKETS  AND  EXCFIANGES.  141 

wore  stationed  at  the  country  shipping  points  and  in  some  instances 
country  elevators  appear  to  have  been  operated  by  the  mills  them¬ 
selves.  The  association  handled  grain  only  for  the  consumption  of  its 
members,  and  tiie  consignment  business  prior  to  1880  was  insignifi¬ 
cant.  Tne  flow  of  shipments  during  the  early  yeai*s  was  almost 
wholly  for  milling  consumption.  Even  for  the  year  1881  the  statis¬ 
tics  show  16,000,(^00  bushels  of  wheat  received  and  flour  shipments 
of  over  3,000,000  barrels;  which  indicates  that  fully  90  per  cent  of 
the  wheat  received  in  that  year  was  consumed  by  the  local  mills. 

The  following  statement  published  by  Col.  George  D.  Rogers,  the 
first  secretary  and  later  the  general  counsel  of  the  Ghamber^of  Com¬ 
merce,  illustrates  the  situation  at  Minneapolis  prior  to  the  establish¬ 
ment  of  an  exchange  where  producers’  grain  could  be  sold  on  commis¬ 
sion  : 

When  I  came  to  Minneapolis  in  1873  from  Calmar,  Iowa,  where  I  had  been  buying 
and  shipping  grain,  the  grain  trade  was  in  the  grip  of  the  Minneapolis  Millers’  Associa- 
don.  The  need  of  an  organized  Chamber  of  Commerce  was  pressing,  yet  it  was  almost . 
impossible  to  convince  the  grain  men  themselves  that  such  an  organization  would  be 
successful.  Time  and  again  they  answered  my  urgent  pleas  for  a  grain  exchange  by 
declarations  that  only  cities  located  at  lake  or  seaports  with  water  transportation 
were  entitled  to  an  exchange.  I  many  times  answered  them  by  saying:  “Show  me 
anothei  W’ater-power  site  such  as  St.  Anthony  Falls,  capable  of  suppljung  current  for 
the  operation  of  countless  flour  mills  and  I  wdll  show  you  the  location  for  a  grain 
exchange.” 

This  incident  will  impress  upon  grain  dealers  of  1917  just  the  conditions  we  were 
forced  to  meet.  Shortly  after  coming  to  Minneapolis  I  sent  out  circulars  to  all  former 
patrons  announcieg  that  I  would  handle  their  grain  on  commission.  A  few  days  later 
came  a  letter  from  a  farmer  at  Luverne  informing  me  that  he  had  shipped  threp  cars  of 
No.  ]  wheat,  such  as  was  desired  by  the  millers.  When  the  cars  arrived  I  took  a  sample 
from  each,  went  to  the  “agent”  of  the  Millers’  Association  and  asked  for  a  price. 

“  Where  did  this  grain  come  from?  ”  he  asked.  “  I  thought  it  was  quality  of  grain  rather 
than  point  of  shipment  you  were  seeking,  ’ ’  was  my  reply.  He  then  explained  that  if 
the  grain  was  shipped  to  me  from  a  station  W'here  the  millers’  association  had  an  agent 
the  nulls  would  not  buy  it.  They  had  an  agent  at  Luverne  and  he  refused  to  buy  it! 
Nothing  was  left  for  me  to  do  but  ship  it  to  Chicago.  The  wheat  was  loaded  in  cars 
which  the  railway  refused  to  allow  to  leave  their  lines.  Hence  I  requested  that  three 
larger  cars  be  parked  alongside  the  grain  cars,  hired  half  a  dozen  men  with  shovels  to 
transfer  it,  and  went  to  bed.  Next  morning  when  I  drove  to  the  siding  I  found  the 
millers’  agent  on  deck.  He  askedyc^diat  I  was  doing  with  the  wheat  and  then  offered 
to  take  it  off  my  hands  at  the  price  I  had  quoted  the  preceding  day.  I  refused  the 
offer.^^ 

The  Minneapolis  Chamber  of  Commerce  was  incorporated  in  1881 
under  a  Minnesota  statute  of  that  year  authorizing  the  incorporation 
of  such  local  associations  for  the  advancement  of  the  general  trading 
interests  of  the  community.  They  proceeded  at  the  outset  to  estab¬ 
lish  a  grain  exchange  whereby  the  members  might  meet  on  a  common 

“  Pamphlet  entitled,  “Minneapolis  Golden  Jubilee,”  June,  1917,  p.  22. 


142 


terminal  grain  markets  and  exchanges. 


trading  floor,  subject  to  definite  rules  and  regulations,  to  buy  and  sell 
carload  shipments  of  grain  from  the  northwestern  area.  Produc¬ 
tion  had  increased  bevond  the  immediate  demands  of  the  millers 
and  the  old  Millers’  Association  was  absorbed  and  superseded  by  the 
newer  trading  body.  In  1885  the  secretary  reported  that  ^'millers 
in  the  city  and  country  who,  in  previous  years,  made  no  purchases 
on  ’Change  have  become  large  buyers.” 

Memhersliip  privileges  and  requirements. — The  exchange  associa¬ 
tion  organized  in  Minneapolis  differed  from  that  organized  in  Chicago 
in  this  respect:  The  Chicago  Board  of  Trade  offered  at  the  outset  a 
trading  floor  to  all  manner  of  merchants  in  the  city  and  tended  in 
later  years  to  specialize  in  grain  because  that  commodity,  more  than 
any  other,  was  marketed  through  the  exchange  factors.  The  Min¬ 
neapolis  Chamber  of  Commerce  was  organized  by  middlemen  in  the 
grain  trade,  and  while  incorporated  under  a  general  commercial  asso¬ 
ciation  statute, took  on  from  the  outset  the  characteristics  of  a 
•modern  grain  exchange. 

Tlic  538  members  listed  at  the  close  of  1881  included  commission 
merchants,  jobbers,  and  millers.  The  total  membership  of  the  asso¬ 
ciation  has  never  varied  to  a  great  extent  from  this  number.  It 
appears  that  from  1883  to  1914  the  number  of  members  was  limited 
by  rule^*  to  550.  (See  Ch.  V,  p.  203.) 

ddie  market  value  of  memberships  has  been  influenced  by  the 
amount  of  property  owned  by  the  association  as  well  as  by  the  value 
of  trading  privileges.  On  vSeptember  4,  1901,  the  building  com¬ 
mittee  reported  that  the  erection  of  the  new  building  had  increased 
the  market  value  of  memberships  from  $500  to  $2,500,  making  a 
total  increase  in  the  income  of  the  association  of  $1,000,000.  As 
noted  in  Chapter  IX,  the  holder  of  a  membership  certificate  in  Min¬ 
neapolis  is  protected  in  his  property  interest  in  case  of  expulsion, 
which  is  cpiite  the  opposite  of  the  rule  followed  for  a  long  time  on 
the  Chicago  Board  of  Trade. 

The  present  market  value  of  memberships  in  the  Minneapolis 
Chamber  is  approximately  $5,000.  The  ^hnitiation  fee”  is  fixed  at 
$7,500  (see  Ch.  IX)  and  the  annual  membership  assessment  has  been 
$70  in  recent  years. 

The  trading  groups. — The  trading  interests  of  the  members 
appear  in  the  following  table : 

12  Annual  Report  for  the  year  188  j,  p.  27.  - 

13  See  Chap.  V,  p.  191. 

w  Voted  by  directors  in  188J.  (See  Weld:  Marketing  of  Farm  rroducts,  p.  271.) 


DEVELOPMENT  OF  OTHER  MxVRKETS  AND  EKCHANGES.  143 


Table  37. — Classification  of  resident  members  in  the  grain  trade,  Minneapolis  Chamber 

of  Commerce,  Dec.  31,  1917 . 


• 

Engaged 

exclu¬ 

sively. 

Engaged 

primarily. 

Total. 

Second¬ 

arily. 

Cash  commissions . 

0 

157 

, 

112 

IVrminalelevators . 

2.5 

91 

116 

5;; 

Other  dealers  J . 

10 

3 

13 

14 

(Consumers  2 . 

59 

3 

62 

7 

Line  elevators . 

26 

43 

69 

68 

Shippers  3 . 

8 

4 

12 

58 

1’  utiirc  commissions  < . 

31 

4 

35 

283 

159 

305 

464 

.59.5 

Out  of  town  members;  Other  exchanges,  38:  surround- 

ing  country,  34 .  ^ 

79 

Not  in  grain  business . . 

09 

. 

558 

1  Feeders  and  all  not  included  in  other  classes.  «  Operating  without  terminal  elevator  facilit  ies 

2  Millers,  maltsters,  linseed  crushers,  etc.  *  Including  one  wire  house. 


As  the  foregoing  table  indicates,  the  cash  commission  men  arc 
clearl}’  the  predominant  group,  although  (for  reasons  peculiar  to 
the  market)  none  of  them  are  listed  as  exclusively  engaged  in  the 
commission  business.  It  will  be  noted  that  the  terminal  elevator 
group  is  unusually  large.  (Cf.  Chicago  classification,  Ch.  III.)  This 
may  bo  explained  by  the  enormous  receipts  of  grain  (especially  spring 
wiieat) ;  the  fact  that  the  milling  demand  greatly  exceeds  mill  storage 
ca])acity;  and  by  the  terms  of  the  Minnesota  public  warehouse  law 
wliich  permits  licensed  elcvatoi*s  to  store  their  own  grain  in  public 
warehouses.^®  The  large  consumers'  group  (mostly  mill  buyers)  ex¬ 
plains  to  some  extent  the  size  of  the  two  preceding  classes  and  is  a 
unique  feature  of  the  market.  The  line  elevators  still  comprise  a  sub¬ 
stantial  group,  although  the  68  members  secondarily  engaged  in  the 
line-house  business  are  largely  terminal  elevator  operators. 

The  future  commission  class  is  small  when  considered  as  an 
e.xchisive  profession.  However,  283  membei-s  were  reported  as 
engaged  secondarily  as  future  traders  (most  of  these  being  primarilv 
cash  commission  men),  so  that  this  secondary  interest  must  be  con¬ 
sidered.  There  is  only  one  private-wire  house  with  a  main  office  at 
Minneapolis.  The  rules  and  regulatioiis  under  which  these  traders  ' 
operate  are  discussed  in  Chapter  V. 

The  most  significant  change  in  the  status  of  the  trading  groups  in 
Minneapolis  has  been  the  increase  in  the  number  of  commission  men 
and  a  corresponding  decrease  in  the  number  of  line  elevator  compa¬ 
nies.  The  manager  of  ^^The  Grain  Bulletin'’  at  Minneapolis,  which 
supplies  the  tributary  areas  with  price  information,  reports  that 
whereas  'Gn  1907-1908,  75  per  cent  of  the  card  quotations  were  sent 
to  elevators  controlled  by  line  companies,  to-day  (1919)  almost  75 
per  cent  are  sent  to  the  operators  of  farmer  and  independent  eleva- 


is  General  Statutes  of  Minnesota,  1913,  section  4482 


144  TEIIMINAL  GRAIN  MARKETS  AND  EXCHANGES. 

tors.”  It  is  asserted  by  two  well-known  commission  houses  of 
Minneapolis  that  the  growth  of  the  commission  business  has  been 
closely  related  to  the  farmers^  cooperative  elevator  movement,  and 
that  the  commission  men  have  financed  and  otherwise  assisted  farmers’ 
elevator  companies  and  built  up  a  large  consignment  business  at  the 
ex]>ense  of  the  line  companies. 

Enforcement  of  rules. — -In  enforcing  its  rules  and  disci¬ 
plining  members  for  uncommercial  conduct  the  Minneapolis  chamber 
has  been  quite  as  well  supported  by  court  decisions  as  has  been 
the  Chicago  Board  of  Trade.  The  authority  of  the  former  asso¬ 
ciation  to  discipline  members  for  refusal  to  arbitrate  has  been  affirmed 
in  a  leading  case,^®  in  the  following  language: 

*  -X-  -X-  Because  such  by-laws  and  rules  give  to  the  board  of  diicctors  power  to 
discipline  only  when  a  member  refuses  to  arbitrate  as  he  has  agreed  to  do  in  considera¬ 
tion  of  the  rights  and  privileges  of  membership,  and  no  attempt  is  made  to  deprive 
him  of  an  op]X)rtunity  to  litigate  his  differences  in  the  ordinary  way,  they  are  not 
unreasonable,  coercive,  violative  of  constitutional  rights,  or  contrary  to  public  policy. 

The  cash  grain  market. — -The  cash  grain  market  on  the  Min¬ 
neapolis  exchange  has  been  largely  on  a  sample  (rather  than  grade) 
basis,  owing  to  the  demand  of  mill  buyers.  For  this  reason  the  com- 
tnission  houses  are  the  largest  and  most  active  operatoi’s  on  the  selling 
side  of  the  market. 

Commission  firms  organized  the  chamber  of  commerce  in  1881,  and 
thereupon  entered  the  field  and  soon  displaced  the  Millers’  Association, 
which  had  controlled  the  marketing  of  country  grain  prior  to  that 
time.  In  some  instances  they  sent  out  solicitors  who  assisted  the  organ¬ 
ization  of  independent  and  cooperative  companies  in  the  country  C® 
and  they  developed  an  active  consignment  business  in  the  terminal. 
Their  financial  assistance  to  country  elevators  was  a  strong  competi¬ 
tive  weapon  and  the  prices  on  the  Minneapolis  exchange  encouraged 
country  dealers  to  ship  on  consignment.  To-arrive  buying  was  never 
such  an  issue  between  the  commission  men  and  the  terminal  elevators 
in  Minneapolis  as  it  was  in  Chicago,  one  reason  being  that  the  com¬ 
mission  men  in  Minneapolis  organized  to  handle  country  grain  both 
on  a  consignment  and  to-arrive  basis  and  prevented  any  considerable 
trading  off  exchange.  During  the  period  1913-1917  about  65  per 
cent  of  all  grain  received  came  in  on  consignment  and  35  per  cent 
was  bought  direct  (7  per  cent  to-arrive  and  28  per  cent  through  line 
companies’  stations). 

Milling  consumption,  including  that  of  country  mills  accessible 
to  Minneapolis,  has  always  been  the  outstanding  fact  in  this  market. 
The  total  output  of  the  Minneapolis  flour  mills  for  the  crop  year 

I’The  Gee-Lewis  Co.  and  the  Gill  ,11 1  m  Remund  Co. 

‘8  Evans  v.  Chamber  of  Commerce,  91  N.  W.  8  (Minn.,  1902). 

w  So  stated  by  ofheers  of  the  Giirillan-Remimd  Co.  and  the  Gee-Lewis  Co.,  commission  merchants. 


DEVELOPMENT  OF  OTHER  MARKETS  AND  EXCHANGES.  145 

ending  August  31,  1917,  amounted  to  16,235,330  barrels,  representing 
a  milling  demand  for  about  75,000,000  bushels  of  wheat,  while  the  6 
linseed-oif  mills  had  an  annual  consuming  capacity  of  about  15,000,000 
bushels  of  flaxseed.  The  estimated  flour-milling  capacity  of  Min¬ 
neapolis  is  91,000  barrels  per  day.  It  is  reported  that  there  are  out¬ 
side  milling  interests  located  at  points  in  Minnesota,  Iowa,  Wisconsin, 
and  Illinois  whose  purchases  in  Minneai)olis  account  for  a  substantial 
proportion  of  the  shipments.  Car  shipments  for  these  outside 
mills  are  consigned  to  Minneapolis  and  sold  on  the  exchange  floor 
l)y  sample  to  the  mill  buyers.  These  facts  explain  why  Min¬ 
neapolis  is  the  largest  cash  market  for  wheat  and  flaxseed  in  the 
United  States. 

The  Washburn-Crosby  Co.,  which  claims  a  daily  capacity  of  50,000 
barrels  of  flour,  states:  “We  far  prefer  to  purchase  all  our  grain  on 
track  at  Minneapolis,  as  we  have  the  opportunity  of  personally  examin¬ 
ing  the  (juality  of  the  grain  before  purchase. 

During  the  five-year  period  1913-1917  not  more  than  30  per  cent 
of  the  wheat  received  at  Minneapolis  was  shipped  out  by  local  traders, 
leaving  70  per  cent  for  local  consumption.  By  reference  to  the  table 
of  wheat  consumption  it  is  clear  that  far  more  wheat  is  consumed  by 
Minneapolis  mills  than  is  received  at  any  other  terminal  in  the  United 
States.  (See  Table  8.) 

The  consumption  of  the  other  cereals  is  much  smaller.  The  average 
proportion  consumed  of  all  grains  received  (five-year  average,  1913- 
1917)  was  about  47  per  cent.  (Vol.  IV.) 

It  appears,  therefore,  that  throughout  the  development  of  the  Minne¬ 
apolis  market  there  have  been  three  rather  distinct  elements:  The 
receivers  (or  commission  men),  the  mill  buyers,  and  the  terminal  and 
line  elevator  operators.  The  first  two  classes  represent,  respectively, 
the  selling  and  bu3dng  interests.  The  third  class  trades  on  both  sides 
of  the  market.  \ 

The  futures  market. — -Trading  in  grain  futures  was  introduced 
in  Minneapolis  in  1890  and  Avas  for  25  years  confined  to  contracts 
for  spring  wheat. Future  trading  in  oats  became  active  in  1917 
although  there  was  an  attempt  to  stimulate  trades  in  this  cereal  as 
early  as  1903.^^  Future  trading  in  barley  and  rye  was  practical^  non¬ 
existent  until  1918  when  it  was  carried  on  with  varying  activity  under 
war  conditions. 

- -  I  ,  . .  I  -  I  - • - - - 

Grain  for  the  Buffalo  mill  is  purchased  at  Duluth.  • 

21  For  the  volume  of  this  trading  see  Vol.  V  of  the  report. 

22  At  a  conference  of  gram  men  held  in  the  chamber  Nov.  17,  1903,  the  following  agreement  was  drawn  to 
be  circulated  and  sent  to  the  members  to  sign:  "  For  the  purpose  of  stimulating  trading  in  oat  futures  tho 
undersigned  agree  that  as  soon  as  notice  is  given  them  that  the  board  of  directors  of  the  chamber  of  commerce 
have  approved  the  method  devised  for  the  establishing  of  an  oat  market  they  will  on  every  business  day  for 
the  next  succeediug  30  days  either  buy  or  sell  in  the  open  pit  at  least  5,000  bushels  of  oats  for  future  delivery. 

168693®— 20 - 10 


146 


TERMINAL  GRAIN  AIARKETS  AND  EXCHANGES. 


Two  pits  are  operated  on  the  Minneapolis  excliange  as  the  photo¬ 
graph  (opposite  p.  140)  shows. 

The  clearing  association,  which  was  organized  in  1891’,  holds  a 
membership  in  the  Chamber  of  Commerce  hut  is  operated  as  private 
corporation  linancially  independent  of  the  exchange.  The  member¬ 
ship  includes  slightly  more  than  100  members  of  the  Chamber  of 
Commerce  and  no  others.  Outstanding  capital  stock  was  about 
$25,000  in  1918.  The  methods  followed  in  clearing  future  trades  are 
shown  ill  the  following  extracts  from  the  rules  of  the  association. 

Rule  Y1. — ^VIethod  of  Cleatung. 

Section  1.  All  transactions  made  in  grain  during  the  day  shall  be  cleared  tlircaig^ 
the  clearii^  association,  unless  otherwise  agreed  upon  by  the  parties  to  the  transaction. 
Upon  the  acceptance  by  the  manager  of  such  transactions,  the  clearing  association 
/assumes  the  position  of  buyer  to  the  seller  and  seller  to  the  buyer  in  respect  to  such 
^  transactions  and  the  last  settling  price  shall  be  considered  as  the  contiact  price. 

Rule  VII. 

r’-? 

SscTioN  1.  The  manager  of  this  association  may  call  from  purchasers  below  the 
market  and  from  sellers  above  the  market  such  reasonable  margins  as  in  his  judgment 
^  !  may  be  necessaiy  for  the  protection  of  the  association.  Such  margins  to  be  placed  to 

the  credit  of  the  party  paying  the  same  and  to  be  retained  by  the  manager,  in  wdiole 
or  in  part,  as  he  may  deem  necessary  until  the  trades  for  which  such  margins  have  been 
_ paid  have  been  settled.  *  *  '' 

Publicity  and  promotion  of  exchange  interests.  Minnctipolis 
has  joined  with  Chicago,  Kansas  City  and  the  other  larger  exchanges 
in  combating  bucketshop  activities,  in  warding  off  legTslation  con¬ 
sidered  detrimental  to  the  exchange,  and  in  presenting  the  exchange 
point  of  view  to  the  public  through  the  press.  This  work  in  Minneapolis 
in  recent  years  has  been  closely  connected  with  a  controversy  with 
the  Equity  Co-operative  Exchange.  Inasmuch  as  this  controversy  is 
the  subject  of  a  legal  process  before  the  Federal  Trade  Commission 
it  is  not  proper  to  consider  the  matter  in  this  place. 

The  records  indicate  that  the  office  of  the  Grain  Bulletin,'  of  which 
F.  R.  Durant’  is  manager,  although  not  officially  connected  with 
the  chamber,  yet  constitutes  an  active  agency  in  the  promotion  of 
exchange  interests  before  legislative  bodies.  The  following  extracts 
from  correspondence  will  illustrate : 

March  12.  1915. 

Mr.  F.  C.  Van  Busen,  Mr.  C.  M,  Harrington,  Mr.  G.  F.  Ewe. 

Gentlemen  ;  As  a  member  of  a  committee  which  has  for  several  years,  been  a  close 
observer  of  legislative  matters  in  South  Dakota,  I  desire  to  state  that  during  all  that 
period  legislative  matters  in  that  State,  so  far  as  they  related  to  the  grain  trade,  have  . 
been  more  closely  watched  and  more  efficiently  handled  than  in  any  State  in  the  IS  est 
or  Northwest  with  which  I  am  at  all  familiar. 


25  Sco  Vol.  V,Ch,  V,  fora  comparative  analysis  of  clearing-house  methods. 


DEVELOPMENT  OF  OTIIEE  MAEKKTS  AND  EXC'HANGES.  147 


t 


In  tills  connection  it  is  appropriiUe  to  say  tliat  the  watchful  eye  and  the  ceaselesa 
activity  of  Mr.  F.  R.  Durant  in  connection  with  legislative  matters  has  been  of  the 
greatest  value  to  the  grain  trade  of  the  Northwest,  and  I  know  of  no  one  who  could 
surpass,  if  indeed  they  could  equal  his  a  igilance  and  valuable  achievements  in  this 
connection. 

Yours,  very  truly, 

J.  li.  McCaull,  Presklnit. 


Mr.  F.  E.  Duhant, 

Chamber  of  Commerce,  Cily. 


June  13,  1917. 


Dear  Sir:  Mr.  Martinson  was  hero  this  morning,  talking  about  the  campaign  to 
line  up  the  complexion  of  the  next  House  of  Representatives  and  the  Senate  in  this 
State.  *  *  * 

I  understand  F.  B.  Snyder  is  in  line  for  nomination  as  senator  from  tins  district  in 
case  Knute  Nelson  concluded  in  1918  that  he  does  not  want  the  honor  again,  and  would 
suggest  that  you  take  this  matter  up  :v\-ith  the  proper  people  and  advise  me  whether  or 
not  we  can  have  a  meeting  for  the  privilege  of  getting  in  line  on  this  matter,  which 
probably  is  of  some  importance,  or  'will  be,  particularly  to  1918. 

Yours  trulv, 


C.  A.  Magnuson,  Fresident, 


[Circular  letter.] 

October  20,  1913. 

Please  attend  meeting  in  room  902  this  afternoon  at  3  o  ’clock. 

The  Railroad  Fommissioners  of  North  Dakota  have  called  a  hearing  on  the  anti- 
discrimination  law,  and  the  object  of  this  meeting  is  to  determine  what  steps  shall  bo 
taken  in  reference  thereto. 

F.  R.  Durant. 


The  minutes  of  the  hoard  of  directors  for  April  25,  1917,  show  that 
the  board  audited  and  approved  for  payment  and  invoice  to  the  Grain 
Bulletin  for  $996.56  ^^on  account  of  printing,  distribution  of  petitions, 
etc.,  in  connection  with  the  1917  session  of  legislature.^’ 

The  central  executive  office  for  all  activities  of  the  chamber  is 
that  of  the  secretary.  From  that  point  a  constant  scrutiny  is  main¬ 
tained  not  only  on  bills  and  resolutions  introduced  in  Federal  and 
State  legislatures,  but  on  appointments  to  official  positions  affecting 
the  interests  of  the  exchange.  Such  publicity  and  legislative  work  is, 
of  C/Ourse,  only  similar  to  practice  extending  throughout  commercial 
circles  in  the  United  States. 

In  a  letter  of  May  26,  1913,  the  secretary  called  upon  a  local  elevator 
company  for  a  subscription  of  $25  for  publicity  work.  He  announced 
that  the  chamber  was  about  to  undertake  a  “campaign  of  education” 
throughout  the  Northwest  to  remove  misunderstandings  with  regard 
to  the  methods  of  the  chamber  of  commerce.  It  w^as  stated  that  this 
campaign  was  induced  by  the  recent  attack  on  the  chamber  through 
the  legislature,  and  it  was  hoped  that  these  “expensive  and  trying 
e.vperiences  ”  could  be  avoided  when  the  public  at  large  should  be 
better  informed.  The  letter  stated  that  by  authority^of  the  directors 


148 


terminal  grain  markets  and  exchanges. 


the  ])resident  of  the  chamber  had  appointed  a  publicity  committee  to 
solicit  volimtary  subscriptions  from  the  members. 

^  *  the  committee  has  assessed  the  members  of  this  organization  various 

amounts  in  harmony  with  the  volume  of  business  transacted. 

In  November,  1913,  when  the  North  Dakota  high  schools  contem¬ 
plated  a  debate  on  the  (piestion  of  the  State  of  North  Dakota  engaging 
in  the  terminal  elevator  business,  the  secretary  prepared  an  article 
stating  the  case  against  State  operation,  which  was  published  in  the 
December  issue  of  the  National  Grain  Grower.  The  article  was 
accepted  by  the  journal  with  the  promise  that  they,  would  mail  a  copy 
of  this  issue  to  each  high  school  in  the  State  as  well  as  to  every  elevator 
in  the  State.  “I  think  it  best  to  run  it  without  your  name,  so  will  do 
so  if  it  does  not  make  any  difference  to  you,”  said  the  editor. 

The  records  of  the  chamber  show  that  on  July  21,  1914,  they  paid 
the’ National  Grain  Grower  .$2,500  for  subscriptions  and  additional 
copies  during  the  10  months  previous. 

Interlocking  interests,  1918. — Although  the  concerns  represented 
on  the  Minneapolis  Chamber  of  Commerce  are  listed  as  “firm  and 
corporation  members,”  this  does  not  mean  that  each  trading  house 
is  allowed  to  have  onl}"  one  of  its  employees  on  the  trading  floor. 
For  example,  no  less  than  7  of  the  employees  of  the  Washburn- 
Crosby  Co.  are  listed  in  the  annual  reports  as  members  of  the  ex¬ 
change.  Likewise,  the  Armour  Grain  Co.  has  5  members  in  good 
standing.  The  Van  Dusen-Harrington  Co.,  in  addition  to  its  presi¬ 
dent,  has  13  officers  and  employees  who  are  members  of  the  exchange. 

In  fact,  there  exists  a  close  community  of  interests  among  the 
more  heavily  capitalized  companies,  and  also  between  these  com¬ 
panies  and  three  large  Minneapolis  banks;  that  is,  the  First  and 
Security  National,  the  Northwestern  National  and  the  Midland  Na¬ 
tional.  These  interlocking  interests  also  extend  into  the  Duluth 
Board  of  Trade,  since  many  of  the  larger  firms  maintain  offices  in 
both  markets. 

A  considerable  concentration  of  control  over  memberships  appears 
from  an  analysis  of  the  interests  of  the  officers  and  employees  of  large 
concerns,  such  as  those  just  mentioned.  Table  38  (following)  shows 
the  voting  power  on  the  exchange  of  the  Washburn-Crosby  interests, 
based  on  the  assumption  that  all  of  the  companies  in  this  interlock¬ 
ing  group  have  identical  interests,  and  that  they  would  be  subject  to 
the  control  of  the  officers  of  the  Washburn-Crosby  Co.  The  remain¬ 
ing  13  tables  show  the  memberships  largely  controlled  or  influenced 
by  the  trading  interests  under  which  they  are  listed  (1918), 


DEVELOPMENT  OF  OTHER  MARKETS  AND  EXCHANGES.  149 

Table  —Memberships  of  Washburn- Crosby  interests  at  Minneapolis  and  Duluth. 
(Members  of  Minneapolis  Chamber  of  Commerce  in  roman;  members  of  Duluth  Board  of  Trade  in  italic.] 


Brown  Grain  Co. — Continued. 

E.  W.  Stiihr. 

0.  G.  Williams. 


Washbiirn-Crosby  Co. : 

Clyde  H.  Burdick. 

W.  G.  Crocker. 

E.  M.  Crosby." 

Arthur  M.  Hartwell. 

P.  D.  McMillan,  jr. 

Walter  H.  Mills. 

John  Washburn. 

W.  H.  Dunwoody. 

St.  Anthony  Elevator  Co.: 

Harold  O.  Hunt. 

John  A.  Mull. 

John  Washburn. 

St.  Anthony  &  Dakota  Elevator  Co.: 
C.  D.  Junkins. 

Geo.  K.  Labatt. 

Clarence  A.  Brown. 

Rocky  Mountain  Elevator  Co. : 

Jas.  F.  Bell. 

Brown  Grain  Co.; 

L.  E.  Brown. 

Donald  Bruce. 

Thos.  V.  Colemen, 

Harold  C.  Hall. 

P.  E.  King. 


Barnum  Grain  Co.  : 

Thornton  W.  Hall. 

G.  G.  Barnum. 

G.  G.  Barnum,  jr. 

Great  Western  Grain  Co. : 

H.  F.  Douglas. 

E.  E.  Mitchell. 

E.  E.  Mitchell. 

Northeast  Feed  Mill  Co.; 

Eberhardt  J.  Gulden. 

Huhn  Elevator  Co. : 

A.  Huhn. 

Alex  G.  Huhn. 

Imperial  Elevator  Co.  and  Hatton 
Grain  Co. : 

Raymond  J.  Allen. 

Morgan  Burke. 

P.  L.  Howe. 

P.  L.  Howe. 

Heising  Grain  Co.; 

Chas.  D.  White. 


Table  39. — Memberships  of  Van  Dusen- Harrington  interests  at  Minneapolis  and  Duluth. 


jMembers  of  Minneapolis  Chamber  of  Commerce  in  roman;  members  of  Duluth  Board  of  Trade  m  italic.] 


Van  Dusen-Harrington  Co.; 
J.  P.  Andrews. 

L.  C.  Andrews. 

C.  R.  Davis. 

A.  W.  Goetz. 

M.  E,  Grant. 

C.  M.  Harrington. 

H.  E.  Hughes. 

Edward  L.  McNulty, 
Frank  F.  Murray. 

Paul  C.  Rutherford. 
John  D.  Stone. 

W.  C.  Wheelock. 

G.  G.  Williams. 

G  .  W.  Van  Dusen  Co. ; 

Jas.  B.  Forbes. 

Chas.  B.  Rngers. 

F.  C.  Van  Dusen. 

John  J.  Wilson. 

Ward  A.  Brown. 

A.  W.  Friclc. 

C.  M.  Harrington. 


W.  B.  Joyce. 

J.  W.  JaeJeson. 

M.  G.  Winsted. 

National  Elevator  Co. ; 

L.  D.  Marshall. 

Herbert  E.  Marshall. 
Atlas  Elevator  Co. : 

D.  G.  Kennedy. 

J.  A.  Reed. 

Crescent  Elevator  Co.: 

G.  F.  Ewe. 

Clarence  Mathewson. 
Pioneers  Steel  Elevator  Co. : 

Walter  G.  Hudson. 
Interstate  Elevator  Co. : 


Star  Elevator  Co. : 


Sheffield-King  MillingiCo.; 
Edwin  J.  L.  Judd. 

H.  H.  King. 


150 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


Commander  Mills  Co.: 

W.  J.  Kiissoll. 
State  EleA'ator  Co.: 


Tabt.e  40. — Memberships  of  G rcporp- Jenni-son  Co.  mteresls  at  Minneapolis  and  Duluth. 
[Mpiinbers  of  Minneapolis  Chamber  of  Commerce  in  roman;  members  of  Duluth  Board  of  Trade  m  italic^ 

Gregory- Jemiison  Co.:  Gregoiy-Cook  &  Co.: 

Lawrence  S.  Gregory. 

\V.  A.  Gregory. 

IF.  D.  Gregory. 

Carter,  Sammis  &  Co.: 

Carl  I,  Rollins. 

T.  A.  Sammis. 

W,  D.  Sammis. 

T.  A.  Sammis. 

Midway  Elevator  Co : 

Merton  W.  Sowle. 

Powers  Elevator  Co.: 

AV.  K.  Powers. 

Duliitli  Universal  Milling  Co.: 

A.  L.  Goodman. 


Big  Diamond  Mills  Co. : 

B.  B.  Sheffield. 
Empire  Milling  Co,: 

AV.  H.  Siiddnth. 

AV.  J.  Jennison  Co.: 

AV.  G.  Gooding. 
Century  Milling  Co.: 
AA".  D.  Gregory. 


Table  41. — Memberships  of  Peavcy  interests  at  Minneapolis  and  Duluth. 
[Members  of  Minneapolis  Chamber  ofComtaerce  in  roman;  members  of  Duluth  Board  of  Trade  ia  italte4 


F.  H.  Peavey  &  Co.: 

F.  B.  AA^ells. 
Monarch  Elevator  Co.: 
H.  G.  Dickey. 
AAmi.  L.  Smith. 

A.  Stewart. 

Alex  Stewart. 

J.  A.  Schumacher. 


Globe  Elevator  Co.: 

A.  L.  Searle. 

E. -N.  Bradley. 

J.  T.  Lundquist. 

W.  D.  Newcomb. 

A.  L.  Searle. 

Omaha  Elevator  Co.: 

Clias.  F.  Deaver. 
British-Ainerica  Elevator  Co.: 

F.  T.  Heffelfinger. 


Tabi-e  42. — Memberships  of  Cargill  Commission  Co.  interests  at  Minneapolis  a^id 

Duluth. 

[Members  of  Minneapolis  Chamber  of  Commerce  in  roman;  members  of  Duluth  Board  of  Trade  in  itati^.j 


Cargill  Commission  Co.: 
Harold  J.  Bates. 

*  Austin  S.  Cargill. 

J.  B.  Cooper. 

Fred  AA^.  Drum. 

E.  J.  Grimes. 

John  C.  Tresise. 

N.  C.  Clarlc. 

F.  E.  Lindahl. 

J.  II.  McMillan. 

A.  M.  Prime. 


Cargill  Elevator  Co.: 

Goo.  H.  Feetham. 

Robert  M.  Johnston. 

J.  H.  McMillan. 

A.  F.  Owen. 

Superior  Terminal  Elevator  Co.: 


Minneapolis  Seed  Co.: 

D.  D.  McMillan. 
Victoria  Elevator  Co.: 
Robert  G.  Cargill. 
David  S.  Levin. 
R.  G.  Cargill. 


DEVELOPMENT  OF  OTHER  MARKETS  AND  EXCHANGES.  151 


Table  43. — Memberships  of  niUhimj  Flour  Milts  Co.  interests  at  MimieapoUs  and 

Duluth. 

[Members  of  Minneapolis  Chamber  of  Commerce  in  roman;  members  of  Duluth  Board  of  Trade  in  italic;] 


Pillsbiiry  Flour  Mills  Co.: 

J.  W.  Avery. 

Edw.  M.  Kaiitli. 

A.  C.  Loring. 

A.  F.  Pillsbury. 

Clias.  S.  Pillsbury. 

Lester  R.  Stevens. 

A.  C.  Loring. 

Empire  Elevator  Co.: 

.T.  R.  McMillan. 

E.  N.  Osborne. 

Edward  N.  Osborne. 
Atlantic  Elevator  Co.: 

G.  C.  Bagley. 

C.  M.  Case. 

Union  Terminal  Elevator  Co.: 
AV.  F.  Brittain. 

R.  AV.  Little. 


Kellogg  Commission  Co.: 

Alvin  F.  Campbell. 

Herbert  A.  Dew. 

E.  S.  Ferguson. 

Royal  Elevator  Co.  and  Geo.  C.  Bagley 
Elevator  Co.: 

R.  C.  Bagley. 

C.  M.  Case. 

I\.  C.  Bagley. 

Homestead  Elevator  Co.: 

F.  C.  Riebe. 

Minneapolis  &  Northern  Elevator  Co  : 

J.  S.  Pillsbury. 

Columbia  Elevator  Co.:  ' 

F.  AV.  Commons. 

H.  AA^.  Commons. 

A.  H,  Thompson. 

Victor  A’'on  Ende. 

J.  F.  AATiallon. 

F.  W.  Commons. 


Table.  AA.—  Memberships  of  E.  S.  Woodworth  Co.  interests  at  Minneapolis  and  Duluth. 
(Members  of  Mumeapolis  Chamber  of  Commerce  in  roman;  members  of  Duluth  Board  of  Trade  in  italic.] 


E.  S.  AA^oodwortli  Co.: 
J.  C.  Geggie. 

L.  B.  Sanford. 
John  B.  Siewers. 
E.  S.  AA'ood worth. 
E.  S.  Woodworth, 
Concrete  Elevator  Co.: 
Chas.  A.  Eaton. 

G.  P.  Hardin". 


Concrete  Elevator  Co. — Continued. 
Maurice  Reinstein. 

B.  H.  AVoodworth. 

AAnod worth  Elevator  Cn.: 

B.  If.  Woodworth. 

C'entral  Grain  &  Commission  Go. : 

R.  P.  AA^ood worth. 

R.  F.  Woodworth. 


Table  Ao.— Memberships  of  H.  PoehJer  Co.  interests  at  Minneapolis  and  DuLifli. 
[Members  of  Momeapolis  Chamber  of  Commerce  in  roman;  members  of  Duluth  Board  of  Trade  in  i  talic. 


H.  Poehler  Co. : 

Harry  J.  Butler. 

F,  J.  Midwood. 
Alvin  H.  Poehler. 
F.  A.  Richter. 
Raymond  R.  Ember. 
A.  TF.  Withrow. 


Pacific  Elevator  Co.: 
P.  R.  Holmes. 
Frank  M.  Norton. 
AV.  A.  Poehler. 

AV.  C.  Poehler. 
Crescent  Milling  Co.: 


Table  46.- — Memberships  of  McCaull-Webster  interests  at  Minneapolis  and  Duluth. 
[Members  of  Minneapolis  Chamber  of  Commerce  in  roman;  members  of  Duluth  Board  of  Trade  in  italic.^ 


McCaull-AA'ebster  Elevator  Co.: 
John  H.  Ehrlc. 

T.  F.  Graham. 

Jas.  C.  McCaull. 

Mct'aull-Dinsmore  Commissioa  Co. 
S.  J.  McCaull. 

Harry  A.  Murphy. 


McCaull-Dinsmore  Commission  Co. — Con, 
J.  AV.  Robinson. 

Geo.  M.  Shannon, 

Z.  K.  Stacks. 

R.  A.  Dinsmore. 

Hawkeye  Elevator  Co. : 

R.  A.  Dinsmore. 


152 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


Table  47. — Memberships  of  McCarthy  Bros,  interests  at  Minneapolis  and  Duluth. 


jMembers  of  Minneapolis  Chamber  of  Commerce  in  roman;  members  of  Duluth  Board  of  Trade  in  italic.] 


McCarthy  Bros.  Co.: 

Charles  11.  McCarthy. 
J.  H.  McCarthy. 

Jas.  H.  McCartliy,  Jr. 
John  V.  McCarthy. 
Siehel  C.  Harris. 

John  F.  McCarthy. 

T.  F.  McCarthy. 


International  Grain  Co.: 
H.  F.  McCarthy. 
Walter  R.  McCarthy. 
Capitol  Elevator  Co. : 

T.  G.  McCarthy. 

R.  A.  Bissonnette. 
Jas.  S.  Graves. 

F.  JI.  McCarthy. 


Table  48. — Memberships  of  Riossell- Miller  Milling  Co.  interests  at  Minneapolis  and 

Duluth. 

jMembers  of  Minneapolis  Chamber  of  Commerce  in  roman;  members  of  Duluth  Board  of  Trade  in  italic.] 
K iissell-Miller  Milling  Co. ;  0 ccident  Elevator  Co. : 

n.  S.  Helm.  M.  II.  Devaney. 

W.  0.  Helm.  A.  W.  Robinson. 

Electric  Steel  Elevator  Co.:  M.  R.  Devaney. 

G.  A.  Morris. 

C.  C.  Thayer. 


Table  49. — Memberships  of  Northwestern  Consolidated  Milling  Co.  interests  at  Minneapolis 

and  Duluth. 


(Members  of  Minneapolis  Chamber  of  Commerce  in  roman;  members  of  Duluth  Board  of  Trade  in  italic.] 
Northwestern  Consolidated  Milling  Co.:  Dnluth-Superior  Milling  Co.: 

H.  P.  Gallaher.  B.  Stockmann. 

Robert  H.  Gallaher.  B.  /Stockmann. 

John  H.  Stadon.  Geo.  Spalshury. 


Table  50. — Memberships  of  Nye-Jenks  interests  at  Minneapolis  and  Duluth. 


[Members  of  Minneapolis  Chamber  of  Commerce  in  roman;  members  of  Duluth  Board  of  Trade  in  italic.) 


Nye,  Jenks  &  Co.: 

C.  C.  Austin. 

David  Fuller. 
Clarence  E.  Johnson. 
Buell  L.  Simmons. 

J.  M.  Jenks. 

Itasca  Elevator  Co. : 

J.  M.  Jenks.' 


Nye,  Schneider,  Fowler  Co.: 


Nebraska  Elevator  Co.: 


Independent  Grain  &  Lumber  Co.: 


Rialto  Elevator  Co, : 


Chas.  T.  Hears. 


Buffalo  Grain  Co.: 


Walter  Stanger.  - — . 

J.  A.  JIaglun.  Central  Groceries  Co.: 

M.  L.  Jenks.  - . 


C.  T.  Mears. 
James  W.  Wood. 


The  three  large  Minneapolis  hanks  which  finance  the  movement  of^ 
grain  in  the  Northwest  include  on  their  directories  representatives 
of  the  leading  grain  interests  of  the  chamber.  There  is,  then,  a 
powerful  concentration  of  buying,  selling,  and  financial  interests.  It 
has  been  publicly  stated  by  officers  of  the  chamber  that  all  of  the  grain 
buyers  of  consequence  within  1.50  miles  of  Minneapolis  are  members 
of  the  Chamber  of  Commerce. 


t 


DEVELOPMENT  OF  OTHEK  MARKETS  AND  EXCHANGES.  153 

Section  8.  Duluth. 

Development  of  the  Duluth-Superior  grain  market. — The 
conjunction  of  a  railroad  terminal  with  the  deep-water  shipping 
facilities  at  the  head  of  the  Great  Lakes  accounts  for  the  development 
of  the  Duluth-Superior  grain  market.  Western  railroad  connection 
was  not  established  until  1870.  Between  1870  and  1873  the  Northern 
Pacific  was  extended  from  Duluth  to  Moorhead,  Fargo,  and  Bis¬ 
marck.  The  Great  Northern  (then  the  St.  Paul  and  Pacific)  soon 
penetrated  the  Northwest  with  additional  lines.  Since  1880  Duluth 
has  become  increasingly  prominent  as  a  forwarding  and  shipping 
center  for  bulk  commodities.  Wheat  is  second  only  to  iron  ore  in 
value  of  commodities  shipped  annually  from  the  Duluth-Superior 
harbor. 

The  table  below  of  receipts  and  shipments  of  grain  indicates  the 
growth  of  the  market  during  the  formative  period,  1870  to  1886, 
inclusive.  The  development  of  the  Duluth  market  parallels  closely 
that  at  Minneapolis,  since  the  two  markets  are  equidistant  from 
many  of  the  northwestern  shipping  points. 

Table  51. — Receipts  and  shipments  of  grain  at  Duluth,  1870  to  1886. 


Receipts,  j  Shipments. 

Year  ending  Aug.  31: 

1871  . 

1872  . . . 

1873  . 

1874  . 

1875  . 

1876  . 

1877  . *. . 

1878  . / 

1879  . . . 

1880  . 

1881 . . . 

1883  . 

Year  ending  Dec.  31: 

1884  . 

1885  . 

1886  . 


Prior  to  1878  wheat  was  the  only  cereal  received  at  Duluth  oats 
and  corn  were  received  in  small  quantities  in  that  year.  It  was  not 
until  1886  that  barley  and  flax  were  established  as  constant  com¬ 
modities  in  the  Duluth  market.’^  From  1895  until  1913  Duluth  was 
the  largest  receiver  of  flaxseed  in  the  United  States.  Beginning 
with  the  year  1914,  however,  the  Minneapolis  receipts  exceeded  those 
of  Duluth,  and  recently  a  greater  volume  of  that  commodity  has  been 
drawn  to  Minneapolis  by  the  linseed  mills.  Table  No.  48  shows 
a  comparison  of  the  Minneapolis  local  consumption  of  flaxseed  with 
that  of  the  Duluth  market.  In  1917  there  was  more  flaxseed  shipped 
from  Duluth  than  was  received  in  that  year.  The  following  table 
shows  the  diversion  of  the  flax  movement  in  favor  of  Minneapolis. 


556,783 
931,611 
1,981,453 
2,407,476 
1,137,721 
1,451,190 
460,595 
l,8a3,090 
1,524,065 
1,347,679 
3,332,176 
4, 707,803 

13,722,930 
14,869,675 
22,424, 850 


544,848 

951,046 

1,583,073 

2,424,176 

1,081,194 

1,376,372 

503,899 

1,782,3.58 

1,487,222 

1,453,674 

2,865,536 

4,586,908 

11,551,582 
14,065, 775 
17,668,251 


Woodbridge  &  Tardee,  History  of  Duluth  and  St.  Louis  County,  vol.  1,  p.  165. 


Idem. 


154  TERMINAI.  GPvAIISr  MARKETS  AND  EXCHANGES. 


Table  1)2 —Receipts  and  shipments  of  flaxseed  at  Minneapolis  and  Duluth,  1913  to  1917. 


Minneapolis. 

Duluth. 

Receipts. 

Shipments. 

Receipts.  : 

Shipments. 

Bushels. 

11,319,620 

7,759,130 

6,148,970 

8,892,200 

6,026,380 

Bushels. 

1,875,090 

568,520 

933,270 

1,163,700 

1,172,150 

Bushels. 

16,441,209 

0,697,766 

5,356,769 

7,590,754 

4,087,260 

Bushels. 

16,990,525 

7,769,549 

4,587,715 

7,422,931 

4,528,659 

'rjiE  MILLING  INDUSTRY. — There  was  a  time  when  it  was  confi-  I 

dently  predicted  that  Duluth  was  to  become  the  greatest  flour  milling  ' 

city  of  the  country.  In  1895  it  ranked  second  in  the  country  in  the 
production  of  flour,  and  then  had  10  mills  with  a  daily  capacity  of 
19,000  barrels. 

One  of  the  writers  of  that  time,  in  a  review  of  the  flour  industry 
of  the  city,  has  left  the  following  record; 

‘‘It  is  only  a  question  of  a  very  few  years  wlien  the  great  Inilk  of  the  wheat  grown 
in  northern  Minnesota  and  the  Dakotas  will  be  ground  into  flour  at  the  head  of  tho 
lakes.  The  advantages  possessed  by  Duluth  over  Minneapolis  as  a  point  for  milling 
are  too  plain  to  require  elaborate  illustration.  A  look  at  the  map  is  all  that  is  needed. 

The  geographical  position  of  Duluth  at  the  head  of  deep-water  navigation  is  supreme. 

She  sits  in  the  middle  of  a  channel  through  which  the  No.  1  hard  wheat  of  the  North¬ 
west  must  naturally  find  its  way  to  the  markets  of  the  East  and  Europe.  MTiatever 
portion  of  this  wheat  is  used  by  the  Minneapolis  mills  is  diverted  from  this  channel  \ 
at  the  expense  of  those  mills  and  to  the  proportionate  advantage  of  the  D^iluth  mills,  ^ 
so  it  requires  no  lengthy  argument  to  shoAV  that  Duluth  must  soon  pass  Minnoapolis  : 
as  a  milling  center.  ” 

In  1899  the  milling  capacity  at  Dulutli-Superior  was  listed  at  about  1 
20,000  barrels  daily.  In  that  year  the  United  States  Milling  Co.,  ^ 
which  Avas  organized  by  a  New  York  City  promoter  for  the  operation  | 
of  mills  at  various  points,  acquired  practically  the  entire  capacity 
at  Duluth-Superior.  They  also  acquired  a  controlling  interest  in  the  J 
mills  of  the  NortliAvestern  Consolidated  Milling  Co.  at  Minneapolis.  | 
Within  less  than  a  year  the  company  went  into  bankruptcy  and  a  | 
Minneapolis  operator  was  named  as  receiver.  During  the  reorganiza-  i 
tion  several  of  the  mills  at  Duluth-Superior  were  closed  down  and  some  .  J 
of  the  smaller  mills  were  Imrncd  in  a  large  fire  at  a  later  time.  This  | 
left  Duluth  in  a  temporarily  weakened  position  as  compared  with  J 
Minneapolis  in  the  development  of  the  wheat-milling  industry,  | 

Tlie  Minneapolis  interests  were  also  alloAved  certain  transit  pri  vilegivs  ^ 
o]i  wheat  and  wheat  products  not  enjoyed  by  Dulutli,  Avhich  assisted  \ 
the  former  millers  in  marketing  flour.  (See  Chap.  II,  sec.  5).  i 

As  a  result  of  this  situation  and  of  the  rapid  development  of  flour  , 
production  at  Minneapolis,  milling  at  Duluth-Superior  has  failed  to-  r 
realize  the  predictions  of  25  A^ears  ago. 


S8  History  of  Duluth  and  St.  Louis  County,  vol.  1,  p.  170. 


DEVELOPMENT  OF  OTHER  MARKETS  AND  EXCHANGES. 


155 


'To-day  there  are  only  two  large  hour  mills  in  the  Duluth-Superior 
district  with  an  aggregate  daily  capacity  of  6,500  barrels. 

The  Duluth  Board  of  Trade. — The  Board  of  Trade  was  organized 
at  Duluth  contemporaneously  with  that  at  Minneapolis,  that  is,  ISSl. 
From  an  original  membership  of  11,  the  exchange  grew  to  200  in  less 
than  hve  years,  more  than  half  of  whom  were  active  grain  dealers. 
The  membership  has  scarcely  increased  beyond  that  pomt  although 
the  personnel  has  become  almost  wholly  devoted  to  grain.  About 
one-fourfh  of  the  membershi})  is  made  up  of  traders  doing  business 
both  in  Duluth  and  Mmneapolis. 

Reference  to  Chapter  V  will  show  in  detail  the  rules  and  regula¬ 
tions  under  w'hich  these  members  operate. 

A  classification  of  the  active  members  appears  in  the  following 
table : 


Table  53. — Classification  of  resident  members  in  the  grain  trade,  Duluth  Board  of  Trade, 

1917. 


Engaged 

exclu¬ 

sively. 

Engaged 

prima¬ 

rily. 

Total. 

Engaged 

second¬ 

arily. 

Cash  cotnmissiou . ; . 

1 

69 

70 

12 

Terminal  elevators . . . . . 

22 

4 

26 

other  dealers ' . 

2 

2 

4 

Consumers  2 . . . . . 

10 

10 

Line  and  country  elevators . 

‘6 

3 

10 

Shippers  (notoperating  terminals).^ . 

4 

6 

10 

9 

Future  commissions ,  . 

2 

1 

3 

83 

41 

...  -m  . 

85 

126 

114 

Gu  1 0 1  town  members : 

Other  exchanges . . . 

56 

Cniintrv  el  evatnrs  . . . 

3 

59 

16 

Not  in  grain  business . 

201 

1  Includes  all  not  in  other  classes. 

2  Millers,  malsters,  linseed  crushers,  etc. 

3  Includes  -wire  houses. 


It  will  be  noted  that  the  cash  commission  men,  as  in  Minneapolis, 
constitute  the  most  numerous  group  in  this  market.  However,  as 
shown  in  another  volume  of  the  report,  there  exists  a  financial 
dependency  between  a  majority  of  the  receivers  and  certain  terminal 
elevators  such  as  to  preclude  the  division  pf  trading  interests  which 
characterizes  some  of  the  other  markets.  (See"  Vol.  III.)  The 
number  of  members  representing  line  elevators  on  this  exchange  is 
relative^  small  and  the  milling  and  converting  interests  are  likewise 
of  lesser  importance.  There  are  some  10  members  representing 
commission  house  shippers  (i.  e.,  shippers  not  operating  elevators). 
The  future  commission  business  is  carried  on  largely  as  a  secondary 
matter  by  concerns  primarily  interested  in  the  cash  commission 
business. 


27Annual  Report  for  1885,  p.  11. 


156 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


The  SurERioR  Board  of  Trade.— A  rival  organization  known  a.s 
tlio  Superior  Board  of  Trade  was  created  in  the  adjacent  city  of 
Superior  in  1904.  Soon  thereafter  the  Duluth  Board  of  Trade 
adopted  a  rule  tJiat  none  of  its  members  could  hold  membership  in  a 
similar  organization  within  a  radius  of  100  miles. As  a  result  prac¬ 
tically  all  the  grain  men  in  in  the  market  were  compelled  to  coniine 
their  operations  to  the  larger  exchange  and  the  Superior  Board  of 
Trade  lost  most  of  its  business.  At  present  the  grain  receivers  in 
Superior  sell  largely  to  Duluth  elevator  interests  directly  without  em¬ 
ploying  exchange  agencies. 

Inspection  and  weighing  controversy. — The  services  of  weigh¬ 
ing  and  inspection  at  Duluth-Superior  are  now  performed  by  the 
Minnesota  or  the  Wisconsin  State  agencies,  respectively.  There  was 
no  State  control  of  grain  inspection  and  warehousing  in  Wiscon¬ 
sin  prior  to  1905  when  the  Wisconsin  Legislature  provided  for  a  State 
grain  and  warehouse  commission.^® 

An  examination  of  considerable  evidence  indicates  that  the  fairest 
statement  of  the  controversy  leading  to  the  passage  of  this  act,  and 
the  subsequent  administrative  difficulties  of  the  commission  appointed, 
was  made  by  the  governor  of  Wisconsin  in  his  annual  message,  1905: 

At  the  last  session,  the  legislature  enacted  chapters  19  and  317,  creating  a  grain  and 
warehouse  commission  for  the  State  of  Wisconsin,  and  providing  for  licensing  and 
regulating  warehouses  and  elevators,  and  for  the  storage,  weighing,  and  inspection 
of  grain  in  the  city  of  Superior,  and  conditionally  at  other  points  in  said  State. 

This  legislation  was  the«outcome  of  a  prolonged  contest  between  railroad  and  ele¬ 
vator  interests  upon  the  one  side  and  citizens  of  Superior,  fai’mers  of  the  Northwest, 
and  millers  of  the  East  upon  the  other.  Its  object  was  to  secure  uniform  grades  of 
grain,  and  an  inspection  of  the  same  which  should  be  just  both  to  the  producer  and 
the  miller. 

Under  the  system  which  had  prevailed  prior  to  the  passage  of  tliis  legislation,  it  was 
claimed  that  the  elevator  and  railroad  interests  doing  business  at  the  city  of  Superior 
so  manipulated  grades  and  inspection  as  to  work  a  great  injustice  to  both  producers 
and  millers,  reserving  enormous  profits  to  themselves  to  which  they  were  not  entitled. 

As  was  to  be  expected,  the  railroads  and  the  elevators  combined  to  defeat  the  opera¬ 
tion  of  these  laws,  and,  it  is  claimed  hy  the  grain  and  warehouse  commission  are  openly 
defying  them. 

In  a  communication  to  the  executive  the  grain  and  warehouse  commission  states: 

“In  attempting  to  enforce  this  law,  we  have  met  with  the  stubborn  opposition  of  not 
only  the  railroads,  elevators,  and  mills  in  the  city  of  Superior,  but  also  the  Duluth 
Board  of  Trade. 

28  The  situation  was  described  in  the  Milwaukee  Sentinel  (Feb.  27, 1908)  as  follows:  In  the  summer  of  1905 
after  the  passage  of  the  Wisconsin  inspection  law  the  business  of  the  Superior  Board  of  Trade  became  much 
more  active  and  much  enthusiasm  was  shown.  Many  new  members  were  taken  in  and  the  price  of  mem¬ 
bership  ran  up  from  $50  as  high  as  $250  and  $300.  In  the  fall,  owing  to  the  closing  of  the  elevators,  no  ware¬ 
house  receipts  were  issued  in  Superior  and  the  trading  on  the  board  was  largely  for  Minneapolis  or  Cliicago 
delivery.  (Transcript  by  Wisconsin  Legislative  Reference  Library.) 

I.aws  of  Wisconsin,  1905,  p.  19.  One  member  of  the  commission  was  to  be  appointed  from  Wisconsin 
end  one  each  from  North  Dakota  and  New  York  on  the  nomination  of  the  governors  of  the  respective  States. 

Copy  furnished  by  Legislative  Reference  Library,  Madison,  IVis 


DEVELOPMENT  OF  OTHER  MARKETS  AND  EXCHANGES.  157' 


The  failure  of  the  Wisconsin  commission  to  collect  its  fees  and  re¬ 
ceive  the  support  of  the  Superior  elevators  led  to  a  further  compro¬ 
mise  in  1907,  whereby  coarse  grains  received  into  the  Duluth- 
Superior  market  arc  inspected  by  Wisconsin  officials  and  wheat  in¬ 
spected  by  Minnesota  officials.^^ 

Development  of  elevator  capacity. — Whereas  in  the  year  1883 
there  were  but  4  elevators  in  Duluth  with  an  aggregate  capacity  of 
3,160,000  bushels,  by  the  year  1918,  27  elevators  had  been  constructed 
with  a  rated  capacity  of  more  than  35,000,000  bushels.  Duluth  is, 
therefore,  third  in  elevator  capacity  among  the  primary  markets. 

As  noted  in  Chapter  V,  section  12,  either  public  or  private  elevators 
may  become  regular  under  the  Board  of  Trade  rules.  Public  termi¬ 
nal  elevators  in  Duluth,  as  in  Minneapolis,  may  be  licensed  by  the 
State  Railroad  and  Warehouse  Commission.  Recently  the  list  of 
regular  elevators  under  Board  of  Trade  supervision  has  included  no 
liouses  holding  a  State  license.  Regular  elevators  are  distinguished 
only  by  the  fact  that  their  receipts  are  deliverable  on  future  con¬ 
tracts.  Fifteen  out  of  27  elevators  in  the  market  had  been  declared 
regular  by  the  Board  of  Trade  in  1918,  and  offered  an  aggregate 
capacity  of  26,400,000  bushels.  The  capacity  of  elevators  declared 
regular  imder  Duluth  Board  of  Trade  rules,  therefore,  exceeds  that 
maintained  as  regular  in  either  Chicago  or  Kansas  City. 

The  cash  grain  market. — ^As  already  noted,  the  great  bulk 
.  of  the  grain  business  has  consisted  in  shipments  by  lake  to  eastern 
markets  for  export,®  or  in  direct  exports  from  the  head  of  the  lakes. 
For  this  reason,  the  terminal  elevator  interests  at  Duluth  are  of 
controlling  importance.  Moreover,  the  shipping  business  is  suf¬ 
ficiently  large  to  support  a  group  of  shippers  or  dealers  who 
do  not  operate  elevators  but  assume  the  shipping  function  between 
certain  elevatora  and  eastern  or  European  buyers.'^"  Such  a  condition 
scarcely  exists  in  any  other  interior  grain  market. 

Duluth  is  also  characterized  as  a  ^‘surplus  market’^  by  local  dealers, 
on  the  ground  that  only  such  part  of  the  northwestern  crop  as  is  not 
required  by  Minneapolis  mills  may  be  diverted  to  Duluth.^^ 

Durum  wheat.  ^About  25  per  cent  of  the  total  wheat  receipts 
during  1917  and  about  22  per  cent  during  1916  consisted  of  durum 

SI  The  agreement  as  finally  perfected  was  reported  by  the  Milwaukee  Free  Press  (Dec.  31, 1907)  as  follows: 
Following  is  the  agreement  imder  which  the  commission  will  work:  Wisconsin  officials  to  do  all  weighing 
in  and  out.  Wisconsin  inspection  of  all  coarse  grains,  including  barley,  rye,  com,  and  oats,  in  and  out: 
Wisconsin  inspection  of  wheat  and  flax,  in  and  out,  when  requested  by  the  owners.  Mills  and  elevators  to 
buy  grain  in  Superior  without  discrimination  against  members  of  either  Superior  or  Duluth  boards  of 
trade  when  usual  commission  is  charged.  Proper  facilities  to  be  furnished  for  storing  Wisconsin  inspected 
grain  and  flax. 

32  See  Table  53 

33  Cf.  p.  154.  For  example,  wheat  receipts  were  over  91  million  bushels  in  1915,  and  only  39  million 
bushels- in  1910. 

o  Or  consumption  to  a  lesser  extent. 


158 


TEEMINiVL  GKAIK  MARKETS  AKD  EXCHANGES. 


wlieat.  The  trade  in  this  cereal  has  been  a  conspicuous  feature  of  the 
market  since  1903.  Although  at  first  refused  by  millers  it  has  been 
found  to  produce  the  standard  semolina  for  macaroni  and  has  a  steady 
demand  on  that  account  in  Europe  and  America. 

Tlie  bulk  of  the  trading  in  the  Duluth  market  is  not  characterizr^d 
by  such  sharp  competition  and  commercial  antagonisms  as  are  evi¬ 
dent  in  some  of  the  other  markets.  The  elevator  companies  consti¬ 
tute  the  only  considerable  buying  group  in  the  market.  Two-tliicds 
of  the  receivers  are  so  identified  with  or  obligated  to  elevator  concerns 
as  to  operate  practically  as  country  buying  agents  of  these  elevators 
in  a  coherent  shipping  system. 

The  futures  market. — Future  trading  in  Duluth  issmahin  voiume^ 
and  the  exchange  mamtains  but  one  pit.  The  chief  features  of  the 
futures  market  are  the  trade  in  durum  as  well  as  spring  wheat,  and  in 
flaxseed.  There  is  no  future  trading  in  either  durum  or  flaxseed 
elsewhere  in  the  United  States. 

The  Duluth  Board  of  Trade  Clearing  Association  was  incorporated 
in  1909  for  settling  regular  future  contracts.  As  in  Minneapolis,  the 
clearing  house  is  an  independent  organization,  although  closely  super- 
f  vised  by  the  Board  of  Trade.  The  plan  of  clearing  and  assumption 
of  responsibility  for  trades  cleared  is  similar  to  that  which  obtains  in 
Minneapolis.  Membership  in  the  clearing  house  is  separate  from  that 
in  the  Board  of  Trade,  each  member  being  required  to  subscribe  to  at 
least  5  shares  and  not  more  than  25  shares  of  stock. 

’  Section  4.  Kansas  City. 

Origins. — Accessibility  to  the  most  productive  area  of  hard  winter 
wheat  siipplemehted  by  a  concentration  of  railroad  terminals  led  to 
the  development  of  a  large  grain  market  at  Kansas  City.  The  milling 
industry  which  was  built  up  because  of  the  flouring  properties  of  this 
variety  of  wheat  created  a  steady  buying  demand  in  and  near  the 
market.  However,  Kansas  City  has  been  predominantly  a  shipping 
market  rather  than  a  consumptive  center  and  is  quite  comparable  in 
'  this  respect  to  Chicago. 

It  is  a  generally  accepted  fact  that  the  original  seed  for  Kansas 
liard  winter  wheat  was  brought  in  by  Kussian  Mennonite  immigrants 
from  the  Crimea.  It  was  soon  discovered  that  this  seed  resembled 
the  hard  spring  wheat  of  Minnesota  and  its  cultivation  was  extended 
through  the  Southwest  during  the  seventies. 

Not  until  after  1870  did  grain  begin  to  be  shipped  east  from  Kamsas 
City  in  appreciable  quantities.  In  1871  the  first  giMin  elevator 
(100,000  bushels  capacity)  was  built.  This  was  followed  in  1874  by 
the  erection  of  two  other  elevators  of  a  combined  capacity  of  400,000 
busliels.  These  elevator  facilities  furnished  a  basis  for  trading  in 
both  cash  and  contract  grain  on  the  newly  organized  Board  of  Trade. 


DEVELOPMENT  OF  OTHER  MARKETS  AND  EXCHANGES.  159 

■  St.  Louis,  however,  still  continued  to  attract  most  of  the  grain  from 
Ka  nsas  and  the  West;  the  railroads  favoring  the  longer  haul  by 
granting  through  rates  lower  than  the  combination  of  the  rates  from 
producihg  points  to  Kansas  City  and  from  Kansas  City  to  St.  Louis. 
It  was  not  until  several  short-line  railroads  were  built  from  Kansas 
City  into  the  grain  belt  that  the  Kansas  City  grain  market 
obtained  an  equal  footing  with  St.  Louis  in  the  matter  of  freight 
rates  and  elevator  facilities.  These  new  stub  lines  in  order  to  secure 
grain  traffic,  built  and  operated  terminal  elevators  in  Kansas  City 
and  gave  free  transfer  and  storage  to  shippers  and  dealers.  Trunk 
lines  such  as  the  Santa  Fe  and  the  Burlington  also  constructed  ter¬ 
minal  elevators  and  absorbed  elevation  and  transfer  charges.  AU 
this  enhanced  the  advantages  of  Kansas  Citv  as  a  terminal  market. 
The  sharp  increase  in  terminal  receipts  during  1875,  and'  the  rapid 
development  of  the  market  thereafter,  appears  in  the  following 
ta])ulation: 


Table  54. — Receipts  of  grain  at  Kansas  City,  1871  to  1880. 


Year. 

Wheat. 

Corn. 

Oats. 

Rye. 

Barley. 

1871  . 

687,000 

350,000 

• 

1872 . 

289;  726 

6I0;  804 

93,695 

105,200 

12, 921 

3,087 
12,380 
37,4.50 
15, 100 
109,045 
203,341 
136,257 
82,894 
82  894 

1873 . 

750, 400 

836,300 

10, 500 

1874 . 

37i;273 

^711;  367 

210;  475 

3;  400 
40,000 

1875 . 

1,256;  237 

1,258; 700 

382;^ 

1876 . 

1,820,297 
2, 259, 572 

5, 769,395 
5,881,703 

111',  241 

396;6i2 
329, 887 
352,262 
184,046 

1877 . 

I8O;  657 

1878 . 

9;  014; '291 

4;  911',  529 

155;  089 

1879 . 

6,417,952 

4,093,528 

4,121,904 

276, 775 

1880 . 

4,421,760 

366,486 

65',  267 

The  Kansas  City  Board  of  Trade. — A  general  commercial  body 
for  the  promotion  of  local  trade  and  commerce  was  organized  at 
Kansas  Cit}^  in  1869  and  was  incorporated  in  1876.  Tlie  objects  of 
this  corporation  were  substantially  identical  with  those  adopted  by 
the  Chicago  Board  of  Trade  in  its  charter  of  1869  (see  p.  191).  With 
the  increase  of  the  trade  in  grain  the  Board  of  Trade  became  wholly  a 
grain  exchange  as  it  is  to-day.  Future  trading  (by  means  of  a 
‘‘calF’)  was  introduced  in  the  year  of  incorporation  and  later  became 
a  permanent  feature  of  the  exchange. 

Memherslii]} — admission  and  requirements. — Membership  on  the 
Kansas  City  Board  of  Trade  has  apparently  been  treated  by  exchange 
representatives  as  a  privilege  rather  than  as  property;  although  no 
record  is  at  hand  substantiating  this  theory.  The  present  member¬ 
ship,  199,  is  practically  of  the  same  size  as  that  of  the  Duluth  Board  of 
Trade. 

As  on  the  other  exchanges,  the  certificates  are  transferable  and  it 
has  been  considered  disadvantageous  to  allow  memberships  to 
‘‘l)ecDme  vacant.’’  dlie  secretary  has  been  authorized  to  sell  mem- 


160 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES, 


})erslups  to  fill  vacancies  as  follows:  In  1907,  one  for  $2,500;  1909, 
one  for  $2,700;  1910,  one  for  $2,500;  1913,  one  for  $2,600. 

Glassification  of  members. — From  Table  55  below  it  appears  that 
only  17  members  (less  than  9  per  cent)  are  nonresident.  It  should 
be  understood  that  fully  10  per  cent  more  of  the  personnel  is  derived 
from  liranch  offices  of  Chicago  concerns.  These  include  terminal 
elevators,  wire  houses,  and  shipping  and  brokerage  firms. 


Table  55. — Classification  of  resident  memhers  in  the  grain  trade,  Kansas  City  Board  of 

Trade,  1917. 


Engaged. 

*  Exclu¬ 
sively. 

Pri¬ 

marily. 

Total. 

Second¬ 

arily. 

Cash  eommission . 

4 

74 

78 

58 

Terininal  elevators . 

1 

34 

35 

6 

other  dealers  * . . . 

9 

7 

16 

Consumers  2 . 

11 

3 

14 

Line  elevators . 

4 

4 

8 

8 

Shippers,  not  operating  terminal . 

1 

1 

38 

FHtnVft  commission . . 

10 

7 

17 

121 

Nonresident  members  in  erain  trade  . . 

40 

129 

169 

17 

229 

Not  in  vrain  trade . . . . _ _ 

3  13 

Total  members . . 

199 

>  All  not  included  in  other  classes. 

2  Millers,  malsters,  linseed  crushers,  etc. 

3  See  p.  194. 


It  will  be  noted  from  the  foregoing  table  that  the  cash  commis¬ 
sion  men  form  the  most  numerous  group  on  the  board  and  are 
apparently  in  a  position  to  control  the  policies  of  the  exchange. 
This  power  of  the  receivers’  group  is,  however,  more  apparent  than 
real.  The  wide  connections  of  the  terminal  elevator  operators  and 
their  unity  of  interest  have  enabled  them  to  assume  leadership  in 
the  affairs  of  the  board.  The  fact  that  most  of  them  carry  on  a  com¬ 
mission  business  in  addition  to  merchandising  places  them  in  direct 
competition  with  all  other  receivers.  It  is  charged  by  small  operators 
that  the  elevator  interests  act  as  a  united  group  to  secure  favorable 
rules  and  regulations. 

A  list  of  the  officers  and  directors,  July  1,  1918,  showed  that  7 
out  of  15  had  elevator  connections;  that  another  one  owned  and  op¬ 
erated  a  line  elevator;  while  the  remaining  7  represented  small 
grain  dealers. 

It  is  alleged  by  the  smaller  dealers  that  the  elevator  interests  ob¬ 
tained  the  recent  amendment  to  the  commission  rule  for  buying 
and  shipping,  and  that  this  rule  in  practice  operates  to  their  ad¬ 
vantage. 

Although  Kansas  is  a  prominent  milling  State  the  mills  are  widely 
distributed  and  not  concentrated  at  Kansas  City.  The  group  of 
consumers  is,  therefore,  relatively  small. 


DEVELOPMENT  OF  OTHER  MARKETS  AND  EXCHANGES.  161 


Another  outstanding  fact  in  the  classification -is  that  a  majority 
of  all  members  carry  on  a  certain  amount  of  future  commission  busi¬ 
ness. 

Operating  reveu'we  and  expense, — The  chief  sources  of  income 
for  the  association  have  been  (1)  assessments  upon  members,  (2) 
membership  transfer  fees,  (3)  sampling  department,  (4)  weighing 
department.  The  assumption  of  inspection  and  weighing  by  the 
St-ate  has  cut  down  the  income  from  those  sources.  Assessments 
are  expected  to  cover  expenses  which  can  not  be  otherwise  defrayed. 
The  excess  of  income  over  expenditures  was  $683.83  for  1914  and 
$537.34  for  1015.  A  small  deficit  was  incurred  in  1916  as  the  follow¬ 
ing  published  statement  shows: 

Board  of  Trade  of  Kansas  City,  Mo. — Income  and  expendilure  account  for  the  year  ended 

December  30,  1916. 


. $3,000.00 

.  10,000.00 

$1, 176.  00 
1,  ]00.  00 
505.  85 
422.  50 
192.  00 

- ^ -  3,396.35 

.  582.  60 

.  7,  000.  00 

23,  978.  95 

Membership  as-sessmeiits .  12,  000.  00 

35,  978.  95 

Deficiency  of  income  for  year .  139.  33 

37,  418.33 

EXPENDITURES. 


INCOME. 

Sampling  department . 

Weighing  department . 

Floor  privileges: 

Admissions . . 

Annual  permits . . . 

Messengers . 

Telephones . 

Tables . 

Market  quotations . 

Membership  transfer  fees . . . . . 


Salaries . . 

Kent . 

Legal  expense . 

Postage . 

Printing . 

Stationery  and  office  supplies . 

Telephones . 

Market  reports  (wire) . 

Iriirniture  and  fixtures  and  repairs 
Dues : 


Council  of  Grain  Exchanges .  $240.  00 

United  States  Chamber  of  Commerce .  90.  00 

Round  Table .  6.  00 


Expense  of  delegates . 

108093^—20 - n 


$11,  547.  50 
2,  400.  00 
600.  00 
140.  00 
352.  72 
293.  24 

1,  326.  84 
8,  292.  15 

2,  737.  36 


336.  00 
543.  55 


162 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


Expenses  in  rate  and  other  eases: 

Missouri  rate  case .  $899.  03 

Shrinkage  case .  25G.  50 

Missouri  grain  dealers .  49.  98 

Omaha  Grain  Exchange .  130.  00 

AVestern  transit  rate  case .  22.  62 

Lake  line  case .  10.  00 


$1,  368.  ]:} 


Appropriations : 

Transportation  bureau  Kansas  City  Commercial  Club .  4,  640.  75 

Crop  improvement  committee  Council  of  Gmin  Exchanges.  1,  500.  00 

Entertainment  of  grain  dealers  and  managers  of  cooperative 

elevators .  333.  38 

Rivers  and  harbors  congress .  50.  00 

Freight  bureau,  Milwaukee  Chamber  of  Commerce .  10.  00 

-  7,  034.  13 

Miscellaneous . . . - .  71 

37,  418.  33 


Elevator  facilities.— Since  Kansas  City  functions  so  largely 
as  an  interior  concentration  point,  the  elevator  facilities  are  of  pri¬ 
mary  importance.  Beginning  with  one  small  warehouse  in  1871,  the 
rated  elevator  capacity  has  gradually  increased  to  about  24,000,000 
bushels. 

About  35  per  cent  (8,500,000  bushels)  of  tha  rated  capacity  is 
owned  outright  by  Chicago  interests,  and  there  are  other  working 
arrangements  between  elevators  in  the  two  markets. 

About  89  per  cent  of  the  total  rated  capacity  is  leased  or  rented 
from  the  railroads.  The  railroads  built  the  elevators  in  the  early 
days  to  provide  traffic  at  the  terminal,  and  elevator  facilities  have 
always  played  a  prominent  part  in  Kansas  City  transportation 
problems.  (See  p.  57.) 

About  6  per  cent  of  the  total  capacity  is  owned  by  millers  and 
converters,  although  the  great  majority  of  the  houses  are  operated 
for  storage  and  transfer  purposes. 

The  “regular  elevators’’  have  an  aggregate  capacity  exceeding 
20,000,000  bushels  and  include  both  “public”  and  “ private ”  houses. 
Tliat  is,  practically  all  the  storage  elevators  of  the  market  conform 
to  the  regisU’ation  and  other  requirements  of  the  rules  for  “regular 
elevators,”  and  may  issue  receipts  deliverable  on  future  contracts. 

As  in  the  other  markets  the  available  “public”  storage  is  an  uncer¬ 
tain  quantity.  Any  merchandiser  owning  an  elevator  can  conform 
to  the  public  warehouse  law  without  seriously  interfering  with  his 
j)rivate  business. 

Other  facilities. — The  weighing,  inspection,  and  transporta¬ 
tion  and  quotation  facilities  are  discussed  elsewhere  in  the  report. 
,  Tiu'  board  contributes  $3,000  annually  to  a  local  transportation 
bureau  and  maintains  a  clerk  in  this  agency  to  compile  freight  rates. 


DEVELOP.\[ENT  OF  OTHER  MARKETS  AND  EXUHANGES. 


163 


Quotations  are  distributed  according  to  formal  contracts  had  with 
the  Western  Union  and  Postal  Telegraph  Companies.  As  in  the 
case  of  the  Chicago  Board  of  Trade,  the  exchange  as  well  as  the 
telegraph  companies  is  party  to  each  contract  made  with  an  appli¬ 
cant  for  continuous  grain  quotations'’  service,  so  that  the  hoard 
may  control  the  use  made  of  quotations. 

With  reference  to  the  collection  of  prices  it  is  agreed  between  the 
])oard  and  the  companies  that— 

Suck  (quotations  shall  be  collected  by  the  board  of  trade  in  the  different  parts  of 
said  Exchange  Hall  and  be  delivered  on  the  floor  of  said  Exchange  Hall  to  the  au¬ 
thorized  representatives  of  said  telegraph  companies  at  such  place  or  places  and  in 
such  Avay  or  method  as  said  board  of  trade  may  determine.  The  said  board  of  trade 
agrees  to  employ  or  cause  to  be  employed  without  expense  to  the  telegraph  com- 
qmriies  a  sufficient  number  of  competent  j^ersons  for  the  purpose  of  collecting  and 
delivering  the  said  quotations  of  prices,  so  that  the  telegraph  companies  shall  obtain 
complete  and  continuous  quotations  throughout  all  sessions  of  said  board  of  trade  of 
the  prices  at  which  all  grains  dealt  in  on  said  l)oard  of  trade  are  bought  and  sold.  Tlie 
said  telegraph  companies  agree  to  employ,  without  expense  to  the  board  of  trade,  a 
sufficient  number  of  operators  and  any  other  competent  persons  necessary  to  receive 
and  transmit  said  cquotations.  ^ 

Tlic  Kansas  City  board  receives  no  compensation  for  the  quotation 
privilege.  Continuous  quotations  of  futures" are  exchanged  with  the 
Chicago  Board  of  Trade. 

The  cash  market.— More  titan  one-half  of  all  grain  shipped  Ity 
Kansas  country  elevators,  and  about  one-fourth  of  tlie  shipments 
from  Nebraska  go  to  Kansas  City.  As  the  tables  in  Chapter  I  in¬ 
dicate,  Kansas  City  is  probably  third  market  in  wheat  receipts  and 
third  in  corn.  The  leading  cereal  in  both  cash  and  future  trade  is 
wheat  (mostly  of  the  “hard  winter”  variety).  Trading  in  the  other 
grains  is  conducted  on  a  much  less  extensive  scale. 

Of  the  grain  received  during  1913-1917,  about  68  per  cent  was 
shipped  in  on  consignment  and  about  32  per  cent  was  bought  directly 
from  outside  points. 

,  The  terminal  elevators  were  the  largest  buyers  in  the  market, 
taking  48  per  cent  of  all  grain  sold  in  the  market 

Consumers  (millers,  manufacturers,  and  feeders)  bought  about 
25  per  cent  of  the  grain  received,  and  houses  listed  as  “commission 
men”  about  5  per  cent  on  a  to-arrive  basis.  Other  dealers  purchased 
19  per  cent.  Approximately  75  per  cent  of  all  grain  received^®  .was 
shipped  out. 

While  the  consumers  constitute  a  steady  attractive  force  in  the 
market,  by  far  the  strongest  buying  group  is  that  of  the  terminal 
elevators.  These  latter  operators  even  compete  with  the  commission 

Based  cn  101,711  ears  received  during  1913-1917,  inclusive. 

•«Thc  published  figures  for  receipts  and  shipments  (1913-1917,  inclusive)  showed  that  77.39  per  cent  of 
Ihe  grain  received  at  the  terminal  was  shipped  out.  A  s'peeial  study  of  actual  ears  sold  showed  71.5  jjcr 
cent  sold  and  shipped  to  outside  buyers  by  the  receivers. 


164  TERMI^nAL  grain  markets  and  exchanges. 

men  as  receivers  and  shippers.  Perhaps  the  most  significant  fact  of 
tile  cash  market  is  the  failure  of  the  commission  men  to  obtain  control 
of  the  receiving  business. 

The  futures  market. — Future  trading  has  existed  throughout 
the  life  of  the  present  association,  one  pit  being  maintained  for  that 
purpose.^^ 

The  volume  of  future  transactions  on  the  Kansas  City  Board  of 
Trade  compared  with  the  trading  on  the  Chicago  Board  of  Trade  is 
relativeh"  small.  The  total  futures  transactions  cleared  during  the 
six  years  1913-1918,  as  reported  by  the  exchange  clearing  house,  were 
as  follows: 


Bushels. 

]9L:I . 1,242,004,000 

1014 .  1,338,252,000 

1915  .  1,430,644,000 

1916  . '. .  2,004,786,000 

1917  . - . .  1,156,352,000 

1918  .  507,058,000 


Included  in  the  foregoing  figures  are  transactions  in  wheat  (except 
for  1918),  corn,  and  oats.  There  is  no  record  of  future  trading  in 
milo  maize,  though  the  exchange  provided  contract  grades  in  this 
commodity  January,  1916. 

In  1917  the  question  was  raised  as  to  whether  puts  and  calls  should 
be  recognized  and  a  charge  prescribed  for  executing  them.  The 
attorney  for  the  board  advised  that  the  Supreme  Court  decision 
caused  him  to  doubt  the  legality  of  these  transactions,  and  a  special 
committee  finally  brought  in  an  adverse  report  March  6,  1917. 

Publicity  and  promotion  of  exchange  interests. — In  pro¬ 
moting  exchange  interests  through  the  press  and  before  legislative 
bodies  the  Kansas  City  Board  of  Trade  has  taken  an  active  although 
relatively  minor  part.  The  following  paragraphs  indicate  the  activi¬ 
ties  of  the  directors  of  the  board  in  this  regard. 

August  4,  1908,  a  special  committee  was  authorized  to  spend  not 
over  $2,500  to  try  to  persuade  the  Interstate  Commerce  Commission 
to  permit  free  elevation  at  Missouri  River  terminals. 

On  January  27,  1914,  the  board  voted  to  contribute  $1,000  toward 
a  special  fund  of  $10,000  to  be  used  by  the  Grain  Dealers’  National 
Association  ‘An  an  endeavor  to  avert  any  drastic  action  or  laws  that 
might  revolutionize  the  entire  present  method  of  handling  grain.” 

On  April  27,  1915,  the  president  was  authorized  to  appoint  a  secret 
committee  of  three  to  investigate  bucketshops  in  Kansas  City  and  to 
take  remedial  measures,  including  the  expenditure  of  any  reasonable 
sums  necessary. 

On  February  5,  1916,  the  secretary  was  authorized  to  publish  5,000 
copies  of  an  article  by  the  secretary  of  the  Chicago  Board  of  Trade, 
entitled  Truth  and  Error  in  the  Economics  of  the  Grain  Trade.” 

57  See  Volumes  V  and  VI  on  future  trading  for  detailed  discussion  of  futures  operations  and  the  clearing 
house. 


DEVELOPMENT  OF  OTHER  MARKETS  AND  EXCHANGES.  165 
Section  5.  Omaha. 

■  The  rate  adjustment  of  1904.— The  Omaha  Grain  Exchange  was 
organized  by  officers  of  the  Chicago  Great  Western  Railroad  Co.,  to¬ 
gether  with  certain  bankers  and  grain  dealers  at  Ojnaha,  during  the 
years  1903-4.  Prior  to  1904  Omaha  had  been  a  railroad  center,  with 
an  elevator  capacity  of  slightly  more  than  2,000,000  bushels  for 
transferring  grain.  Because  of  an  unfavorable  adjustment  (see  Chap. 
II,  p.  46),  the  bulk  of  the  grain  from  Nebraska  and  other  territory 
west  of  Omaha  passed  on  through  without  entering  mto  the  trade  of 
this  market.  A  pronounced  change  in  this  situation  was  effected 
by  the  promulgation  of  new  proportional  rates  on  June  10,  1904. 

As  a  result  the  elevator  capacity  was  doubled  within  less  than  two 
years,  and  receipts  of  all  grains  increased  to  nearly  20,000,000  bushels. 
The  combined  elevators  of  Omaha  and  Council  Bluffs  were  rated  at 
more  than  10,000,000  bushels  capacity  in  1917.  There  has  been  a 
steady  increase,  especially  in  the  receipts  of  wheat,  corn,  and  oats. 
The  quantity  of  rye  and  barle}^  handled  has  been  comparatively  in¬ 
significant.  During  the  five-year  period  1913-1917  the  average  an¬ 
nual  receipts  of  the  five  cereals  were  as  follow^s:  Corn,  27,352,000 
bushels;  wheat,  21,274,000  bushels;  oats,  15,864,000  bushels;  barley, 
872,000  bushels;  rye,  805,000  bushels. 

Organization  and  membership  of  the  exchange. — The  Omaha 
Grain  Exchange  is  a  stock  corporation,  organized  in  1904  for  a  period 
of  99  years,  with  an  authorized  capital  stock  of  $200,000.  Of  this 
authorization  $109,000  was  outstanding  in  191 7. It  is  expected 
that  the  revenues  of  the  corporation  will  be  chiefly  derived  from  the 
sale  of  memberships,  and  all  money  so  received  in  excess  of  $200,000 
must  be  charged  to  surplus  account  and  not  distributed  as  dividends. 

There  were,  on  December  31,  1917,  188  members  in  good  standing. 
From  the  evidence  at  hand  there  were  from  60  to  70  firms  actively 
engaged  in  the  cash  business  in  1918,  but  only  43  of  these  were 
bonded  to  transact  business  on  the  floor.  Under  the  stock  arrange¬ 
ment  the  membership  is  limited  to  200.  The  classification  of  mem¬ 
bers  appears  in  the  following  table: 

Table  56. — Classification  of  resident  members  in  the  grain  trade,  Omaha  Grain  Exchange, 

1917. 


Engaged 

exclu¬ 

sively. 

Engaged 

prima¬ 

rily. 

Total. 

Engaged 

second¬ 

arily. 

Resident  members  in  grain  trade: 

Cash  commission . 

22 

34 

56 

60 

Terminal  elevators . 

4 

36 

40 

17 

Other  dealers  ® . . . 

1 

1 

2 

2 

Consumers  b . 

5 

4 

9 

11 

Line  elevators . 

3 

10 

13 

21 

Shipr/’TS  . 

4 

4 

8 

16 

Future  commission  d . 

6 

■  '  7 

13 

40 

45 

96 

141 

167 

Out-of-town  grain  firms . 

18 

Not  in  grain  business . . 

29 

47 

188 

a  Includes  all  not  in  other  classes.  <■  Operating  without  a  terminal. 

Millers,  malsters,  etc.  Includes  wire  houses. 

3*  Articles  5  and  8,  Articles  of  Incorjicration,  published  Apr.  1, 1918;  also  see  balance  sheet  for  1917. 


166 


TERMINAL  GRAIN  AIARKETS  AND  EXCHANGES. 


Operating  revenues. — ^Thc  following  profit  and  loss  statements* 
for  the  years  1916  and  1917  indicate  the  present  activities  of  the  ex- 
chaiiiie  and  its  favorable  financial  condition: 


‘  IXCOMK. 

Inspection  and  weighing  depaidTiients: 

Inspection  fees . . . 

Weighing  fees . 

Tallymen  deficiency . 

Condition  reports . 

Moisture  tests . 

Overtime . 

Testing  scales . 

Appeals . - . 

Sample  grain . - . 

Rent  of  tradhig  tables . . . 

Telephone  rental . 

Arbitration  fees . 

I^enalties . 

Rent . 

Income  from  other  sources: 

Interest . 

Transfer  fees  and  special  cards . 

Cash  assessments . 

Total  amount  income . . 

EXrEXDlTVRF.S. 

Inspection  and  weighing  departments; 

Inspection- 

Salaries  . 

Rent . 

Supplies . 

Miscellaneous . . . 

Weighing — 

Salaries . 

Weigh  credits . 

Rent . 

Seale  exi)enses . . 

Supplies . 

Miscellaneous . 

Overtime,  salaries . . 

Carfare . 

Trading  hall: 

Ticker  and  clock . 

Salaries . - . 

Uniforms,  supplies,  and  miscellaneous . 

Arbitvation . 

Telephone: 

Instruments . . 

Salary . 

Telegraph . 

Postage . 

Prmting  and  stationery . 

Office  salaries . 

Office  rent  and  light . 

Traffic  department . . 

Office  equipment . . 

Subscription  and  dues . 

Miscellaneous  expenses . . . 

Towel  supply . - . - . 

Publicity  committee . 

T^egal  expenses . 

Traveling  expenses . 

Surety  bond . 

Insurance . 

Taxes . 

Depreciation,  furniture  and  fixtures . 

Accounts  charged  off . 

*  Total  expendit  nres . 

Total  gain . . . 

Loss  on  leases . 

Net  gain . . 


1916 

1917 

$40,865.33 

$51,133.48 

36,007  .48 

29, 121.  ;30 

100.60 

2,021.95 

15, 343'.  50 

12,274.75 

4,824.50 

2,454.75 

2,025.80 

919.10 

263.30 

491.00 

90.00 

180.00 

3,588.82 

1,042.85 

1,019.50 

1,. 575. 86 

1,69.5.86 

203.00 

218.50 

9.75 

.50.75 

4:3.00 

.59.5 . 63 

1,655.70 

2,525.00 

2,.500.0(» 

10,660.00 

9,925.00 

116, 3.55  .60 

119,070.46 

!  2:3,140.80 

30, 158.90 

!  658.24 

1  4.:394.48 

7,151.15 

1  95.13 

22,3.57.00 

25,731.45 

5,998.50 

4,775.60 

6.58.24 

2,073.08 

16l3. 54 

714.01 

1,334.00 

106.84 

3,951.36 

3,222.25 

6:34.40 

758.25 

789.90 

2,124.02 

2,200.68 

2,067.00 

152.85 

486, 9:1 

169.00 

111.  6.5 

1,037.61 

1,078.52 

600.00 

655.00 

1:30.61 

2^.94 

290.12 

178.85 

.877.01 

1,066.38 

3,840.00 

4,515.50 

1,355.75 

1,733.50 

1,218.86 

5,571.51 

464.81 

1,165.00 

1,300.00 

455.. 59 

58.09 

:34..50 

36.00 

1,140.2.5 

529.00 

4,123.70 

2,166.67 

1,117.00 

1,461.54 

45.00 

43.  (RT 

126.80 

435.25 

713.57 

781. 15 

1,303.43 

1,540.78 

1.65 

285.20 

i. 

86,095.55 

'  103,812.92 

30,260.05 

15,257.54 

5,000.00 

1,793.18 

25,260.05 

.  13,401.36 

a  Issued  bv  the  exehange^. 


DEVELOPMENT  OF  OTHER  MARKETS  AND  EXCHANGES.  167 


'I'iio  Omaha  Exchange^  unlike  most  similar  associations  in  the  large 
primary  markets,  did  not  have  a  scries  of  preceding  organizations 
upon  which  to  build.  The  exchange  was  organized  as  much  by 
bankers  and  wholesale  merchants  as  by  the  grain  men,  and  for  six 
yeai*s  the  president  was  not  chosen  from  the  grain  dealers.  Only 
four  out  of  nine  of  the  first  board  of  directors  were  directly  interested 
in  grain.  In  1910  the  grain  dealers  obtained  control  of  a  majority 
of  the  memberships  and  in  the  winter  of  1911  it  was  urged  that  active 
grain  dealers  be  chosen  for  the  directoiy.  At  present  every  officet 
and  director,  with  the  exception  of  the  secretary,  is  an  active  dealer 
in  grain. 

The  cash  market. — The  Omaha  Exchange  started  with  a  few  line 
companies,  local  elevators,  and  shippers  carrying  on  the  bulk  of  cash 
trading.  By  1911  there  were  92  active  grain  members,  representing 
3(S  firms.  The  line  companies  had  declined  appreciably  in  their  busi¬ 
ness  and  many  small  dealers  had  gained  a  foothold  through  the  expan¬ 
sion  of  the  market.'^^ 


An  examination  of  the  records  for  227,579  cars  of  grain  received 
at  Omaha  from  1913  to  1917  showed  that  about  58  per  cent  of  the 
grain  was  received  on  consignment  and  the  remainder  purchased  on 
a  to-arrive  or  other  basis.  Of  the  grain  disposed  of  in  the  market 
on  first  sales  the  elevators  took  about  55  per  cent  (mostly  for  ship- 
])iiig  purposes).  The  great  bulk  (about  90  per  cent)  of  these  re¬ 
ceipts  was  ultimately  shipped  out  of  the  market. It  is  clear  that 
Omaha  is  chiefly  a  transfer  and  forwarding  point.  The  larger  part 
of  the  trading  takes  place  between  commission  men  acting  for  sellers 
and  elevator  men  operating  as  buyers  and  shippers. 

Trading  in  futures  at  Omaha. — Immediatelv  after  the  organiza- 
tion  of  the  Omaha  Exchange  future  trading  was  introduced,  and 
carried  on  from  February  1  to  December  31,  1904.  The  total  volume 
of  future  trades  during  that  period  amounted  to  slightly  over  5,000,000 
bushels,  including  wheat,  corn,  and  oats.  Another  attempt  to  estab¬ 
lish  a  market  in  futures  was  made  July  5,  1916,  and  trading  continued 
for  some  18  months.  Since  1917  the  pit  has  been  entirely  discon¬ 
tinued.  It  seems  impossible  to  conduct  future  trading  successfully 
at  Omaha  in  competition  with  the  older  and  firmly  established  future 
markets  at  Chicago,  Minneapolis,  and  Kansas  City.  The  relatively 
small  membership  and  the  smaller  volume  of  receipts  of  wheat,  corn, 
and  oats,  as  compared  with  these  other  three  markets,  have  also 
constituted  handicaps  to  active  and  continuous  future  trading. 


Section  6.  St.  Louis. 

The  earla'  river  market. — The  early  grain  trade  at  St.  Louis  was 
derived  from  the  water  traffic  on  the  Mississippi,  Missouri,  and  Illinois 
Kivers.  Prior  to  1860  this  market  held  a  leading  position  in  the 


*9  See  Nalional  Hay  and  (irain  Reporter,  May  20,  1911,  pp.  94  and  9ti.  **  See  Vol.  IV,  Appendix  taldes. 


/ 


168 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


Mississippi  Valley  trade  as  a  distributor  of  water-borne  grain  (espe¬ 
cially  oats)  from  the  North  and  West  to  points  South  and  Southeast.'*^ 
Tlic  srain  carried  in  the  river  trade  was  handled  in  sacks;  there  w^ere 
no  elevators  for  bulk  grain  on  the  St.  Louis  levee  prior  to  1864.^"  The 
inadequacy  of  the  river  channels  for  heavy  cargoes  and  the  lack  of 
facilities  for  handling  in  bulk  constituted  limitations  upon  the  grain 
movement.  Even  as  late  as  1865  when  the  trunk  line  railroads  had 
reached  the  Mississippi,  rnore  than  80  per  cent  of  the  grain  receipts 
at  St.  Louis  came  by  river,  as  appears  in  the  following  statement; 


Bushels  received. 

Wheat. 

Oats. 

Rye. 

Barley. 

Totals. 

Tty  river.  . 

2,756,359 

514,529 

181,834 

3,  .502, 617 
670,  .562 

208,111 

9,457 

732,038 

114,192 

7, 199, 125 
1,308,740 
181,834 

Ily  rail  .  .  . . . 

H  V  i  . . 

3,452,722 

4,173,179 

217,-568 

846,230 

8,689,099 

Development  of  milling  and  elevator  facilities. — Prior  to  ^ 
1 865  the  great  bulk  of  wheat  received  was  ground  in  the  city.**^  In  that 
year  the  market  had  16  mills  with  an  annual  grind  of  743,281  barrels. 
Owing  to  the  lack  of  elevator  facilities  the  mills  controlled  the  local  ^ 
stocks  of  wheat  almost  up  to  1870.  St.  Louis  operated  14  flour  mills  , 
as  early  as  1847,  and  was  the  largest  milling  center  in  the  United  States 
prior  to  1880,  wLen  precedence  went  to  Minneapolis.  Consumption 
of  grain  by  flour  and  grist  mills  in  1914  was  only  about  2,500,000 
bushels.^®  i 

Handling  in  bulk. — It  was  first  proposed  to  handle  grain  in 
bulk  at  St.  Louis  in  1860.  A  resolution  to  permit  the  construction  , 
of  an  elevator  in  that  year  was  vetoed  by  the  mayor.'*^  , 

In  1865  a  barge  company  (The  Mississippi  Valley  Transportation  j 
Co.)  w^as  formed  to  carry  grain  in  bulk  to  New' Orleans,  thus  giving 
dealers  a  southern  outlet  for  their  grain.  Through  the  efforts  of  the  | 
Merchants’  Exchange  of  the  city,  a  small  elevator  for  receiving,  stor¬ 
ing,  and  shipping  grain  was  begun  in  1865  and  completed  two  j  ea'rs 
later.  As  a  result  of  these  improvements,  St.  Louis  no  longer  de¬ 
pended  entirely  on  the  milling  demand  to  attract  wheat  to  its  market. 
'LV  healthy  and  paying  order  demand  sprung  up  from  the  Eastern 
and  Middle  States,  sufficient  to  take  any  surplus  not  wanted  by  the  ' 
millers.”^® 

Report  of  the  St.  Louis  Merchants’ Exchange  for  1882,  p.  86.  ’ 

W.  B.  Stevens,  History  of  St.  Louis,  1764-1911,  Vol.  II,  p.  470.  '  ' 

See  Report  of  St.  Louis  Merchants  Exchange  for  1865,  pp.  34  and  38. 

<<  Thus,  in  1865,  only  62,860  bushels  of  wheat  vvere  shipped  out  of  St.  Louis,  The  shipment  of  oats,  how¬ 
ever,  amounted  in  the  same  year  to  3,083,864  bushcjs,  compared  with  receipts  of  4,173,221  bushels.  (Annuel 
report,  1865,  pp.  34  and  38.) 

Report  for  1865,  p.  22. 

From  a  report  prepared  by  the  Division  of  Manufactures  of  the  Bureau  of  the  Census  for  theFeleral 
Trade  Commission. 

•t' Stevens,  History  of  St.  Louis,  II,  p.  470.  . 

<8  Report  of  Merchants  Exchange  for  1870,  p.  GO.  ■  — 


169 


DEVELOPMENT  OF  OTUEP  MARKETS  AND  EXCHANGES. 


The  fil-st  important  attempt  to  establish  an  ex])ort  trade  came  in 
1869  when  the  St.  Louis  Grain  Association '  was  organized  with 
8100,000  capital  stock.  During  the  first  year  470,000  bushels  of 
wlieat  were  shipped  to  Europe,  and  Avhile  the  experiment  was  not 
profitable  the  feasibility  of  the  Gulf  route  was  clearly  established. 
After  more  experience  was  gained,  the  export  business  increased  so 
that  in  the  year  1880  over  15,000,000  bushels  were  exported  by 
St.  Louis  houses.  In  1906  about  50,000,000  bushels  of  wheat,  corn, 
and  oats  were  exported  through  New  Orleans  and  Galveston.  This 
export  movement  has  sometimes  been  temporarily  interrupted 
through  the  uncertainty  of  river  iiavigation  as  compared  with  that 
of  the  Great  Lakes  and  all-rail  trunk-line  routes  to  the  Atlantic  sea¬ 
board.  Likewise  the  river  port  is  no  longer  a  significant  factor  in 
the  attraction  of  grain  shipments.  The  falling  off  in  river  receipts 
was  very  marked  in  1903  and  1904,  as  is  shown  by  the  following  table: 


Table  b7 .—Shipments  and  receipts  of  grain  at  St.  Louis  by  rail  and  river,  1896  to  1904d 


l.sOf) 

1.S97, 

1598 

1599 

1900. 

1901. 

1902. 

1903. 

1904. 


Year. 


Shipmeiits. 

Receipts. 

River. 

Rail. 

^  River. 

Rail. 

Bushels. 
11, 652,027 
6, 813, 450 
7, 276, 668 
2, 669, 180 
3, 943, 266 
2, 975, 974 
3,900, 041 
3,295,141 
155, 355 

Bushels. 
20, 791, 121 
32, 889,  .506 
.38.317,507 
29;  234, 279 
39,254,806 
42, 849, 364 
44, 704, 186 
51,609,930 
54, 796, 963 

Bushels. 

1, 555, 097 
819, 438 
1,327,  763 
1,293,411 
1,831,503 
1, 943, 192 
2, 408,700 
554, 454 
835,  431 

- - - - — . 

Bushels. 
49,579,247 
56, 781,201 
52, 945, 452 
46,950,326 
59,31.3,301 
58, 106, 606 
68,028,372 
68,205,532 
61,50.5, 507 

Report  of  the  Commissioner  of  Corporations  on  Transportation  by  Water,  Vol.  2,  p.  301. 


As  the  table  shows,  ‘formerly  large  quantities  of  wheat,  corn, 
and  some  oats  were  sent  by  river  to  New  Orleans  for  export,  but  the 
building  of  railroad  lines  direct  to  Gulf  ports  from  points  in  the  grain- 
growing  territory  w^est  of  St.  Louis  and  the  neglect  of  systematic 
river  improvement  in  the  Mississippi  below  the  city  have  greatly 
decreased  the  river  shipments.  The  last  of  the  river  shipments  to 
New  Orleans  were  taken  by  the  St.  Louis  Steel  Barge  Co.  (in  1902) 
and  by  the  St.  Louis  and  Mississippi  Valley  Transportation  Co.,  which 
went  out  of  business  shortly  afterwards.” 

The  promoters  of  inland  deep-waterway  development  now  predict 
a  1‘evival  of  the  grain  movement  down  the  Mississippi  with  New  Or¬ 
leans  as  a  great  port  of  concentration  for  the  tributary  area.^®  In 


Report  of  the  Commis-sioaer  of  Corporations  on  Transportation  by  Water,  Vol.  2,  p.  300, 

‘'®  The  president  of  the  Merchants’  Exchange  in  welcoming  the  Grain  Dealers  National  Association,  Oct. 
13, 1919,  stated:  ‘U  indeed  esteem  it  a  great  privilege  to  welcome  you  on  behalf  of  the  Merchants’  Exchange, 
l)robably  the  oldest  grain  exchange  in  the  United  States.  *  *  *  q'jig  mayor  has  told  you  of  the  barge 
line.  That  barge  line,  carrying  grain  to  the  Gulf,  will  add  to  and  make  St.  Louis  still  larger  as  a  consign¬ 
ment  market.  And  you  will  see  a  beautiful  sign  if  you  will  go  to  any  one  of  our  present  public  elevators, 
now  connected  with  loading  facilities  to  the  river,  and  see  a  l)arge  carrying  (50,000  bushels  of  wheat  down 
the  river ,  the  first  time  in  many  years.  Sixty  thousand  bushels  of  wheat  or  corn  means  50  carloads,  in  one 
barge.” 


170 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


fact  the  Merchants’  Exchange  did  appropriate  $25,000^  on  May  10, 
1917,  ^Ho  be  invested  in  a  transportation  line,  to  be  operated  on  the 
Mississippi  Kiver  between  St.  Louis  and  New  Orleans. This  line, 
liowever,  is  not  yet  in  operation  (1919).® 

The  St.  Louis  Merchants’  Exchange. — The  St.  Louis’ Merchants’ 
Exchange  traces  its  origin  to  a  merchants’  debating  society  (known 
as  the  Chamber  of  Commerce)  organized  in  the  summer  of  1836,  and 
on  that  precedent  may  be  considered  the  oldest  grain  exchange 
among  the  primary  markets.  The  25  business  men  of  this  earliest 
association  met  monthly  to  hear  papers  on  commercial  topics. 
They  were  incorporated  in  1837  by  special  act  of  the  State  of  Mis¬ 
souri.  This  charter  required  that  the  property  of  the  association 
should  ‘Liot  exceed  at  any  time  a  sum  of  $20,000.”  Otherwise,  they 
might  perform  any  function  ''not  contrary  to  the  laws  of  the  land.”^" 

Although  the  early  chamber  did  not  provide  an  exchange  hall,  they 
did  agree  upon  certain  regulations  for  the  grain  business  and  adopted 
a  schedule  of  commissions  “to  be  charged  on  sales  of  produce  and 
lead,  on  purchases  of  produce,  on  payment  of  freight  bills,  on  advances 
to  customers,  on  placing  insurance,  and  on  adjustment  of  losses.” 
The  new  chamber  also  fixed  a  schedule  of  fees  for  the  arbitration  of 
business  disputes  which  is  the  earliest  record  on  file  of  commercial 
arbitration  provided  by  a  grain  exchange  agency  in  the  United 
vStates.^^ 

Although  the  meeting  place  of  the  commercial  l)ody  was  known 
as  the  “Merchants’  Exchange  and  News  Room,”  it  was  not  until  1849 
that  the  Merchanis’  Exchange  was  formally  established  by  the  cham¬ 
ber  of  commerce.  A  permanent  secretary  was  appointed;  news- 
])apers  were  kept  on  file;  regular  telegrams  showing  the  state  of  other 
markets  were  received;  and  trading  hours  were  set  from  11  a.  m.  to 
12  noon.  The  rooms  were,  during  that  time,  open  to  everybody,  but 
only  members  could  buy  and  sell. 

During  the  same  year  a  Millers’  Exchange  was  opened  for  business 
in  rooms  rented  near  the  levee  so  that  samples  of  grain  and  produce 
might  be  displayed  without  being  exposed  on  the  river  front.  This 
exchange  was  shortly  absorbed  by  the  older  body. 

Upon  two  pine  counters,  in  24  tin  ]>ans,  i)egan  the  selling  oi  grain  and  flour  by  sample 
:  in  St.  Louis.  And  this  was  the  inauguration  of  tlie  sample  method  of  trading  on 
:  ’Change  for  the  United  States.  It  dates  back  to  the  decade  of  ISlO-1850.  The  Mer- 
<  chants’  Exchange,  which  was  only  two  blocks  away,  sent  an  invitation  to  the  Mil¬ 
lers’  Exchange  to  bring  their  flour  and  grain  sanqilc^s  and  do  the  tiading  there. 
The  invitation  w- as  accepted * 

"  ’  a  A  barge  line  was  operated  during  the  war  by  the  Director  General  of  Railroads.  _ 

n  Mmual  Report  for  1917,  p.  32. 

Stevens,  History  of  St.  JiOuis,  Vol.  II,  pp.  IJO-lTi. 

Idem. 

»’  .‘^tevens’  History  of  St.  Louis,  17G1-1911,  Vol.  II,  p.  181. 


development  of 


OTHER  VtARKETS  AND  EXCHANGES. 


171 


A  special  chamber  of  commerce  building  was  erected  in  1857^  in 
which  the  Merchants’  Exchange  occupied  the  second  floor,  at  an  annual 
rental  of  $2,500.  The  Exchange  hall  was  101  feet  long  by  SO  feet 
wide,  with  a  distance  of  63  feet  from  the  floor  to  the  apex  of  the  dome. 
It  was  pro])ably  the  best  equipped  commereia]  hall  of  its  day  in  the 
country. 

The  Civil  War  disrupted  the  chamber  of  commerce  because  of  a 
division  of  sympathies  between  the  members,  with  the  result  that 
there  was  organized  what  was  called  the  Union  Merchants’  Exchange. 
This  group  had  withdrawn  from  the  other  members  at  the  time  of  the 
annual  election  in  1862.  In  March,  1863,  they  were  incorporated,  and 
later  (1875)  the  name  Avas  changed  to  Merchants’  Exchange  of  St. 
Louis.  The  corporate  history  of  the  present  body,  therefore,  dates 
from  the  Civil  War. 

In  1871  they  absorbed  the  St.  Louis  Grain  Association,  Avhich  liad 
been  organized  a  few  years  previously  as  an  independent  exchange  for 
the  purpose  of  marketing  surplus  receipts  nbt  taken  by  the  local 
mills. 

Memhersliip  j^olicy. — Embracing  as  it  did  the  various  trades  of 
the  city  the  membership  of  the  exchange  continued  to  expand  so  long 
as  it  Avas  on  a  subscription  basis.  The  largest  membership  Avas 
reached  in  1883,  Avhen  it  totaled  3,565  members.  In  1882  the  old 
form  of  ^^subscribing”  memberships  Avas  abolished  and  membership 
"  certificates  aawc  issued  and  made  transferable.^®  The  initiation  fed 
on  May  1,  1882,  Avas  fixed  at  $2,500.^^  Since  that  time  the  number  of 
memberships  has  progressively  declined,  due  to  the  redemption  and 
forfeiture  of  outstanding  certificates.^*  As  Table  55  shows,  there. 
Avere  only  942  members  in  1917,  and  the  membei-ship  is  noAv  limited 
’  to  the  outstanding  certificates.  This  policy  has  not  as  yet  greatly 
increascAl  the  market  value  of  the  certificates,  AAdiich  ranges  below 
$200.  A  large  portion  of  the  membership  is  inactive,  retaining  the 
Certificates  only  to  obtain  membership  commission  rates. 

Expenditures  by  the  exchange  for  the  redemption  of  unused  certifi¬ 
cates  over  a  5-year  period  haA^e  been  as  follows: 


.  $3,450.00 

1914 . 3,300.00 

1915. . 3,000.00 

1910 . . . . .  3,  20(».00 

1917 . 45,200.00 


Reports  of  the  Merchants’  Exchange,  1869,  p.  11;  1S71,  p.  8. 

Cf.  p.  73  for  Chicago  practice. 

Annual  Report  1892,  p.  10.  See  also  Directors’  Report  for  1897,  in  which  they  state  The  time  is  near  at 
hand  when  the  number  of  outstanding  memberships  will  have  been  reduced  to  the  actual  requirements  of 
business,  resulting  in  ait  iircreased  value  for  certificates.’: 

Annual  Report,  1832,  p.  9. 


172 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES.. 


A  reduction  of  119  members  was  effected  in  1917  as  follows: 

Purchased  and  canceled  100,  as  provided  for  by  an  order  of  the  board  under  section 
38  of  Rule  XIII;  redeemed  11  certificates  of  deceased  members;  resigned  1;  5  for- 
leited  for  nonpayment  of  dues,  and  the  certificates  of  two  members  were  canceled,  the 
members  being  placed  on  the  list  of  honorary  members.  *  *  *  »» 


Classification  of  memhers.—iCaQ  table  below  shows  a  classification 
of  the  resident  members  in  the  grain  trade  at  the  close  of  1917. 


Table  No.  58. —  Classification 


Kesident  members  in  grain  trade; 

('ash  commission . 

Terminal  elevators . 

Other  dealers  i . 

Consumers'- . . . 

Line  elevators . 

Shippers  ^ . 

Future  commission  * . 


Out-of-town  members: 
Other  exchanges . . 
Adjacent  territory. 

Not  in  grain  business.. 

Total . 


of  resident  members  in  the  grain 
chants^  Exchange,  1917. 


trade,  St.  Louis  Mer- 


gel 

lu- 

ly. 

Engaged 

prima¬ 

rily. 

Total. 

Engaged 

second¬ 

arily. 

40 

109 

149 

24 

12 

9 

21 

15 

74 

74 

81 

7 

88 

4 

4 

3 

4 

3 

7 

62 

43 

3 

46 

84 

254 

135 

389 

188 

61 

128 

189 

364 

942 

1  Feeders,  and  all  others  not  included  in  other  classes. 

2  Millers,  malsters,  etc. 

3  Operatiirg  without  terminal  elevator  facilities. 

*  Including  wire  houses. 


Examination  of  the  table  shows  that  the  cash  commission  men  are 
by  far  the  most  numerous  on  the  exchange  and  that  the  buyers  for 
millers  and  manufacturers  constitute  a  relatively  large  group.  .The 
bulk  of  the  grain  storage  of  the  market  is  owned  by  these  latter  inter¬ 
ests  and  public  warehousing  at  St.  Louis  is  insignificant  in  comparison 
to  that  business  at  Chicago,  Minneapolis,  and  Kansas  City.  The 
])ulk  of  the  grain  which  passes  eastward  (or  southeastward)  is  recon¬ 
signed  without  going  to  storage. 

Operating  revenue  and  expense. — The  treasurer’s  statement  of  cur¬ 
rent  receipts  and  expenditures  for  the  calendar  year  1917,  which  fol¬ 
lows,  shows  the  trading  facilities  maintained  by  the  exchange. 


Receipts: 

Balance  on  band,  Jan.  1,  1917 .  |2,  820.  57 

Received  from  assessments .  108,  500.  00 

*  Received  from  department  of  wmigbts .  42,135.78 

Received  from  hay  department . . .  G,  070.  00 

Received  from  telegraph  counters .  3,  700.  02 

Received  from  transfer  fees .  3, 100.  00 

Received  from  drawer  rents . . *. .  1,  333.  25 

Received  from  interest .  1,  025.  71 

Received  from  long-distant  telephone  booths .  888,  00  i 

Received  from  nonresident  tickets .  500.  00 


^  1917  Report. 


DEVELOPMENT  OF  OTHER  MARKETS  AND  EXCHANGES.  173 


Receipts — Continued. 

Received  from  sweepings . 

Received  from  private  telephone  booths 
Received  from  messenger  tickets . 


$452.  20 
266.  00 
160.  00 


Total  receipts . 

Expenditures: 

Department  of  weights .  |4g^  045.  79 

Redemptions .  45’  200.  00 

Salaries .  702  70 

Telegraph  account . . .  16^  447  og 

Traffic  department . '  _  55  046  52 

Transferred  to  real  estate  account .  5^  500.  00 

Hay  department . .  5^  045.  75 

Delegates  to  conferences  and  conventions .  3.  255.  05 

Telephone  service . . .  2  462  05^ 

Printing  and  stationery .  4^  74g  47 

State  ex  rel.  v.  Merchants’  Exchange . .  1,  460.  32 

Annual  report . "  l’ 030.  85 

Su4)plie8,  lavatory  and  porters’ .  g47.  40 

Attorney .  75O.  oo 

Flour  inspector .  739  qo 

Provision  inspector .  600.  00 

Postap... . .  571.76 

Contribution — Missouri  Federated  Road  Association .  500.  00 

Contribution— Mississippi  Valley  Waterways  Association.  500.  00 

Sanitary  cups,  water  and  ice .  354.  40 

Dues— Chamber  of  Commerce  of  the  United  States  of 

^nierica .  300.  00 

Rt^pairs .  243.  91 

Board  of  directors .  225.  75 

Dues — Council  of  Grain  Exchanges .  200.  00 

Books,  papers,  price  currents,  etc .  407.  50 

Judges  of  election .  63.00 

Taxes  for  1917 .  50.  97 

Sundries . . .  946.  75 


170,  931.  53 


Total  expenditures . . .  470^  342.  02 

Balance  on  hand,  Dec.  31,  1917 .  619.  51 


It  will  be  noted  from  this  statement  that  63  per  cent,  or  $108,500, 
of  the  revenues  for  that  year  were  derived  from  assessments  upon 
members;  and  that  this  assessment  was  all  necessary  to  meet  operating 
expenses.  The  principal  expenditures  have  been  for  the  following 
objects:  The  weighing  department  (now  superseded  by  the  State  of 
Missouri);  administrative  salaries;  the  telegraph  account  (market  in¬ 
formation  service);  and  the  traffic  department. 

Elevator  and  warehouse  facilities. — As  already  stated,  the 
fu’st  public  warehouse  for  bulk  grain  was  completed  in  1865.  In  1872 
there  was  one  1,250,000-bushel  house  and  1,600,000  bushels  capacity 
distributed  among  five  other  houses. 

Between  1882  and  1891  the  storage  capacity  increased  to  more  than 
11,000,000  bushels.  Owing,  however,  to  the  decline  in  river  grain 


174 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


movement  and  the  competition  with  Kansas  City,  Omaha,  and  other 
recently  developed  western  markets  the  storage  capacity  has  shown 
a  marked  decline.  (Sec  Ch.  II,  sec.  5.) 

The  public  elevators  in  the  St.  Louis  market  may  and  do  operate 
as  merchandisers,  since  the  Illinois  warehouse  law  does  not  apply  t<* 
Ihist  St.  Louis.®®  The  10  '^public”  elevators  (with  an  aggregate  ca¬ 
pacity  of  4,750,000  bushels  Jan.,  1918)  are  operated  by  grain  dealers. 
TJie  32  private”  elevators  are  practically  all  operated  by  millers, 
brewers,  and  other  converters,  and  possess  a  rated  capacity  of  4,776,500 
bushels.®^  The  Mississippi  Valley  and  Burlington  elevators  have  rated 
capacities  of  1,500,000  and  1,300,000  bushels,  respectively.  The 
Anheuser-Busch  Brewing  Association  has  maintained  a  private  house 
of  1,660,000  bushels  capacity.  The  remaining  houses  are  small. 
Little  grain  is  bought  for  storage  on  the  Merchants  ’  Exchange,  the 
bulk  trointr  to  consumers  or  distributors. 

The  CASH  market. — A  regular  trading  floor  for  cash  contracts  was 
conducted  by  the  Merchants’  Exchange  after  the  absorption  of  the 
millers’  association  (about  1850).  About  1876  the  call  method  of 
trading  was  introduced  for  both  spot  -and  futures  contracts.  The 
call  board  was  vciy  active  for  more  than  20  years.  It  has  practically 
ceased  since  1897,  although  still  provided  for  in  the  rules.®-  These 
call  board  transactions  (both  in  cash  and  futures),  as  shown  by  the 
annual  reports  of  the  merchants’  exchange  from  1876  to  1897,  are 
ofiven  in  the  following  table: 


T  'Vble  59. — Cash  and  future  a  call  board  transactions,  St.  Louis  Merchants'  Exchmiffe, 

1S76  to  1897. 

[Car  lots  reduced  to  bushels,  OOO's  omitted.] 


Year. 

Wheat.  * 

Corn. 

Oats. 

Rye. 

Cash. 

Futures. 

Cash. 

Futures. 

Cash. 

Futures. 

- 

Ca.sh. 

Futures. 

1870 . 

1,268 

22, 853 

5,881 

10,895 

600 

1,030 

95 

97 

1877 . 

'910 

7, 162 

3,670 

14,345 

335 

2,340 

128 

78 

3878 . 

3, 530 

9,645 

2, 665 

10,645 

695 

3,218 

233 

270 

3879 . 

4,441 

18,505 

1,780 

25, 165 

983 

6,170 

101 

120 

1880 . 

10, 287 

39;  080 

7,287 

39,115 

1,231 

5,315 

82 

55 

3881 . . 

7,114 

64,275 

10,808 

87,585 

2,489 

21,630 

185 

110 

1SS9 

11,822 

77,885 

9,668 

97,405 

4,514 

26, 155 

121 

8^659 

105'  160 

12,560 

105,860 

3,944 

21,175 

286 

8, 378 

105,316 

8,970 

99,650. 

2,188- 

20,580 

ITO 

2,392 

109' 480 

9, 733 

72,720 

2)478 

18, 140 

201 

4,862 

85, 855 

4,270 

57,410 

1,994 

12,475 

48 

1.SS7 

3, 588 

86, 170 

2,322 

62,735 

1,377 

12,740 

86 

1, 130 

87, 895 

4,331 

61,995 

1,821 

16,580 

87 

3,541 

52, 205 

6)180 

51,010 

1,273 

8,325 

192 

3, 192 

71',  890 

7,502 

53,980 

803 

12,305 

145 

1891 . 

10^385 

62',  160 

5,898 

48,120 

1,326 

9, 255 

72 

1  RQO 

7,089 

55, 095 

5,464 

45,435 

895 

10, 575 

104 

' 

48)  815 

4,540 

39,230 

602 

4,265 

63 

4' 968 

39)  520 

3,564 

35,705 

846 

oSo" 

48 

3  357 

39)860 

3,322 

>  35,265 

638 

7,980 

71 

isioa 

3’  522 

38,3^ 

3)654 

■  34,590 

892 

6, 405 

70 

1897 . . 

'240 

20,055 

920 

17,065 

130 

2,380 

10 

. 

:• 

«  This  does  not  include  all  future  trading.  See  annual  report  for  1897,.  p.  184. 

The  law  defining  public  warehouses  of  class  A  relates  to  cities  of  over  100,000  populatioii. 
Annual  report  for  1917,  p.  101% 

Rule  XI,  1017  edition,  p.  47. 


DEVl'lLOPMENT  OF  OTHER  MARKETS  A:ND  EXCHANGES.  175 


llie  cxchaiigc  is  eoiicenicd  primarily  with  the  grain  and  flour 

trade,  although  its  membership  comprises  all  trades  and  industries 

in  the  city.  It  differs  from  most  of  the  other  western  irrain  ex- 

changes,  in  that  the  flour  trade  is  as  important  as  that  in  grain.  There 

is  also  extensive  trading  in  hay,  provisions,  produce,  seeds,  and  castor 

beans.  A  feature  of  the  grain  market  is  the  trade  in  soft,  red  winter 

wheat,  which  is  concentrated  at  this  terminal. 

A-  d  e  f  ^  1 0 ,  b  7 1  c  a  i  s  received  by  St.  Louis  traders  durimj: 

_  *  ^  * 

1913-1917  showed  that  56  per  cent  were  shipped  in  on  consignment 
and  the  remainder  purchased  direct  from  outside  points;  62  per  cent 
of  the  direct  purchases  were  made  by  consumers. 

tlie  ^ram  sold  in  the  market,  the  consumers  (millers,  converters, 
and  feeders)  were  likewise  the  largest  buyers,  taking  about  47  per 
cent  of  the  cars  examined.  The  elevators  took  25  per  cent. 

The  futures  market. — As  Table  59  shows,  trading  in  futures 
lias  been  conducted  since  the  early  seventies,  but  never  on  a  scale 
comparable  Avith  that  in  (Licago,  Minneapolis,  or  Kansas  City 
to-day.  There  is  no  great  conGentration  of  contract  grain  and  tlie 
market  is  comparatively  free  from  large  speculative  operations.®* 


Section  7.  Peoria. 

The  Peoria  market.— Peoria,  as  the  maps  show  (pp.  32,  33), 
lies  in  the^  center  of  an  area  of  dense  corn  and  oats  production. 
The  early  market  was  developed  through  its  river  shipping  facilities, 
the  movement  being  toward  St.  Louis.  A  regular  line  of  packets 
was  operated  between  the  two  river  ports  for  a  long  period.  Pe- 
ccntly,  however,  the  larger  part  of  the  river  traffic  has  been  by 
barges  and  canal  boats. 

Railway  connection  Avas  established  between  Lhicago  and  Peoria 
in  1854.  Peoria  is  noAV  a  “rate  breaking’’  point  AA'ith  connections 
on  14  railroads,  although  possessing  no  trunk  line  terminals  such  as 


those  in  Chicago.  The  Peoria  Board  of  Trade  has  for  maiw  years 
alleged  a  rate  discrimination  by  trunk-line  roads  in  favor  of  Chicago 
(see  p.  45). 

The  grain  sliipping  business,  Avhile  active,  has  been  of  less  conse¬ 
quence  to  the  market  than  the  consumptiA^e  demand  of  local  distilleries 
and  cereal  food  manufacturers.  During  1913-1917  about  58  per  cent 
of  coiii  receipts,  53  per  cent  of  barley,  and  20  per  cent  of  rye  receipts 
Avere  consumed  in  the  local  market.  (See  Table  S,  p.  24.)  Peoria 
Avas  second  among  the  primary  markets  in  the  United  States  in  con¬ 
sumption  of  corn  during  1913-1917,  using  on  the  average  (in  all  Avays) 
nearly  14,000,000  bushels  annuallv. 


The  Peoria  Board  of  Trade. — The  earliest  board  of  trade  in 
Peoria  aatis  incorporated  in  1857.  The  present  body  Avas  organized 


“  Sec  general  tables,  A'ol.  IV. 


See  \*ol.  A',  cli.  1,  lor  more  detailed  discussion. 


176 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


in  1869  au(]  incorporated  the  next  year  under  the  general  laws  of 
Illinois. 

About  135  memberships  are  outstanding  to-day,  the  recent  market 
Table  (1918)  being  about  $400.  The  price  of  a  ^Areasury  member¬ 
ship”  (^‘initiation  fee”)  is  fixed  at  $1,000.  Further  expansion  of 
tlie  association  is  thus  restricted,  as  on  the  other  larger  western 
exchanges.  A  transfer  fee  of  $50  is  charged  except  as  between  mem- 
])ers  of  a  single  firm.  Memberships  maybe  owned  either  by  individ¬ 
uals  or  by  a  firm  itself.®^ 

It  will  be  noted  from  the  following  table  tliat  although  tliere  is  no 
pit  trading  at  Peoria  there  are  five  future  commission  houses  which 
liold  memberships  on  the  Board  of  Trade.  These  are  branch  offices 
of  Chicago  wire  houses  which  handle  the  Peoria  futures  business  and 
also  serve  the  local  cash  traders  by  sending  to-arrive  bids  to'  the 
country  and  procuring  Chicago  cash  and  future  cjuotations. 

Table  00. — Classification  of  resident  members  in  the  grain  trade,  Peoria  Board  of  Trade, 

1916. 


Engaged 

exclu¬ 

sively. 

Engaged 

prima¬ 

rily. 

Total. 

Engaged 

second¬ 

arily. 

Ilesident  members  in  grain  trade: 

('ash  commission . 

14 

30 

44 

10 

Terminal  elevators . 

1 

1 

3 

1 

Other  dealers  i . 

3 

1 

Consumers  * . . . 

14 

1 

15 

Fine  elevators . . . 

7 

7 

4 

Shippers  3 . 

2 

2 

4 

35 

18 

Future  commission  < . 

4 

1 

0 

35 

44 

79 

69 

Out  of-town  members . 

4 

Not  in  grain  business . ■. . 

50 

54 

Total  accounted  for . 

133 

1  Feeders  and  all  others  not  included  in  other  classes. 

2  Millers,  malsters,  distillers,  etc. 

3  Operating  without  terminal  facilities. 

*  Including  wire  houses. 

Enforcement  of  rules. — The  Peoria  exchange  seems  to  be  neither 
so  highly  organized  nor  so  strictly  regulated  as  those  in  the  larger 
primary  markets.  For  example,  the  margin  rule  designed  to  pro¬ 
tect  buyers  and  sellers  on  contracts  for  deferred  shipment  (30,  60, 
or  90  days  delivery)  is  almost  never  invoked.  The  reason  advanced 
for  failure  to  demand  cash  margins  is  that  competition  is  so  keen  that 
the  customer  will  simply  transfer  his  account  to  some  other  Peoria 
grain  man  who  does  not  demand  margins.  It  is  reported  that  sub¬ 
stantial  losses  have  been  sustained  in  cases  of  default  on  such 
contracts. 

Likewise,  the  arbitration  rules  (see  Ch.  V,  sec.  6)  have  been  seldom 
called  into  use. 


See  Ch.  V,  sec.  4. 


DEVELOPMENT  OF  OTHER  MARKETS  AND  EXCHANGES.  177 


Elevator  facilities. — Peoria  lias  very  meager  elevator  facilities. 
Of  tlie  three  houses  in  operation®®  in  1918  only  one,  the  Burlington, 
was  operated  ‘‘as  a  public  house.’'  This  elevator  has  a  1,000,000- 
bushel  rated  capacity  and  the  stock  is  controlled  by  three  local 
grain  firms.  The  available  public  storage  of  the  market  is  thus  so 


small  as  to  make  it  difficult  to  transfer  grain  for  shipping  purposes. 
Lack  of  elevator  facilities  frequently  compels  receivers  to  reconsign 
grain  or  ship  on  destination  weights,  which  constitutes  an  obstacle 
to  the  growth  of  the  market. 

The  exchange  has  no  supervision  over  the  elevators  except  in 
weighing  grain  and  registering  grain  stored  by  outside  parties. 

The  CASH  market. — Trading  on  the  Peoria  Board  of  Trade  is 
confined  to  cash  transactions.  About  75  per  cent  of  all  cars  of  grain 
received  at  Peoria  are  sold  for  local  consumption.  An  examination 
of  91,983  cars  received®^  during  the  period  1913-1917  showed  that 
49.6  per  cent  were  bought  on  to-arrive  contracts  (mostly  from  Illinois). 
Most  of  these  direct  purchases  (94  per  cent)  were  made  by  commis¬ 
sion  men. 

Of  aU  grain  sold  in  the  market,  consumers  took  46  per  cent  on  initial 
sales.  It  is  reported  that  75  per  cent  of  the  corn  received  was  pur- 
cliased  by  the  seven  distilleries,  operating  through  one  agent.  They 
were  the  heaviest  buyers  in  the  market. 

The  traders  listed  as  commission  men  are  therefore  the  predomi¬ 
nant  selling  group,  while  consumers  (manufacturers,  converters,  and 
feeders)  are  to-day  the  principal  buyers.  There  is  only  one  terminal 
elevator  represented  on  the  exchange,  and  the  seven  members  repre¬ 
senting  line  companies  are  reported  to  be  dissatisfied  and  ready  to 
sell  out. 


It  is  apparent  that  the  Peoria  market  is  narrow  and  irregular  as 
compared  with  the  larger  exchanges  already  described.  A  call  board 
is  frequently  resorted  to  as  a  method  of  establishing  local  cash  prices: 

The  concentrated  buying  by  associated  distilleries®®  scarcely  assisted 
the  development  of  the  market,  since  they  could  readily  buy  and  store 
at  Chicago  or  St.  Louis  when  Peoria  prices  were  out  of  line,  and  have 
done  so  in  times  past.  The  buying  agent  of  the  distilleries  stated  in 
Jul}^,  1918,  that  he  then  had  2,009,000  bushels  of  sam2:)le  grade  corn 
stored  at  Chicago. 


Section  8.  Louisville. 

The  Louisville  market. — Like  the  other  Ohio  River  and  Lake 
Erie  markets  Louisville  was  relatively  more  important  as  a  grain 
market  several  decades  ago  than  it  is  to-da}^.  In  common  with 
Cincinnati,  Louisville  is  a  natural  gateway  to  the  Southeast.  These 


®« Including  the  Turner-Hudnut,  a  private  house,  at  Pekin. 
See  general  tables,  Vol.  IV. 

6®  Owned  by  the  American  Distilling  i  Distributing  Co. 


20 - 12 


178 


TERMIKxiL  GExUX 


MxVRKETS  AND  EXCEEVNGES. 


river  2:)orts  flourished  as  distributing  2>oiDts  so  long  as  transx>ortation 
v'as  largely  by  water,  but  development,  of  the  trunk-line  railroad 
system  and  the  shifting  of  production  areas  gave  other  maikets,  such 
ais  8t.  Louis  and  Chicago,  an  initial  advantage. 

Idiere  is  no  trading  floor  operated  for  grain  in  Louisville  and  tlie 
consignment  business  is  negligible.  The  grain  trade  is  supervised  ])y 
tlu'  grain  committee  of  the  Board  of  Trade,  which  also  controls  the 
weighing  and  inspection  services.  A  special  act  of  Kentucky, 
approved  April  28,  1880,  authorized  the  local  board  of  trade  to  weigli 

and  inspect  grain. 

Seven  or  eight  firms  handle  the  grain  trade  of  the  market.  The 
oldest  of  these  merchandisers,  A.  Brandeis  &  Son,  has  operated  at 
this  point  since  1851.  About  68  per  cent  of  the  grain  handled  is 
consumed  in  the  market,  for  the  most  part  by  the  local  flour  and 
cereal  mills  and  (formerly)  distilleries.  There  are  3  corn  mills  with 
an  aggregate  daily  capacity  of  8,000  barrels  and  2  flour  mills  with 
an  aggregate  dailv  capacitv  of  5,000  barrels. 

Since  there  is  no  floor  trading,  local  transactions  are  based  largely 

on  Chicago  quotations. 

Section  9.  Cincinnati. 

The  Cincinnati  market. — ^Cincinnati,  once  a  relatively  important 
market,  was  surpassed  by  Chicago  and  St  Louis  in  receipts  of  grain 
as  far  back  as  1858.®°  Keceipts  of  grain  to-day  are  considerably  less 
than  at  Peoria  or  Indianapolis  although  greater  than  at  Toledo  or 
Louisville. 

(If  the  country  grain  received  more  than  65  per  cent  conies  from 
Indiana  and  the  remainder  is  about  equally  derived  from  Ohio  and 
Illinois.  Shipments  out  of  the  market  are  to  Newport  News  or 
Baltimore  for  export  and  to  the  Southeast  for  consumption.  It  has 
been  difficult  to  get  favorable  billing  in  other  directions. 

Cincinnati  is  a  large  hay  market  and  trade  in  this  commodity 
accounts  to  a  large  extent  for  the  present  activity  of  the  local  exchange. 

The  Cincinnati  Grain  and  Hay  Exchange. — The  Cincinnati 
Grain  and  Play  Exchange  is  the  result  of  a  secession  of  the  grain 
men  from  the  general  commercial  body  which  had  long  existed  in 
the  market.'^  It  was  felt  that  a  distinct  association,  composed  of 
active  traders,  could  improve  the  system  of  weighing  and  grading 
grain,  and  regulate  trading  practices  more  effectively. 

A  stock  corporation  was  organized  in  April,  1918,  and  stock  was 
taken  up  by  44  firms.  There  were  more  than  100  resident  members 
of  record  in  1918. 

Capital  stock  in  the  sum  of  $10,000  (100  shares  at  $100  each)  wa.s 
authorized  and  annual  dues  were  set  at  $50  for  eacli  firm  membership. 


63  See  Ch.  in,  sec.  1. 

68  per  cent  of  the  country  shipments  reported  for  1913-lt>17. 
”  Cf.  formation  of  nufralo-C'oru  Exchange, p.  183. 

J212S  on  Aug.  3,  1918. 


DEVELOPMENT  OF  OTHER  MARKETS  AND  EXCHANGES.  179 


For  issuance  of  additional  memberships  an  initiation  fee  of  $2,500 
was  adopted. 

The  membership  figures  are  subject  to  some  qualification,  since 
only  20  or  25  firms  are  actively  engaged  in  trading  on  the  floor. 
Most  of  the  fh’ms  are  small  dealers  in  grain,  hay,  and  feed. 

A  classification  of  members  made  early  in  1918  appears  in  the  fol¬ 
lowing  table: 


Table  —Classiftcaiion  of  resident  members  in  the  grain  trade,  Cincinnati  Grain  and 

Hay  Exchange,  1918. 


Engaged 

exclu¬ 

sively. 

Engaged 

primarily. 

Total. 

Engaged 

second¬ 

arily. 

Cash  commission . . 

37 

11 

18 

20 

Terminal  elevators . 

^  10 

10 

2 

other  dealers  i . 

■  22 

22 

4 

Consumers  2 . 

11 

11 

Line  elevators . 

Shippers  2 . 

10 

10 

0 

Future  commission  < . 

1 

1 

71 

31 

102 

35 

Out  of  town  members: 

Surrounding  country . 

Not  in  grain  busines's . . . 

5 

* 

12 

* 

.  114 

1  Feeders  and  all  others  not  included  in  other  classes. 

2  Millers,  malsters,  etc. 

*  Operating  without  terminal  elevator  facilities. 

^  Including  wire  houses. 

Local  consumption. — Formerly  there  were  about  40  distilleries, 
and  a  large  starch  miU  in  Cincinnati,  which  consumed  large  quantities 
of  corn  and  rye.  There  were  also  over  20  breweries,  but  these  con¬ 
cerns  purchased  their  barley  direct  from  Minneapolis.  The  dis¬ 
tilleries  were  closed  prior  to  1918  and  the  starch  mill  has  been  ino^'cd 
away.  The  local  consumptive  demand  has  been,  therefore,  mucii 
restricted. 

Elevator  facilities. — There  are  no  public  elevators  at  Cincin¬ 
nati  (i.  e.,  elevators  devoted  wholly  or  primarily  to  the  public  storage 
and  transfer  business,  and  issuing  warehouse  receipts).  Private 
storage  is  rated  at  2,995,000  bushels  capacity.  The  largest  house, 
that  of  the  Cleveland  Grain  Co.,  is  rated  at  700,000  bushels  and 
does  not  issue  any  warehouse  receipts.  It  is  reported  that  a  little 
storage  business  is  done  as  an  accommodation  to  other  firms. 

As  in  Indianapolis,  it  is  difficult  for  the  small  dealer  not  equipped 
with  an  elevator  to  break  into’^  the  shipping  business.  He  is 
obliged  to  reconsign  or  sell  his  grain  on  destination  weights,  neither 
of  which  is  a  very  satisfactory  method.  The  new  exchange  is  en¬ 
deavoring  to  improve  this  situation  by  preparing  a  list  of  approved 
weighing  points”  for  the  protection  of  shippers  against  imreliablo 
consignees. 

Credit  facilities. — It  appeal's  that  the  banks  have  opposed  rather 
than  promoted  the  grain  trade  in  Cincinnati,  and  will  advance  money 


180 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


only  when  it  can  be  strongly  secured  by  liills  of  lading.  (See  Vol.  Ill 
for  discussion  of  financing  consignments.) 

Cash  trading. — The  newly  organized  exchange  (1018)  fitted  up  a 
trading  floor  with  18  sample  tables.  The  cash  market,  however,  seems 
to  be  very  narrow.  Exchange  officers  reported  that  ^‘practically  all 
the  buying’^  was  concentrated  in  the  hands  of  three  firms,  Early  & 
Eaniel,  the  Cleveland  Grain  Co.,  and  A.  C.  Gale.  They  were  reported 
to  be  doing  also  90  per  cent  of  the  grain  shipping  business. 

Because  of  this  narrow  market  certain  methods  of  trading  exist, 
under  sanction  of  exchange  rules,  which  would  not  be  tolerated  in  the 
larger  markets.  Member  firms  are  allowed  to  buy  grain  consigned 
to  themselves  if  the  car  is  put  up  at  auction  and  they  are  the  highest 
bidders.  It  is  assumed  that  such  an  auction  sale  complies  with  the 
law  of  the  jurisdiction.  The  larger  traders  approve  of  the  practice, 
and  it  is  reported  that  from  3  to  5  cars  are  so  sold  at  auction  every 
business  day. 

The  exchange  exercises  drastic  supervisory  powers  over  members 
and  may  ap23oint  auditors  to  examine  individual  accounts. 

Future  trading. — Future  trading  is  not  carried  on  in  Cincinnati 
(although  provided  for  in  the  exchange  rules)  and,  in  fact,  is  not  in 
very  good  repute.  Early  &  Daniel  is  the  only  firm  reported  as 
hedging  its  transactions,  while  the  president  of  the  exchange  in  1918 
stated  that  he  considered  it  a  detriment  for  a  grain  man  in  that  section 
to  acquire  the  reputation  of  being  engaged  in  future  trading.  Two 
branches  of  Chicago  wire  houses  are  located  in  Cincinnati,  neither  of 
them  participating  in  the  cash  business. 

Section  10.  Indianapolis. 

The  Indianapolis  market. — Indianapolis,  which  is  ranked  ninth 
among  the  primary  markets  tabulated  in  this  report,  is  a  primary 
market  for  corn  and  oats  grown  in  Indiana  and  eastern  Illinois.  The 
average  yearly  consumption  of  wheat  by  local  flour  mills  was  more  than 
2,000,000  bushels  during  the  period  1913-1917.  Corn  was  consumed 
to  the  extent  of  about  10,000,000  bushels  yearly,  mostly  by  corn 
products  mills.  The  census  of  1914  showed  that  more  corn  was  con¬ 
sumed  by  cereal  mills  in  Indianapolis  than  at  any  other  center  in  the 
United  States  — namely,  6,883,199  bushels. 

The  Indianapolis  market  has  developed,  therefore,  from  local 
'  milling  demand  and  its  railroad  position  as  a  reconsigning  point. 

The  Indianapolis  Board  of  Trade. — The  Board  of  Trade  is  a 
large  stock  corporation  which  was  chartered  in  1882.  Only  about 
13  per  cent  of  the  members  are  resident  grain  traders.  Ownership  of 
one  share  of  stock  gives  full  membership,  although  other  persons  may 

’3  The  largei’  total  consumption  at  Peoria  was  due  to  distilleries. 

Prom  a  report  prepared  tor  the  Federal  I'rade  Commission  by  the  Division  of  Manufacture"?,  Bureauof 
the  Census. 


DEVELOPMENT  OF  OTHER  MARKETS  AND  EXCHANGES.  181 


acquire  a  license  to  trade. The  grain  traders  constitute  the  only 
group  with  a  special  body  of  rules  and  regulations.  A  classification 
of  the  members  appears  in  the  following  table: 


Table  Q2 .—Classification  of  resident  members  in  the  grain  trade,  Indianapolis  Board  of 

Trade,  1917. 


Engaged 

exclu¬ 

sively 

Engaged 

pri¬ 

marily. 

Total. 

Engaged 

second¬ 

arily. 

Cash  commission . 

6 

1 

11 

15 

1 

2 

7 

17 

11 

23 

12 

11 

17 

5 

7 

9 

18 

4 

4 

Terminal  elevators . 

other  dealers!. .j. . 

Consumers  2 . 

2 

4 

5 

2 

Line  elevator . 

Shippers* . 

19 

4 

Future  commission  < . 

Out  of  town  members: 

Members  of  other  exchanges . 

43 

41 

84 

57 

496 

49 

23 

34 

Located  in  surrounding  countrv . 

Not  in  grain  business . 

637 

‘  Feeders  and  all  others  not  included  in  other  classes. 

2  Millers,  malsters,  etc. 

2  Operating  without  terminal  elevator  facilities. 

*  Including  wire  houses. 

The  present  trading  floor  for  grain  has  been  maintained  since  1915 
and  contains  16  sample  tables  which  are  rented  annually  to  members. 

Bid  prices  are  frequently  established  through  the  call-board  mefhod. 

Elevator  facilitipis. — The  Indianapolis  elevator  warehouses  are 
relatively  small  and  a  majority  are  connected  with  milling  or  manu¬ 
facturing  plants.  The  largest  is  the  Big  Four  at  Urmston  with  a  rated 
capacity  of  650,000  bushels.  Most  of  the  country  grain  shipped  to 
this  market  is  handled  on  a  reconsignment  or  transit  billing. 

Cash  trading. — The  grain  trade  at  Indianapolis  has  been  con¬ 
fined  to  cash  transactions  since  1896,  although  rules  for  future  trad¬ 
ing  are  still  published. 

Examination  of  the  records  of  73,994  cars  of  grain  received  by 
local  traders  during  the  period  1913  to  1917  showed  that  about  52 
per  cent  of  the  grain  was  bought  directly  from  outside  points  and 
the  remainder  handled  on  consignment.  The  largest  buyers  on  ini¬ 
tial  sales  of  this  grain  w^ere  the  consumers,  who  took  38  per  cent. 
Elevator  buyers  took  25  per  cent  and  later  sold  nearly  one-half  of 
this  to  the  consumers.  A  conspicuous  feature  of  the  market  was 
the  large  proportion  of  total  direct  purchases  brought  in  by  con¬ 
sumers — 68  per  cent. 

Section  11.  Toledo. 

The  Toledo  market. — The  grain  market  at  Toledo  is  old  and  well 
established,  but  for  many  years  it  has  not  been  in  position  to  attract 
country  grain  to  any  such  extent  as  the  other  markets  here  con- 

See  Annual  Report  1917,  p.  44. 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


III 

wim 


!}}  ■ 
't' 


“*1 


sidorod.  Examination  of  the  records  of  more  than  10,000  cars  of 
grain  received  during  the  period  1913  to  1917  showed  that  41  per  cent 
canm  from  Ohio,  40  per  cent  from  Indiana,  10  per  cent  from  Michigan, 
and  7  per  cent  from  Illinois. 

The  market  for  clover  and  grass  seed  at  Toledo  is  relativelv  more 
important  than  that  for  grain.  This  is  probably  the  only  market 
in  the  United  States  where  future  trading  in  grass  seeds  is  conducted. 

The  local  milling  demand  for  soft  winter  wheat  brings  a  larger 
volume  of  vrheat  to  Toledo  than  is  received  by  either  Peoria,  Indi- 
ana])olis,  or  Cincinnati.  A  study  of  the  records  of  more  than  32,000 
cars  of  wheat  handled  at  Toledo  during  the  period  1913  to  K)17  showeil 
that  68  per  cent  of  the  wheat  was  bought  from  dealers,  21  per  cent 
through  l)rokers,  and  only  12  per  cent  received  on  consignment. 

Receipts  of  the  other  cereals  for  the  period  were  so  small  as  to 
place  Toledo  seventh  in  rank  among  secondary  markets  as  to  re¬ 
ceipts  of  all  grains.  Out  of  about  52,000  cars  received,  1913  to  1917, 
(all  5  grains)  73  per  cent  were  obtained  from  dealers  elsewhere  so 
that  Toledo  is  clearly  a  secondary  market  under  the  classifications 
hero  adopted  (see  p.  329). 

7\1  though  possessed  of  excellent  water  and  rail  shipping  facilities  and 
elevator  storage  in  excess  of  many  of  the  secondary  markets  (see  ]>.  28) 
Toledo  does  not  figure  promineiitU  among  the  terminal  grain  markets. 
Both  as  an  initial  concentration  point  and  for  transship  men  ts  the 
market  is  somewhat  out  of  line  with  the  present  marketing  scheme. 

The  Toledo  Produce  Excii.vnge. — The  Toledo  Produce  Ex¬ 
change,  which  was  incorporated  in  1876,  has  at  present  onl3^35  mem- 
l)ers.  Twenty-four  of  these  (68  per  cent)  are  resident  members  iti 
the  grain  business.  The  fact  that  14  members  arc  engaged  as  future 
commission  men  indicates  chiefly  the  prominence  of  the  futures 
market  in  seeds,  since  the  grain  futures  business  in  the  market  is  of 
minor  importance.  The  classification  is  shown  in  the  following  table: 


Table  63. — Classification  of  resident  members  in  the  rjrain  trade,  Toledo  Produce  Exchanrie, 

1917} 


Cash  commission 
Terminal  elevators 
other  dealers  " 
Consumers  ^ 

Line  elevators 

Shippers  < . 

Future  commissions 


DEVELOPMENT  OF  OTHER  MARKETS  AND  EXCHANGES.  183 

Section  12,  Buffalo. 

The  Buffalo  market. — Buffalo  is  and  always  lias  been  distin- 
<>:iiished  as  a  transfer  point  for  grain  sliipped  to  the  Atlantic  seaboard. 
Just  as  the  union  of  rail  and  water  terminals  has  made  Duluth  a 
great  shipping  port,  so  a  similar  junction  of  terminals  at  the  other 
end  of  the  lakes  has  built  up  Buffalo  as  the  chief  forwarding  and  dis¬ 
tributing  market  for  grain  at  the  eastern  end  of  the  Great  Lakes. 

Prior  to  the  great  industrial  development  which  set  in  about  1875 
tlic  chief  business  of  Buffalo  merchants  was  in  grain.  At  that  time 
it  is  reported  that — 

*  *  *  the  larger  business  interests  of  Buffalo  were  so  much  in  transportation  and 
the  grain  trade  that  all  really  dignified  ideas  of  business  were  associated,  habitually, 
with  the  line  of  wharves  on  the  north  side  of  Buffalo  Creek,  extending  about  a  half 
mile  in  length,  which  were  spoken  of  always  as  The  Dock.  There,  in  the  storage  and 
transfer  elevators,  in  the  offices  of  grain  merchants  and  brokers,  lake  and  canal  shippers, 
and  marine  insurance  agencies,  were  the  principal  operations  of  capital,  the  chief 
source  of  wealth,  the  most  readily  recognized  positions  of  commercial  and  financial 
importance  in  the  town.'® 

Origin  of  lake  shipping. — In  1836  a  small  cargo  of  grain  reached 
Buffalo  from  Grand  Haven  on  Lake  Michigan.  The  first  arrival  fi’om 
Chicago  was  in  1839  when  the  39  bags  of  wheat  were  brought  in  by 
the  steamer  Great  ^\estern.  Also,  a  small  bulk  shipment  arrived  in 
that  year.  A  full  cargo  of  grain — 3,000  bushels— was  received  from 
Lake  Michigan  in  1840.  ''The  growth  of  the  trade  was  slow  until 
the  opening  of  the  Illinois  Canal  in  1848,  and  it  did  not  rise  rapidly 
until  1861,  when  the  total  receipts  of  breadstuffs  (including  flour, 
reduced  to  its  equivalent  in  wheat)  suddenly  rose  to  61,000,000 
bushels.” 

Lake  receipts  and  canal  shipments. — As  indicated  in  the  history 
of  the  Chicago  market,  an  importan^t  factor  in  the  lake  movement  of 
grain  was  the  Erie  Canal  with  its  terminal  at  Buffalo.  Before  the 
Civil  War  there  was  no  immediate  railroad  competition  in  the  move¬ 
ment  of  bulk  grain  down  the  canal.  By  1869,  however,  with 
the  beginning  of  the  great  trunk-line  development,  grain  was  being 
diverted  from  the  canal  to  the  railroads.  The  report  of  the  Buffalo 
Board  of  Trade  for  1870  shows  that  one-third  of  the  grain  shipments 
went  by  rail  and  two-thirds  througli  the  canal.  During  the  next 
15  years,  as  the  volume  of  shipments  increased,  the  canal  gained  over 
the  railroads.  This  was  assisted  in  1883  by  the  removal  of  all  tolls 
on  canal  traffic.  Beginning  Avith  1889  the  railroads  began  to  take  a 
larger  portion  of  grain  shipments,  and  10  years  later  shipments 
by  rail  aggregated  over  130,000,000  bushels,  Avhile  those  through  the 
canal  were  slightly  more  than  21,000,000.'*  (See  decision  of  the 


<6  The  History  of  Buffalo,  by  J.  N.  Larued,  Vol.  I,  p.  20‘J. 
'7  llj.,  p.  215. 

7*  Idem,  pp.  215-219. 


184  TERMIJs^AL  GRAIN  MARKETS  AND  EXCHANGES. 

Interstate  Commerce  Commission  with  regard  to  the  railroad  com- 
])etition  with  the  lake  and  canal  grain  traffic,  quoted  on  p.  67.)  The 
decline  in  canal  shipments  is  shown  in  the  following  table: 

f 

Table  64. — Grain  movement  by  canal  at  Buffalo  from  1880  to  1900. 


[In  thousands  of  bushels.] 


Year.  . 

t 

Lake 

receipts. 

Canal 

ship¬ 

ments. 

Per  cent 
of  canal 
shipment 
to  lake 
receipts. 

105,453 

56,807 

50,834 

72,069 

68.4 

issi  . 

31 ; 175 
29,753 
42,378 

54.9 

1882  . 

58.5 

188.3  . 

65,722 

64.4 

issi  . 

56, 964 
49,740 
72,. 51 5 

38,  ICO 
31,660 
45,224 
49,246 
38,194 
42,023 
38,479 
34,658 
31,821 

68.0 

1885  . 

63. 5 

]  883  . 

62.4 

84;  731 
73,224 
90,870 
89,313 

58.2 

1888  ..j . 

52.2 

46.3 

1890  . 

43.1 

128,993 

133,039 

135,920 

103,960 

118,028 

163.432 

26.8 

1892  .  . 

23.9 

1893  . 

48;  127 
48,567 
20,364 
36,327 

36.1 

1894  . 

46.7 

1 895  . 

17.2 

1 896  . 

22.1 

1897  . 

185,444 

221,384 

26,193 

23,296 

14.1 

1898  . ! . . 

10.8 

18^  . . . 

153,393 

157,656 

21,145 

15,865 

13.7 

1900  . 

10.0 

No  evidence  is  yet  at  hand  of  the  effect  of  the  Welland  and  New 
York  Barge  Canal  routes  upon  the  Buffalo  grain  business. 

The  average  yearly  receipts  of  all  grains  by  lake  during  the  period 
1913-1917  were  over  169,000,000  bushels. 

Invention  of  the  elevator. — Quite  appropriately  the  first  great 
labor-saving  device  in  handling  grain  was  introduced  in  the  transfer 
market  of  Buffalo.  Prior  to  1843  handling  at  transfer  points  was 
a  large  factor  in  the  transportation  cost.  At  Buffalo  transshipment 
was  required  on  lake  vessels  to  canal  boat,  and  at  New  York  from 
canal  boat  to  ocean  vessel.  If  carried  in  bulk  the  grain  had  to  be 
shoveled  into  barrels  or  buckets  and  hoisted  from  the  vessel  holds 
by  block  and  tackle,  all  of  which  was  a  very  slow  and  laborious 
process. 

As  earl}^  as  1780  an  endless  belt  with  buckets  attached  had  been 
invented  by  Oliver  Evans  for  conveying  wheat  and  flour  in  mills. 
This  device  was  now  taken  over  by  Joseph  Dart,  a  Buffalo  grain 
forwarder,  to  be  worked  inside  of  a  long  movable  ‘deg’’  which  could 
be  lowered  directly  into  the  vessel  hold.  He  was  thus  able  to  scoop 
out  a  cargo  of  grain  rapidly  and  convey  it  to  the  top  of  a  warehouse, 
from  which  point  gravitation  would  carry  it  through  pipes  to  any 
desired  bin.  “His  little  elevator,  built  for  that  experiment  at 
Buffalo  in  1843,  with  a  capacity  for  holding  55,000  bushels  per  day, 
was  the  first  of  its  kind  in  the  world.”  Similar  elevators  were 


«  Larhed,  Vol.  I,  p.  216. 


I 


DEVELOPMENT  OF  OTHER  MARKETS  AND  EXCHANGES.  185 

o]:)cratc(l  at  other  ports  by  horse  power  until  1848,  when  the  first 
steam  elevator  was  erected  in  Chicago. 

o 

As  a  direct  result  of  this  invention  it  became  more  profitable  to 
move  grain  eastward  without  previously  grinding  it  into  flour  as  had 
been  formerly  done.  During  the  period  1836  to  1845  out  of  the  total 
receipts  of  flour  and  grain  (representing  41,851,438  bushels)  only 
one-third  came  in  as  grain.  During  the  next  decade  the  total 
receipts  rose  to  174,714,437  bushels,  and  two-thirds  of  this  amount 
was  received  as  grain.  The  remainder  consisted  of  barreled  flour. 
•This  proportion  has  been  fairly  well  maintained  throughout  the  later 
history  of  the  market. 

The  Buffalo  Corn  Exchange. — The  first  commercial  organization 
which  operated  an  exchange  at  Buffalo  was  organized  in  1844  and 
known  as  the  Board  of  Trade.*®  This  body  was  incorporated  in  1857 
and  its  name  was  changed  in  1882  to  ^‘The  Buffalo  Merchants’  Ex¬ 
change.”  In  1903  the  membership  was  enlarged  and  the  association 
was  reorganized  as  the  Chamber  of  Commerce.”  The  present  Buffalo 
Corn  Exchange  was  organized  and  incorporated  by  the  grain  trade  of 
this  chamber  of  commerce  in  1904.  The  grain  traders  had  become 
dissatisfied  with  their  subordinate  position  in  the  large  commercial 
body  wdiich  is  similar  to  the  commercial  exchanges  of  the  Atlantic 
and  Gulf  ports.  They  began  to  operate  as  a  grain  exchange  in  1906, 
assuming  the  functions  of  inspecting  and  w^eighing  grain  as  well  as 
entire  jurisdiction  over  other  matters  pertinent  to  the  grain  trade  in 
the  market.*^ 

As  pointed  out  in  Chapter  V  (p.  194)  the  Buffalo  Corn  Exchange 
has  very  broad  charter  powders,  unlike  those  of  any  other  grain  asso¬ 
ciation  considered  in  this  report.  In  practice,  how^ever,  both  the 
trading  and  the  government  of  the  exchange  is  quite  similar  to  that 
of  western  exchanges. 

Membership. — The  Corn  Exchange  has  but  a’ small  membership, 
indicating  that  a  large  portion  of  the  enormous  receipts  of  grain  do 
not  enter  into  the  local  trading. 

The  regular  membership  is  limited  to  75,  the  $7,500  outstanding 
capital  stock  being  divided  into  shares  of  $100  each.  In  order  to 
enlarge  this  membership  the  practice  of  issuing  license  memberships 
for  trading  privileges  only  was  introduced.  A  further  distinction  is 
made  between  the  two  classes  of  membership  in  that  a  licensed  member 
pays  dues  of  $150  per  year  for  use  of  the  trading  floor,  whereas  a  cer¬ 
tificate-holding  member  pays  only  $75  a  year.  Regular  certificates 
are  transferable  without  payment  of  a  transfer  fee.  There  are  ap¬ 
proximately  25  licensed  members  to-day,  showing  a  substantial 
demand  in  excess  of  the  75  outstanding  stock  certificates.  Recent 


J.  N.  Lamed,  History  of  Buffalo,  vol.  1,  p.  213. 

See  National  Hay  and  Grain  Reporter,  May  20,  1911,  p.  134. 


186 


TERMINi^  GRAIN  MARKETS  AND  EXCHANGES. 


market  prices  (19l7)  of  the  certificates  liave  ranged  between  $800  and 
$900.  The  following  table  gives  a  classification  of  the  members 
in  1917. 


Table  Go  .—Classification  of  resident  members  in  the  grain  trade,  Buffalo  Corn  Exchange 
{both  certificate  holding  and  licensed  members),  in  1917. 


Exclus¬ 

ively. 

Pri¬ 

marily. 

Total. 

Second¬ 

arily. 

Total. 

Receivers . 

G 

20 

26 

19 

45 

5 

8 

13 

13 

(IthGr  Hp5^1or.8l  . . . 

4 

4 

2 

6 

('onsumers . 

18 

G 

24 

1 

25 

Shippers  - . 

3 

6 

9 

24 

33 

Future  commissions . 

8 

2 

10 

15 

25 

Total . 

44 

42 

86 

61 

147 

Out  o{  town  members: 

ether  e.xfh anpe.s . 

4 

Adjacent  territory . 

3 

7 

'Mol  in  era  in  irado  . 

8 

101 

1  Feeders  and  all  others  not  included  in  other  classes. 

2  Operating  without  terminal  elevator  facilities. 


The  terminal  elevators. — The  Buffalo  terminal  elevators,  with 
an  aggregate  capacity  of  28  million  bushels,  constitute  the  most 
conspicuous  feature  of  the  market. 

For  a  period  of  over  50  years  (and  until  recently)  an  association  of 
grain  elevators  known  as  the  Western  Elevating  Asociation  con¬ 
trolled  these  facilities  in  the  port.  The  earnings  of  the  member 
elevators  were  pooled  and  distributed  on  an  agreed  basis.  The 
association  at  one  time  issued  negotiable  warehouse  receipts  which 
were  used  both  as  bank  collateral  and  as  a  means  of  delivering  grain 
sold  on  contract.  These  receipts  generally  covered  grain  of  vdiich 
the  identity  was  preserved.  At  various  times  attempts  have  been 
made  in  Buffalo  liy  grain  dealers  to  introduce  a  system  of  bulk  and 
grade  storage  of  grain  similar  to  the  systems  of  Chicago,  Kansas 
City,  and  other  large  markets  which  would  enable  grain  in  store  to 
be  negotiated  by  means  of  warehouse  receipts  without  regard  to  the 
identit}^  of  parcels.  These  efforts,  however,  have  not  met  with  success. 

Weighing  and  inspection. — The  Corn  Exchange  maintains  a 
weighing  and  inspection  department.  This  had  been  established'  in 
1884  by  the  Merchants  Exchange  and  was  taken  over  by  the  present 
body  at  its  organization.  The  State  of  New  York  has  no  weighing 
or  inspection  laws  so  that,  excepting  Federal  supervision,  the 
system  is  wholly  private.  (See.  Ch.  V,  p.  270,  for  charges.)  The 
average  annual  expenses  of  this  department  have  been  slightly  more 
than  $26,000;  and  have  been  defrayed  from  inspection  and  weighing 
fees.  The  exchange  made  a  profit  from  the  operation  of  its  weigh¬ 
ing  and  inspection  department  during  four  of  the  five  years  ending 
December  31,  1917. 


DEVELOPMENT  OE  OTHER  MARKETS  AND  EXCHANGES.  187 


The  CASH  market. — The  Buffalo  Corn  Exchange  at  present  con¬ 
ducts  cash  trading  only.  The  Chicago  future  cpiotations  are  posted, 
however,  and  form  the  basis  for  a  considerable  part  of  the  cash  trad¬ 
ing  on  the  floor. 

The  principal  coiiimodities  sold  are  wheat  and  corn,  although  the 
other  cereals,  including  buckwheat  and  several  foodstuffs,  enter  into 
the  sales.  In  addition  to  the  shipping  business  there  is  a  steady 
consumptive  demand  from  the  large  flour  mills  and  cereal  manufac¬ 
turing  plants.  There  is  also  a  distributing  business  to  millers,  con¬ 
verters,  and  local  dealers  in  New  York,  Pennsylvania,  and  New 
England. 

F uture  trading  was  conducted  in  a  limited  way  on  the  old  Board 
of  Trade  between  1877  and  1886.  The  “calF'  board  method  was 
employed  and  thrived  for  a  few  years.  There  is  no  evidence  of  any 
revival  of  future  trading  in  Buffalo. 

Section  13.  The.  eastern  seaboard  markets. 

Because  of  their  geographical  location  the  seaboard  grain  markets 
are  largely  export  shipping  points  and  in  many  other  ways  are  hardly 
to  be  compared  with  the  interior  terminals.  Except  at  Baltimore, 
there  is  only  a  negligible  consignment  business  in  grain  at  the  Atlantic 
ports.  In  each  port  the  grain  dealers  form  a  section  of  a  general 
commercial  exchange,  and  sample  trading  is  quite  meager  as  com¬ 
pared  with  the  western  primary  markets.  Export  jobbers  and  bro¬ 
kers  predominate  in  the  grain  trade.  The  business  consists  largely  of 
arranging  transshipments  between  rail  and  water  carriers,  or  in 
trading  for  foreign  account.  Actual  merchandising  has  declined  at 
the  seaboard  during  recent  years  and  trading  is  largely  on  interior 
market  terms. 

Baltimore  is  the  only  port  on  the  Atlantic  seaboard  where  grain  has 
been  handled  on  consignment  over  a  long  period.  Grain  has  been 
shipped  to  this  market  over  the  Baltimore  &  Ohio  and  Western 
Maryland  Railroads  since  the  early  history  of  the  city.  A  study  of 
the  records  of  some  60,000  cars  handled  during  the  period  1913-1917 
showed  that  about  48  per  cent  of  the  grain  came  in  on  consignment. 
On  the  same  basis  of  comparison  Philadelphia  received  less  than  4  per 
cent  on  consignment.  New  York  less  than  2  per  cent,  and  Boston 
about  0.2  per  cent.  Baltimore  consignments  were  derived  mainly 
from  Maryland,  Illinois,  Indiana,  and  Ohio.*" 

The  export  business  at  the  seaboard  terminals  has  been  developed 
by  the  trunk  line  railroads.  Export  rate  adjustments  and  the  de¬ 
velopment  of  elevating,  switching,  and  lighterage  facilities  have  ])e(‘ii 
the  important  factors  in  the  history  of  the  markets.  The  elevators 
are  operated  for  the  accommodation  of  rail  and  water  carriem, 

m 


# 


^2  See  general  tables  in  Voi.  IV. 


188 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


There  has  been  a  comparative  decline  in  elevator  capacity  at  the 
port  of  New  York,  as  shown  by  the  tabulation  below.  This  was 
largely  caused  by  the  decline  in  canal  traffic  and  the  practice  of  the 
railroads  of  delivering  grain  free  alongside  ship. 


Rated  elevator  capacity  at  four  ports  (in  bushels). 


•  1898 

1905 

1919 

New  York . 

30,075,000 

4,5.50,000 

3,925,000 

5,350,000 

15,730,000 

4,250,000 

4,300,000 

5,350,000 

7,3.30,000 

2,500,000 

4,550,000 

5,650,000 

Boston . 

Pliiladelpliia . 

13altimore . 

The  quantity  of  grain  exported  at  a  given  port  (see  Table  63)  is  not 
a  fair  index  of  the  volume  of  trading  in  that  market.  Grain  exporting 
is  largely  done  through  seaboard  forwarders  or  brokers  who  do  not 
own  the  grain  themselves,  and  do  not  carry  stocks  with  which  their 
orders  are  filled.  They,  however,  offer  grain  in  cargo  or  round  lots 
to  European  dealers  (usually  by  cable  offer),  and,  upon  receiving  an 
acceptance,  they  go  into  the  market  and  fill  the  order  at  the  lowest 
price  possible.  They  may  sell  the  grain  free  on  board  the 
vessel  on  this  side  (f.  o.  b.)  but  frequently  the  price  includes  cost, 
insurance,  and  freight  to  Europe  (c.  i.  f.).  In  purchasing  the  grain  to 
fiir  their  contracts  the  exporters  obtain  their  supply  mainly  direct 
from  western  markets.  Hence  the  grain  exporters  can  with  almost 
equal  convenience  do  business  through  one  of  any  of  the  principal 
ports.®^  The  brokers  are  usually  in  a  position  to  know  from  what  port 
grain  for  the  time  being  may  be  most  cheaply  and  conveniently  ex¬ 
ported.  It  appears,  then,  that  the  relative  shipments  of  grain  from 
the  rival  ports  are  not  conclusive  evidence  as  to  the  importance  of 
an}'  one  port  as  a  grain  merchandising  center,  but  that  they  do  show 
the  importance  of  each  port  as  a  gateway  for  export  grain. 

The  table  below  shows  the  average  exports  of  grain  from  the 
United  States  and  from  the  four  North  Atlantic  ports  during  the 
period  1913-1917,  with  corresponding  percentages. 

Table  66. — Average  grain  exports  from  the  United  States  and  from  specified  Atlantic 
ports  for  the  calendar  years  191S  to  1917  (in  bushels). 


Exported  from — 

AVheat 

Per  cent. 

Corn. 

Per  cent. 

Oats. 

Per  cent. 

Ignited  States . 

N  ew  Y  ork . 

3’hiladelphia . 

Baltimore . 

Boston . 

147,890,547 
73, 761, 632 
17,625, 273 
19, 843, 825 
3,406,613 

100.0 

49.9 

11.9 
13.4 

2.3 

42,974,269 
7,951,804 
1,944, 156 
14, 670,983 
1,668, 925 

100.0 

18.5 

4.5 

34.1 

3.9 

68,998, 210 
15,203,128 
5, 489, 292 
19,370,596 
1,816,560 

100.0 

22.0 

8.0 

28.1 

2.6 

Exported  from— 

Barlej'. 

Per  cent. 

Rye. 

Per  cent. 

All  grains 

Per  cent 

United  States . . 

New  York . 

Philadelphia . 

Baltimore . 

Boston . 

19,565, 200 
6,916,992 
466, 604 
2,  449, 293 
280,036 

100.0 

35.4 

2.4 

12.5 

1.4 

10,314,203 
1,662,513 
620, 048 
7,301,403 
283,  798 

100.0 

16.1 

6.0 

70.8 

2.8 

289,  742, 430 
105, 496,069 
26,145,373 
6.3,636,100 
7,455,932 

100.0 

36.4 

9.0 

22.0' 

2.8 

See  New  York  Produce  Exchange  v.  £.  d-  0.  R.  R.,  7  I.  C.  C.,  p.  634. 


DEVELOPMENT  OF  OTHEK  MARKETS  AND  EXCHANGES.  189 

TilE  COMMERCIAL  EXCHANGES. - CollGCtioil  of  SHiall  eXCllJiRgeS, 

each  trading  in  different  comniodities  according  to  its  own  rules,  but 
all  in  the  same  big  hall,  that,  in  a  nutshell  is  the  New  York  Produce 
Exchange.  *  *  *  It  is  not  a  homogeneous  exchange,  but  is  rather 

a  supervisory  body  leaving  the  management  of  the  exchange  trans¬ 
actions  in  each  commodity  to  a  committee  of  members  of  that  trade 
appointed  by  the  exchange.  *  *  *  takes  all  kinds  of  produce, 

no  one  commodity  being  important  enough  to  support  a  single 
exchange.^’ 

This  description  of  the  New  York  Produce  Exchange  applies  in 
general  to  the  Commercial  Exchange  of  Philadelphia  and  the  Boston 
Chamber  of  Commerce.*^  The  exchanges  at  Philadelphia  and  Balti¬ 
more  are  smaller  so  that  the  grain  traders  are  relatively  niore  impor¬ 
tant;  but  none  of  these  bodies  can  be  considered  a  grain  exchange 
comparable  to  the  highly  organized  associations  of  the  western  pri¬ 
mary  markets. 

The  recent  price  of  memberships  on  the  New  York  Produce  Ex¬ 
change  has  been  about  $3,500.  The  prices  of  memberships  in  the 
other  seaboard  associations  are  nominal  and  procurable  at  small  fees 
(see  Ch.  V). 

The  cash  markets. — The  forwarding  or  exporting  business  (ex¬ 
cept  for  a  nominal  amount  of  local  merchandising)  characterizes  all 
of  the  seaboard  markets.  Even  the  business  of  ''receivers”  includes 
the  handling  of  grain  reconsigned  from  other  terminal  markets. 

On  the  New  York  Produce  Exchange,  as  an  example,  grain  trading 
occupies  almost  the  entire  eastern  half  of  the  trading  hall.  The 
grain  brokers  are  stationed  about  long  tables,  but  most  of  the  export 
buying  is  by  grade  instead  of  sample.  The  brokers  operate  on  a 
commission  of  one-eighth  cent  for  trades  with  nonmembers  and  one- 
sixteenth  cent  for  trades  with  members. 

At  Baltimore  a  trading  hall  for  the  grain  trade  is  maintained  in 
the  Chamber  of  Commerce  building.  Sample  tables  for  the  con¬ 
signment  business  occupy  one  side  of  the  floor,  while  representatives 
of  receiving-and-exporting  firms  congregate  in  another  section  to 
watch  the  Chicago  quotations  and  arrange  trades  for  European 
orders.  A  "market”  is  established  by  means  of  a  "call”  conducted 
twice  daily  by  the  secretary  of  the  chamber  from  a  disused  pit  near 
the  quotation  boards.  There  is  no  requirement  that  trades  be  ex¬ 
ecuted  on  ’change  or  confined  to  exchange  hours 


Mortimer  B.  Lane  in  “The  Street,”  Vol.  1,  No.  15,  p.  7. 
86  No  public  oflicial  grain  market  is  maintained  at  Boston. 


Chapter  V. 

ORGANIZATION,  RULES,  AND  REGULATIONS  OF  THE  EXCHANGES/ 
Section  1.  Incorporation  of  grain  exchange  associations. 

From  the  earliest  history  of  the  terminal  markets,  traders’  organi¬ 
zations  have  been  maintained  to  regulate  the  marketing  methods. 
Hoiiietimes  the  organization  was  of  a  buying  group  such  as  the  old 
Millers’  Association  of  Minneapolis.  More  frequently  a  local  chamber 
of  commerce  or  board  of  trade  existed  as  a  deliberative  body  to 
])romote  the  welfare  of  the  market  town.  The  so-called  grain 
exchanges  are  essentially  modern  in  character.  They  develoj^ed  with 
the  spread  of  modern  means  of  transportation  and  communication, 
linking  markets  together  and  accelerating  the  concentration  of  grain 
at  great  centers  of  commerce.  The  exchanges  have  been  called  by 
their  advocates  “merely  organized  market  places”;  but  they  arc,  in 
several  instances,  corporate  organizations  of  such  wealth  and  influ¬ 
ence,  and  perform  services  of  such  vast  imj^ort  to  the  public  as  to 
differ  radically  from  the  ordinary  municipal  market  place  (or 
chamber  of  commerce  controlling  it).“ 

Some  idea  of  the  chronological  development  of  organized  exchanges 
providing  a  market  for  grain  can  be  gained  from  the  following  tabu¬ 
lation;  although  the  reorganizations  which  have  taken  place  in  indi¬ 
vidual  markets  make  the  dates  of  incorporation  not  altogether  a  fair 
index  of  historical  position : 

1  Schedule  of  abbreviations  and  corresponding  documents  cited  in  this  chapter.  (E.  g.— ‘Thi.— 1:2'’ 
refers  to  rule  1,  section  2,  rules  of  the  Board  of  Trade  of  the  City  of  Chicago.) 

“Chi.”:  Act  of  incorporation,  rules,  b}’-laws,  and  regulations  of  the  Board  of  Trade  of  the  City  of 
Chicago,  in  force  Feb.  15, 1918.* 

“Mil.”:  Annual  report,  Milwaukee  Cham])er  of  Commerce,  1917-18.  Appendix  dated  Apr.  1,  1918, 
contains  charter  and  general  rules. 

“M'pls.”:  Rules  and  by-laws  of  the  Chamber  of  Commerce  of  Minneapolis,  Minn.,  amended  to  Oct. 
25,  1918. 

“  Dul.”;  Articles  of  incorporation  and  general  rules  and  by-laws  of  the  Duluth  Board  of  Trade,  corrected 
to  Mar.  1, 1918. 

“  K.  C.”:  Constitution,  rules,  and  regulations  of  the  Board  of  Trade  of  Kansas  City,  Mo.,  corrected  to  1919. 

“Oma.”:  Articles,  by-laws,  rules,  and  regulations  of  the  Omaha  Grain  Exc^nge  of  Omaha,  Nebr., 
fe vised  to  Apr.  1, 1918. 

“St.  L.”;  Merchants’  Ifxchange  of  St.  Louis.  Articles  of  association,  rules,  by-lav's,  regulations, 
corrected  to  1919. 

“  Feo.”:  Rules  and  by-laws,  Peoria  Board  of  Trade,  corrected  to  Dec.  30, 1918. 

“Cin.”:  By-laws  adopted  Mar.  12,  1918;  rules  and  regulations  governing  grain  and  hay  trade  in  Cincin¬ 
nati,  effective  Apr.  1, 1918. 

“Tol.”:  General  rules,  Tojedo  Produce  Exchange,  1918. 

“Ind.”:  Annual  report  of  the  Indianapolis  Board  of  Trade  for  the  fiscal  year  ending  June,  1918. 

“Buf.”:  By-laws  of  Corn  Exchange  of  Buffalo.  (Also)  rules  and  regulations  governing  the  grain  trade, 
corrected  to  June,  1918. 

“Balto.”:  Annual  report,  Baltimore  Chamber  of  Commerce,  year  ending  Dec.  31,  1918;  contains  act  of 
incorporation,  bj'-laAvs  of  the  Chamber. 

“Phila.”:  Annual  report,  the  Commercial  Exchange  of  Philadelphia,  1918;  contains  charter,  by-laws, 
floor  rules,  and  grain  rules  of  the  Exchange. 

“N.  Y.”:  Annual  report.  New  York  Produce  Exchange,  1917-18;  contains  charter,  by-laws,  rules  of  the 
grain  trade,  etc. 

“  Bos.”:  Annual  report,  Boston  Chamber  of  Commerce,  1917-18. 

2  (’i'_  jYgn;  York  ct-  Chicago  Grain  <£*  Stock  Exchange  v.  Board  of  Trade  of  the  Citij  of  Chicago  et  at.,  2  L. 
'r  .  .\ .  1 1 1 ,  19  N  L.  855  (Ill. ,  1889). 


EXCHANGE  EULES  AND  REGULATIONS.  191 

Chicago  Board  of  Track — 1S59. — Incorporated  under  a  special  act  of  the  State  of 
1  llinois.  First  incorporation  in  1850  under  the  general  laws  of  Illinois. 

New  York  Produce  Exchange — 1862. — Incorporated  as  New  York  Commercial 
Association  under  special  rmt  of  the  State  of  Now  York.  .Present  name  adopted  1872. 

koidsville  Board  of  Trade — 1862. — Incorporated  under  a  special  act  of  the  State  of 
Kentucky. 

The  Commercial  Exchange  of  Philadelphia  1863. — Incorporated  as  the  Corn  Exchange 
Association  under  a  special  act  of  the  State  of  Pennsylvania.  Present  name  adopted 
1868. 

Baltimore  Chamber  of  Commerce  I860. — Incorporated  as  the  Corn  and  Flour  Exchange 
under  a  special  act  of  the  State  of  Maryland.  Present  name  adopted  1884. 

Milwaukee  Chamber  of  Commerce  1868. — Incorporated  under  special  act  of  the 
State  of  Wisconsin. 

Peoria  Board  of  Trade  1870. — Incorporated  under  the  general  laws  of  Illinois  provid¬ 
ing  for  the  incorporation  of  boards  of  trade  and  chambers  of  commerce.  An  earlier 
Board  of  Trade  was  incorporated  in  1857. 

Indianapolis  Board  of  Trade  1875. — Incorporated  under  the  general  laws  of  Indiana. 
Kansas  City  Board  of  Trade  1876. — Incorporated  under  the  general  laws  of  Kansas. 
Toledo  Produce  Exchange  1876. — Incorporated  under  the  general  laws  of  Ohio 
authorizing  the  incorporation  of  boards  of  trade  and  chambers  of  commerce. 

Minneapolis  Chamber  of  Commerce  Incorporated  under  the  general  laws  of 

Minnesota  providing  for  the  incorporation  of  chambers  of  commerce  and  boards  of 
trade.  Artieles  amended  to  conform  -with  session  laws  of  1883. 

Duluth  Board  of  Trade  1881. — Incorporated  under  the  same  general  laws  of  Minne¬ 
sota  as  Minneapolis  Chamber  of  Commerce,  and  articles  amended  to  conform  with 
the  session  laws  of  1883. 

St.  Louis  Merchants  Exchange  Incorporated  under  the  general  laws  of  Missouri. 

An  earlier  association,  the  St.  Louis  Chamber  of  Commerce,  was  incorporated  in  1837. 
Omaha  Grain  Exchange  1903. — Incorporated  under  the  general  laws  of  Nebraska. 
Buffalo  Corn  Exchange  1904. — Incorporated  under  the  general  laws  of  New  York. 
Its  predecessor,  the  Merchants’  Exchang-e,  was  incorporated  in  1882.  The  still  earlier 
Board  of  Trade  was  incorporated  in  1857. 

Boston  Chamber  of  Commerce  1909. —Tha  present  charter,  uniting  the  former  Cham¬ 
ber  of  Commerce  with  the  Boston  Merchants’  Association  was  granted  by  special  act 
of  the  State  of  Massachusetts.  This  is  the  fourth  organization  in  Boston  to  bear  the 
corporate  name  “Boston  Chamber  of  Commerce.”  It  is  a  merger  of  the  old  Boston 
Chamber  of  Commerce  incorporated  in  the  year  1885  and  the  Boston  Merchants’ 
A.ssociation  which  was  organized  in  1876  and  ineorporated  December  9,  1880'. 

Cincinnati  Grain  and  Hay  Exchange  7975.— Incorporated  under  the  general  laws  of 
Ohio.  The  members  had  been  organized  since  1911  as  a  part  of  the  Cincinnati  Cham¬ 
ber  of  Commerce. 

The  objects  and  purposes  expressed  in  the  articles  of  incorpora¬ 
tion  of  these  associations  are  substantially  uniform^  and  are  as  fol¬ 
lows:  ToJacilit  ate  the  buying  and  selling  of  all  products,^  to  incul- 

^  Mpls.  and  Onia.— “  To  facilitate  the  buying  and  selling  of  all  products.” 

Chi.,  Dul.,  and  Pco. — “To  maintain  a  commercial  exchange.” 

Tol.— “To  conduct  and  regulate  commercial  transactions,  the  buying  and  selling  of  provisions,  bread- 
stuffs,  grain  and  produce,  and  all  other  such,  articles  of  trade  and  exchange  as  may  be  determined  by  the 
rules  and  by-laws  of  the  association.  *  *  *  ” 

Phila.— In  1S63  the  Corn  Exchange  Association  petitioned  the  Court  of  Quarter  Sessions  (City  and 
County  of  Philadelphia)  to  change  its  name  “to  one  which,  in  the  judgment  of  its  members,  will  be  moro 
descriptive  of  its  purposes,”  i.  c.,.  Commercial  Exchange  of  Philadelphia;  which  petition  was  granted. 

X.  Y.— “  To  provide  a  suitable  reem  or  reems  for  a  produce  exchange  in  the  city  of  New  York.” 

The  objects  were  somewhat  more  rcslrictedfor  the  associations  in  Cincinnati,  Buffalo,  and  Baltimore. 
Cin. — “  *  *  *  guarding,  protecting,  and  promoting  the  general  interests  of  the  grain,  hay,  and  mill¬ 
ing  trades 

Biif.--‘“'=  *  to  conduct,  maintain,  and  regulate  a  grain,  produce  and  stock  exchange  *  *  *.  ” 

Balto.— “  *  *  to  advance  the  commorcialcl!aia.cter  and  promote  the  general  interests  of  the  city 

of  Paltimore,  and  more  particularly  those  of  the  giain  and  flour  tiade  =*=  *.  ” 


192 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


cate  just  and  eqiiitalde  principles  in  trade/  to  promote  uniformity  in 
the  customs  and  usages  of  merchants/  to  facilitate  the  speedy  adjust¬ 
ment  of  husijiess  disputes/  to  acquire  and  to  disseminate  valuable 
commercial  (and  economic)  information^  The  articles  of  a  majority 
of  the  associations  include  as  a  purpose  the  promotion  of  the  com¬ 
mercial  \yelfare  of  the  locality.*^ 

<  This  language  is  identical  in  Chi.,  Mpls.,  Dul.,  K.  C.,  St.  L.,  Peo.,  Buf.,  Baito.,  Phila.,  N.  Y.,  and  Bos¬ 
ton;  and  in  Mil.  except  for  “promote”  instead  of  “inculcate.” 
indpis. — “*  *  *  to  promote  commercial  ethics  *  * 

Tol. — “*  *  *  to  promote  equitable  and  honorable  principles  and  modes  of  business  *  *  * 

6  So  stated  by  Chi.,  K.  C.,  Peo. 

Mil. — “to  maintain  uniformity  in  the  commercial  usages  of  the  city.  *  *  *  » 

St.  L. — “  To  establish  and  maintain  the  utmost  fairness  and  unifonnity  in  commercial  usages  *  *  *  " 

Indpis. — “*  *  *  to  secure  uniformity  in  commercial  usages  and  customs 

Phila.,  Baito.,  N.  Y.  and  Boston. — “*  *  *  establish  and  maintain  uniformity  in  commercial  u.sages 
®  So  stated  in  Chi.,  Mpls.,  K.  C.,  Oma.,  Peo. 

Dul. — “*  *  *  to  adjust  controversies  and  business  disputes  ***,»» 

St.  L. — “*  *  *  to  avoid  and  araicabl}’  adjust,  as  far  as  practicable,  any  controversies  or  misunder¬ 
standings  arising  between  individuals  engaged  in  trade  *  *  *.  ” 

Indpis. — “*  *  *  to  adjtsst  differences  and  disputes  in  trade 

Cin. — *  *  adjusting  and  settling  in  a  proper  and  equitable  manner  controversies,  disputes, 
and  differences  as  to  contracts,  accounts,  customs  and  usages  that  may  arise  *=!«*” 

Buf. — “*  *  *  to  adjust  controversies  and  misunderstandings  between  persons  engaged  in 
business  h< 

Baito.— “*  *  *  with  a  view  to  avoid  and  adjust,  as  far  as  practicable,  the  controversies  and  misun¬ 
derstandings  which  frequently  arise  between  persons  engaged  in  trade  *  *  *  » 

N.  Y.,  Phila. — “  *  *  *  to  adjust  controversies  and  misunderstandings  between  the  members 

thereof  *  *  *  »»  y. — “its  members.”)  ‘ 

’  So  stated  by  Chi.,  Mpls.,  Oma.,  and  Peo. 

Mil.,  Baito.,  Phila.,  N.  Y.,  and  Boston—"*  *  *  to -acquire',  preserve,  and  disseminate  valuable  l.msi- 
ess  information  *  *  *.” 

Dul. — “*  *  *  to  acquire  and  dis.seminate  valualde  business  informat  ion  *  *  *.” 

K.  C. — “*  *  *  to  collect  and  disseminate  valuable  commercial  and  economic  information  *  *  *.” 

St.  L. — “*  *  *  to  acquire,  preserve,  and  disseminate  valuable  information  *  *  *.” 

Cin.— “*  *  *  for  the  purpose  of  collecting  and  recording  local  and  general  statistical  information 
relating  to  the  grain,  hay,  and  milling  trade  *  *  *.” 

Buf.— “*  *  *  to  acquire,  preserve,  and  diffuse  accurate  and  reliable  businc.ss  information  *  *  *.” 
»  Mpls. — “*  *  *  to  advance  the  general  prosperity  and  business  interests  of  the  City  of  Minneapolis.” 

M. i,'.— “*  *  *  to  support  such  regulations  and  measures  as  may  advance  the  mercantile  and  manu¬ 
facturing  interests  of  the  City  of  Milwaukee  *  *  *.” 

Chi.,  Dul.,  and  Peo.— The  corporate  name,  “Board  of  Trade  of  the  City  of  Chicago,”  which  was  adopted 
in  the  articles  of  that  association  implies  as  an  object  the  general  commercial  AATlfare  of  the  city.  The 
same  is  true  of  the  “Duluth  Board  of  Trade”  and  the  “  Peoria  Board  of  Trade.” 

K.  C — “'*  *  *  to  promote  the  general  welfare  of  Kansas  City  *  *  *.” 

Oma.— “*  *  *  to  advance  the  general  prosperity  and  business  interests  of  the  City  of  Omaha  and  of 

the  territory  tributary  thereto.” 

Bt.  L.— “*  *  *  generally  to  advance,  promote,  and  extend  the  commercial  and  manufacturing  inter¬ 
ests  of  St.  Louis  and  vicinity  *  *  *.” 

Tol.— “*  *  *  to  advance  the  commercial  and  material  interests  of  the  city  of  Toledo,  *  *  *  and 
also  of  the  places  in  and  from  which  interchanges  of  commodities  are  made  by  dnd  through  this  associa¬ 
tion  *  *  *.” 

Indpis. — “*  *  *  to  promote  the  commercial,  financial,  industrial,  and  other  interests  of  the  city  of 
Indianapolis  *  *  *.” 

Baito.— “*  *  *  to  advance  the  commercial  character  and  promote  the  general  interests  of  the  city  of 
Baltimore  *  *  *.” 

Phila. — “*  *  *  to  provide  and  maintain  suitable  accommodations  for  general  business  exchanges  in 
the  city  of  Philadelphia  *  *  *.” 

N.  Y. — “*  *  *  to  provide  and  regulate  a  suitable  room  or  rooms  for  a  produce  Exchange  in  the  city 
of  New  York.” 

Boston. — “*  *  *  to  advance  the  commerce,  indust r}^  and  public  interests  of  Boston  and  of  New 
England  *  *  *.” 

Buf. — “*  *  *  to  conduct,  maintain,  and  regulate  a  grain,  produce,  and  stock  exchange  *  *  *.” 
(-'in.— In  contrast  with  the  above  provisions  the  articles  of  the  (.'incinnati  Hay  and  Grain  E.xchango 
give  as  an  object:  “  Providing  a  place  of  common  resort  during  business  hours  of  those  interested  in  said 
trade,  and  for  the  interchange  of  opinion,  the  transaction  of  daily  business  in  such  a  hall  as  may  be  erected 
or  pjovided  for  the  u.‘;e  of  said  trade,  and  for  the  doing  of  all  other  things  that  will  enhance  the  interest  of 
said  trade  *  *  *.” 


■J 


EXCHANGE  RULES  AND  REGULATIONS. 


193 


Only  the  Grain  and  Hay  Exchange  of  Cincinnati  and  the  Balti¬ 
more  Chamber  of  Commerce,  among  the  17  associations  enumerated, 
have  chartem  which  specify  a  particular  trade  or  uidustry.’’  The 
articles  of  incorporation  of  the  Omaha,  St.  Louis,  and  Toledo  ex¬ 
changes  contemplate  not  only  the  welfare  of  a  particular  city,  but 
also  tliat  of  the  territory  surrounding  or  tributary  to  the  city,  as 
being  within  the  commercial  objects  of  the  association.  And  tlie 
purpose  clauses  contained  in  the  17  articles  of  association  (with  the 
two  exceptions  noted)  are  applicable  without  qualification  to  all  the 
mercantile  interests  of  each  community.  The  prmcipal  grain  ex¬ 
changes”  in  the  United  States.,  according  to  their 'articles  of  incor¬ 
poration,  were  not  incorporated  solely  or  exclusively  for  the  conve¬ 
nience  and  regulation  of  the  grain  trade  or  of  any  particular  trade. 
As  stated  in  the  Minneapolis  and  Omaha  articles,  they  were  created 
”to  facilitate  the  buying  and  selling  of  all  products.”  It  would 
seem  that  the  practice  of  trading  exclusively  or  prmcipaUy  m  grain 
and  seeds  on  the  exchange  floors  of  these  exchanges  was  brought 
about  through  the  wiU  of  the  predominant  group  of  traders.  In 
any  case  the  following  table  shows  the  unquestioned  predominance 
of  the  grain  trade  on  12  exchanges. 


Table  —Proportion  of  exchange  members  in  specified  exchanges  engaged  in  the  grain 

trade,  1918. 

I.  p:xchanges  devoted  exclusively  or  primarily  to  grain  and  seeds. 


'  s 

Total 

member¬ 

ship. 

Members 
not  in 
grain 
trade. 

Chicago  Board  of  Trade . 

1,620 

464 

199 

201 

188 

534 

133 

942 

114 

101 

35 

303 

1 198 

Minneapolis  Chamber  of  Commerce . 

Kansas  City  Board  of  Trade . 

Duluth  Board  of  Trade . 

It) 

Omaha  Grain  Exchange . 

Milwaukee  Chamber  of  Commerce . 

20s 

Peoria  Board  of  Trade . 

St.  Louis  Merchants’  Exchanee . 

Cincinnati  Hay  and  Grain  Exchange . 

A 

Buffalo  Corn  Exchange . 

Toledo  Produce  Exchange . 

c 

Baltimore  Chamber  of  Commerce . 

9 

II. -EXCHANGES  WHERE  THE  GRAIN  TRADE  IS  SUBORDINATE. 

' 

ndianipolis  Board  of  Trade . 

637 

1,631 

,1,769 

1,278 

496 
1,563 
a  1  sfi.! 

Louisville  Board  of  Trade . 

New  York  Produce  Exchanee . 

Boston  Chamber  of  Commerce . 

1,0.51 

‘  Unaccounted  for,  6.  2  Unaccounted  for,  95. 

It  will  be  noted  that  in  the  so-called  grain  exchanges  at  Chicago, 
Milwaukee,  St.  Louis,  and  Baltimore  there  is  a  considerable  personnel 
not  engaged  in  the  grain  trade.  This  is  due  to  the  fact  that  certain 

®  See  footnote  3,  p.  191.  The  Baltimore  association’s  objects  were  “more  particularly  those  of  the  grain 
and  flour  trade.” 

See  footnote  8,  p.  192. 

108693°— 20 - 13 


194 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


members  of  these  fom'  exchanges  have  continued  to  a  small  extent 
the  trading  in  other  commodities,  such  as  provisions.  On  the  other 
eight  exchanges  remainino*  in  Part  I  of  the  table  the  groups  not  in  the 
grain  business  are  comprised  of  banks,  railroads,  brokerage  houses, 
and  others  who  find  it  advantageous  to  hold  a  membership  on  one  or 
more  grain  exchanges;  that  is,  they  have  a  collateral  interest  in 
grain.  Of  the  22  members  of  the  Minneapolis  Chamber  of  Commerce 
not  actually  trading  in  grain,  there  was  only  one  reported  to  the  Com¬ 
mission  who  was  not  known  to  have  been  at  least  indirectly  interested 
in  the  grain  business.  The  members  of  the  Kansas  City  and  Duluth 
exchanges  not  engaged  in  this  trade  are  likewise  collaterally  interested 
as  follows : 

Firm  connections  of  members  of  Kansas  City  and  Duluth  Boards  of  Trade  not  engaged  in 

grain  business,  1918. 


Kansas  City: 

Railroads . 3 

Bag  manufacturer .  1 

Packer . 1 

Secretary  of  board .  1 

Retired  from  grain  busmess . 7 


Total . . .  13 


Duluth: 

Shipping  companies . 8 

Banks . : . .  2 

Railroads . 2 

Insurance  agency .  _  1 

Retirtrd  from  grain  business .  3 


Total . . .  16 


The  legislative  act  under  which  the  Chicago  Board  of  Trade  was 
incorporated  makes  no  specific  mention  of  grain  except  in  listing  the 
commodities  which  they  might  weigh,  inspect,  measure,  etc. ;  that  is, 
the  board  was  empowered  to  examine,  measure,  weigh,  gauge,  or 
inspect  flour,  grain,  provisions,  liquors,  lumber,  or  any  other  articles 
of  produce  or  traflB.c  commonl}^  cfealt  in  by  the  members  of  said  corpo¬ 
ration.’’  And  yet,  as  the  table  shows,  except  for  a  small  subdi¬ 
vision  of  the  membership,  the  Chicago  Board  of  Trade  is  a  grain 
exchange. 

The  four  exchanges  listed  in  Part  II  of  the  table  arc,  on  the  other 
hand,  general  commercial  bodies  representing  the  diverse  trades  of 
the  community.  The  grain  traders  here  exercise  only  a  subordinate 
influence. 

Among  the  exchanges  now  considered,  the  Buffalo  Corn  Exchange 
is  the  only  association  empowered  to  construct,  manage,  and  operate 
elevators,  and  to  buy,  sell,  and  deal  in  grain  produce,  stocks,  bonds, 
and  property  of  all  descriptions.  However,  since  its  organization  the 


^^Sec.  10  of  act  approved  Feb.  18, 1859. 


EXCHANGE  RULES  AND  REGULATIONS. 


195 


association  has  never  exercised  these  broad  powerS;  but  has  confined 
its  operations  to  the  maintenance  of  a  grain  exchange  for  the  use  of 
members. 

The  regulatory  powers  acquired  by  these  exchanges  are  exceedingly 
broad.  It  has  been  shown  that  there  is  a  marked  similarity  In  the 
purposes  of  incorporation  as  expressed  in  the  articles  filed  by  the 
respective .  associations,  and  these  stated  objects  cover  in  the  main 
the  functions  which  have  been  assumed  by  the  exchanges: 

(1)  A  frequently  stated  purpose  was  ‘^to  inculcate  principles  of 
justice  and  equity  in  trade.’'  Keference  to  the  section  on  discipline 
(p.  210)  and  to  other  sections  of  this  chapter  discussing  the  rules  of 
the  exchanges  will  show  to  what  extent  tliis  object  has  been  car¬ 
ried  out. 

(2)  Several  of  the  charters  give  as  an  object  that  of  securing  uni- 
fornaity-in-cammercial  usages  and  customs.  The  sections  which  fol¬ 
low  will  show  the  service  rendered  by  the  exchanges  for  the  grain 
trade  in  promoting  uniformity  among  the  customs  and  regulations 
of  the  markets. 

(3)  Under  the  object  ^Ho  facilitate  speedy  adjustments  of  business 
disputes/’  all  of  the  exchanges  have  provided  means  of  settling  such 
disputes  through  boards  of  arbitration  and  appeal.^^  Some  of  the 
charters  provide  in  detail  for  the  establishment  of  such  boards, 
giving  their  awTards  the  force  of  judgments  when  properly  filed  and 
confirmed  by  the  courts.  The  language  of  these  charter  provisions 
for  arbitration  is  important  only  where  it  is  necessary  to  distinguish 
between  voluntary  and  compulsory  arbitration.  (See  p.  218.) 

(4)  A  further  object  of  association  is  ^‘to  acquire  and  disseminate 
valuable  commercial  information.”  This  function  includes  the  wdiole 
quotation  service  of  the  exchanges  whereby  the  world  is  continuously 
informed  of  prevailing  prices  and  of  supplies  of  grain  in  the  leading 
markets. 

The  charters  of  these  associations  contain  ^  in  many  instances 
specific  powers  which  w^ould  be  implied,  such  as  to  admit,  regulate, 
discipline,  and  expel  members,  and  to  adopt  by-law^s,  rules,  and 
regulations.’^ 

Section  2.  Exchange  government. 

The  gram  exchange  corporations  have  follow’-ed  a  generally  uni¬ 
form  scheme  of  organization  and  government.’^  Exchange  affairs 
are  directed  and  policies  are  formulated  by  an  elective  board  of  di¬ 
rectors,  wdiich  usually  includes,  ex  officio,  the  president,  vice  presi¬ 
dents,  and  sometimes  other  elective  officers  of  the  association.  This 

J^Sce  Evans  v.  Minneapolis  Chamber  ofCommerce,  «S6  Minn.,  448,  91  N.  W.,  8. 

’  Chicago,  Minneapolis,  Milwaukee,  and  Peoria. 

’  17  Cyc.  15  L 

’“This  socl.ion  is  based  on  only  10  exchanges,  viz,  those  at  Chicago,  Milwaukee,  Minneapolis,  Duluth. 
Kansas  City,  Omaha,  St.  Louis,  Peoria,  Toledo,  and  Budalo. 


196 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


l)oard  appoints  a  secretary/*  who  constitutes  the  chief  administrative 
officer  or  manager  of  the  association,  and  usually  receives  the  highest 
salary  of  any  of  the  full-time  officials.  The  supervision  of  the  various 
departments  and  services  is  assigned  to  committees,  some  of  which 
are  selected  from  the  directors  and  some  from  the  membership  at  large. 

Moreover,  each  association  maintains  a  staff  of  employees  and 
subordinate  officers  (inspectors,  samplers,  weighers,  traffic  experts, 
quotation  reporters,  and  the  like),  some  of  whom  are  responsible  to  the 
secretary  and  some  to  specific  committees.  Such,  in  brief,  is  the 
usual  plan  of  organization  of  these  associations. 

Elective  officers. — In  most  of  the  associations  the  officers,  in¬ 
cluding  a  president  and  one  or  two  vice  presidents,  are  elected  by  the 
whole  membership. These  officers  are  chosen  for  short  terms,  the 
president  invariably  for  one  year.  In  Chicago,  Minneapolis,  and 
Kansas  City  a  second  vice  president  is  elected  annually  and  he  auto¬ 
matically  becomes  first  vice  president  during  his  second  year  of 
office.  In  the  other  associations  vice  presidents  are  elected  for  one 
year  only.  The  directory  is  partially  renewed  each  year  on  most  of 
the  exchanges  and  the  terms  of  office  vary  from  two  to  three  years. 
There  are  9  directors  elected  in  Milwaukee,  Duluth,  Omaha,  and 
Buffalo;  10  in  Minneapolis,  St.  Louis,  Peoria,  and  Cincinnati  (Grain, 
and  Hay  Exchange) ;  and  15  in  Chicago.  In  addition  to  these  the 
president  and  vice  president(s)  are,  ex  officio,  members  of  the  board.^** 
In  Milwaukee  and  Peoria  the  secretary  and  treasurer  are  also  ex 
officio  members  of  the  board  of  directors. 

Elective  committees. — The  committee  (or  board)  of  arbitration 
is  elective  in  eight  associations  and  the  committee  on  appeals  is  like¬ 
wise  elective,  except  in  Omaha,  Kansas  City,  and  Peoria,  where  they 
are  appointed  by  the  board  of  directors.  These  arbitration  and 
appeals  committees  are  chosen  as  follows; 


Exchange. 

Arbitra¬ 
tion  com¬ 
mittee 
(number 
of  mem¬ 
bers). 

Terms 

(years). 

Appeals 
commit¬ 
tee  (num¬ 
ber  of 
mem¬ 
bers). 

Terms 

(years). 

Elected— 

Chicago . 

10 

2 

10 

2 

5  each  year. 

Part  each  year. 

2  members  on  even  years  and  3  on  odd 
years. 

Annually. 

Arbitration  committee  elected  annually 
Both  committees  appointive. 

Arbitration  committee  elected  annually. 
Annually. 

1 

Milwaukee . 

5 

2 

5 

2 

Minueanolis . 

5 

2 

5 

2 

Duluth . 

3 

1 

3 

1 

Kansas  City . 

5 

1 

fll5 

1 

Omaha _ _ 

10 

5 

Peoria . 

3 

1 

0  15 

1 

Toledo  . . 

7 

1 

11 

1 

a  Appointive. 

'« Elective  at  Milwaukee,  Toledo  and  Peoria. 

17  The  executive  officers  (president,  vice  president,  treasurer,  etc.)  arc  chosen  by  the  board  of  directors 
Iron!  their  own  number  in  Omaha,  Cincinnati,  Louisville,  and  Buffalo.  Two  vice  presidents  are  elected 
except  on  Duluth  and  Indianapolis  Boards  oi  Trade.  The  treasurer  is  also  elective  in  Milwaukee,  Peoria, 
and  Indianapolis. 

Except  Peoria  (1  year),  Toledo  (1  year)  and  Indianapolis  (4  years). 

"  Except  on  the  Omaha  Crain  Exchange,  where  they  are  elected  by  the  board  ol  directors  from  its  own 
number. 

*®  Chicago,  Milwaukee,  Duluth,  Minneapolis,  Omaha,  Kansas  City  Peoria  and  Toieda  v 


EXCHANGE  RULES  AND  REGULATIONS. 


197 


Appointive  committees. — The  more  important  appointive  com¬ 
mittees  (generally  appointed  by  the  president  with  the  approval  of 
the  directors)  are  those  on  membership, rules,--  quotations,^^  ware¬ 
housing  (or  elevators),  inspection  and  weighing,^^  transportation,-® 
to-arrive  grain,^’  discount,'^®  and  the  call.-®  There  is  also  a  committee 
on  futures  in  St.  Louis,  on  margins  in  Kansas  City  and  Omaha,  and 
a  clearing-house  committee  in  Chicago.  The  sundry  committees 
which  relate  to  exchange  real  estate,  finance,  trading  hall,  promo¬ 
tion,  publicit}^,  and  the  like,  are  not  considered  here. 

Functions  of  officers  and  committees. — The  duties  of  ex- 
(*hange  officers  and  committees  are  fairly  apparent  from  their  titles 
and  are  indicated  in  subsequent  sections.  The  powers  and  duties  of 
the  board  of  directors  and  of  standing  committees  generally  resemble 
those  enumerated  by  the  Omaha  Grain  Exchange,  viz: 

Sec,  7.  The  board  of  directors  shall  have  power — 

(а)  To  employ  such  legal  assistance  as  they  may  deem  needful  for  the  exchange. 

(б)  To  elect  a  presiding  officer  in  the  absence  of  the  president  and  vice  presidents 
who  shall  discharge  the  duties  of  president  during  such  absence. 

(c)  To  establish  all  necessary  regulations  for  the  inspection,  weighing,  and  ware¬ 
housing  of  any  property  dealt  in  by  members  of  this  exchange. 

(d)  To  determine  the  terms  and  conditions  to  which  elevators  and  warehouses 
must  submit  in  order  to  have  their  receipts  for  property  made  a  legal  tender  in 
deliveries  among  members  of  this  exchange,  and  to  require  their  assent  thereto: 
Provided,  No  elevator  shall  be  so  made  regular  unless  it  has  a  storage  capacity  of  not 
less  than  50,000  bushels  and  receiving  and  discharging  facilities  adequate  for  the 
prompt  dispatch  of  business. 

{e)  To  designate  the  warehouses  and  elevators,  the  receipts  of  which  shall  be  a  legal 
tender  in  delivering  property,  and  to  declare  such  receipts  no  longer  a  legal  tender: 
Provided,  That  no  elevator  or  warehouse  shall  be  thus  made  regular  or  irregular  by 
less  than  six  affirmative  ballot  votes. 

(/)  To  levy  assessments  upon  the  memberships  of  this  exchange  as  is  provided  in 
the  articles  of  incorporation. 

ig)  To  establish  the  time  and  place  of  trading  among  members  of  this  exchange 
and  the  manner  in  which  said  trading  shall  be  conducted  and  provide  regulations 

Chicago  (3  members),  Milwaukee  (5),  Minneapolis  (5),  Duluth  (3),  Omaha  (5),  Kansas  City  (5),  St. 
Louis  (3),  Peoria  (5),  Indianapolis  (9). 

22  Milwaukee  (3),  Minneapolis  (5),  Kansas  City  (5),  St.  Louis  (6),  Peoria  (3).  On  by-laws,  Indianapolis 
(.5);  change  in  rules,  Minneapolis  (9);  interpretation  of  rules,  Kansas  City  (3);  rules  and  legislation,  Chicago 
(3);  violation  of  rules,  Chicago  (5)  and  Omaha  (5). 

23  Chicago  (3),  Milwaukee  (3),  Minneapolis  (5),  Duluth  (3),  Omaha  (5),  and  Kansas  City  (5).  On  closing 
price  on  wheat,  Miimeapolis  (3);  closing  price  on  coarse  grain,  Minneapolis  (3);  market  reports,  St.  Louis 
(7),  Peoria  (3);  telegraph  and  printing,  Peoria  (3). 

2-1  Chicago  (3),  Minneapolis  (4),  Duluth  (3),  Omaha  (5),  Peoria  (3).  Regular  warehouse,  Peoria  (3);  in- 
.surance,  Duluth  (3),  St.  Louis  (5),  and  Indianapolis  (5);  bonding  and  insurance,  Kaasas  City  (3). 

23  Milwaukee  (5)  and  Buffalo  (5).  Inspection,  Peoria  (5),  Baltimore  (3),  Toledo  (7),  and  Duluth  (5 
elected);  sampling,  Chicago  (7)  and  Minneapolis  (3);  sampling  and  inspection,  Duluth  (5),  Kansas  City 
(3);  weighing,  Kansas  City  (4),  St,  Louis  (9),  Peoria  (3);  weighing  and  custodian,  Chicago  (3);  grain 
committee,  Chicago  (7),  Omaha  (7),  St.  Louis  (7),  Indianapolis  (9),  Buffalo  (5). 

26  Chicago  (7),  Milwaukee  (3),  Minneapolis  (12),  Duluth  (3),  Omaha  (9),  Kansas  City  (5),  St.  Louis  (14), 
Peoria  (9),  Indianapolis  (9),  Buffalo  (5).  Harbor,  Duluth  (3);  Mississippi  River,  St.  Louis  (7). 

»  Chicago  (5),  Milwaukee  (3),  Omaha  (5),  and  Kansas  City  (3). 

Omaha  (5),  Indianapolis  (5). 

29  Peoria  (3)  and  Indianapolis  (3). 


198 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


tliercfor.  Members  guilty  of  irregular  trading  may  be  fined,  suspended,  or  expelled 
from  this  exchange  at  the  discretion  of  said  board  of  directors. 

(h)  To  establish  regulations  for  admission  to  the  exchange  room  and  to  charge  a 
fee  therefor. 

(i)  To  require  of  the  secretary  and  treasurer  such  bonds  as  they  may  determine, 
conditioned  for  the  safe-keeping  and  proper  disbursement  of  the  funds  of  this  exchange 

(j)  It  shall  be  their  duty,  unless  otherwise  provided  for,  to  enforce  the  by-laws, 
rules,  and  regulations  of  this  exchange,  and  to  require  obedience  thereto  from  all 
persons  and  parties  under  the  jurisdiction  thereof. 

(k)  Whenever  it  shall  be  determined  by  such  board  of  directors  that  it  is  to  the 
interest  of  this  exchange  to  become  the  owner  of,  or  interested  in,  any  property,  said 
board  of  directors  shall  have  full  power  to  frame  and  adopt  such  plan  as  they  may 
deem  advisable,  by  which  such  property  shall  be  held  for  the  use  and  benefit  of  those 
who  may,  from  time  to  time,  be  members  of  this  exchange  in  good  standing,  and  so 
as  not  to  vest  in  any  person,  now  or  hereafter  a  party  hereto,  any  interest  in  said 
property  independent  of,  or  distinct  from,  such  membership. 

Sec.  8.  It  shall  be  the  duty  of  the  board  of  directors  to  provide  for  the  collection 
of  the  revenues  of  this  exchange  and  for  the  payment  of  its  legitimate,  ordinary  ex¬ 
penses,  including  also  the  cost  of  such  measures  as  they  may  deem  requisite  for  fostering 
and  promoting  the  objects  of  this  exchange  and  the  commerce  of  Omaha. 

*  *  *  *  *  * 

POWERS  OF  STANDING  COMMITTEES. 

The  Alleged  Violation  of  Rules  Committee  shall  hear  and  determine  all  complaints 
arising  from  technical  violations  of  the  rules,  and  shall  cause  to  be  inflicted  the  penal¬ 
ties  provided  therefor. 

The  Appeals  Committee  shall  hear  and  determine  all  cases  appealed  from  a  decision 
of  any  committee  when  formally  brought  before  it  as  otherwise  provided  in  the  by¬ 
laws,  rules,  and  regulations. 

The  Arbitration  Committee  shall  hear  and  determine  all  disputes  of  financial,  mer¬ 
cantile,  or  commercial  character  connected  wdth  or  arising  from  any  matter  referred  to 
in  the  by-laws,  rules,  and  regulations,  subject  to  the  provisions  in  Article  III  of  the 
rules  and  regulations  of  this  excliange. 

The  Cash  Margin  Committee  shall  settle  all  disputes  as  to  proper  marginal  prices 
or  any  other  feature  connected  with  cash  margins. 

The  Discount  Committee  shall  determine  the  proper  basis  of  settlement  where  buyer 
and  seller  can  not  agree  in  all  cases  of  reinspection. 

The  Elevator  Committee  sliall  investigate  and  report  as  to  the  character  and  equip¬ 
ment  of  all  elevators  or  warehouses  applying  to  be  made  “regular.  ” 

The  Finance  Committee  shall  act  as  counselor  in  all  financial  matters  relating  to 
the  exchange. 

The  Grain  Committee  shall  have  general  supervision  of  the  inspection  and  weighing 
of  grain  and  of  all  matters  relating  thereto  subject  to  the  order  and, direction  of  the 
board  of  directors.  The  grain  committee  shall  at  its  firat  meeting  elect  by  ballot  a 
permanent  chairman,  and  in  case  the  permanent  chairman  is  disqualified  or  absent 
at  any  meeting,  a  temporary  chairman  shall  be  elected  in  the  same  manner. 

The  Membership  Committee  shall  receive,  investigate,  and  pass  upon  all  appli¬ 
cations  for  membership  in  the  exchange,  and  make  the  proper  recommendations  to 
the  board  of  directors. 

The  Quotations  Committee  shall  have  general  supervision  of  the  trading  floor  and 
mirket  quotations. 

The  Transportation  Committee  shall  have  supervision  over  all  matters  relating  to 
transportation,  adjustment  of  rates,  and  railroad  regulation. 


““Omaha  by-laws,  Art.  II. 


EXCHANGE  EULES  AND  KEGULATIONS. 


199 


A  fairly  typical  enumeration  of  the  functions  of  the  secretary 
occurs  in  the  rules  of  the  Kansas  City  Board  of  Trade: 

It  shall  be  the  duty  of  the  secretary  under  the  direction  and  control  of  the  board 
of  director’s  to  keep  a  journal  of  the  proceedings  of  said  board  and  of  the  association: 
to  keep  the  books  and  accounts  of  the  association:  to  collect  and  pay  over  to  the  treas¬ 
urer  all  moneys  due  the  association;  to  take  charge  of  the  seal,  books,  papers,  and 
personal  property  belonging  to  the  association;  to  collect  and  record  valuable  statistical 
and  other  information  pertaining  to  the  commercial,  mercantile,  and  manufacturing 
interests  of  the  city,  and  on  or  about  the  1st  of  January  in  each  year  he  shall  make 
to  the  association  a  full  report  of  the  grain  and  provision  business  of  the  city  for  the 
year  ending  December  31,  which  report  shall  contain  allrsuch  commercial  information 
in  his  possession  as  may  be  of  interest  to  the  members;  he  shall  furnish  the  chairman  of 
every  special  committee  a  copy  of  the  resolution  whereby  such  committees  shall 
have  been  created;  give  notice  of  meetings  of  the  board  of  directors  and  of  the  asso¬ 
ciation,  read  such  records  and  papers  as  the  presiding  officer  may  direct,  conduct 
the  correspondence  of  this  association;  attend  meetings  of  the  committees  of  arbi¬ 
tration  and  appeals,  and  any  committees  of  the  board  of  trade  when  requested  so  to 
do  by  the  acting  chairman  thereof,  and  keep  a  record  of  their  proceedings  and  give 
notice  when  their  services  are  required.  He  shall  issue  certificates  of  election  to 
the  president,  second  vice  president,  directors,  and  members  of  the  committees  of 
arbitration  and  appeals,  and  shall  issue  to  all  appointees  of  the  board  of  directors 
certificates  of  their  appointment.  All  such  certificates  will  bear  the  signature  of  the 
president  and  secretary  and  the  seal  of  the  association,  and  those  issued  to  employees 
shall  specify  the  duties  to  which  they  may  be  appointed,  the  term  of  their  service, 
and  that  such  appointments  are  revocable  at  the  pleasure  of  the  board  of  directors. 

He  shall  keep  his  office  open  during  usual  hours  of  business,  shall  see  that  the  rooms 
and  pmperty  of  the  association  are  kept  in  good  order,  and  shall  perform  such  other 
duties  as  may  be  provided  by  by-laws,  rules,  regulations,  or  resolution  of  the  board 
of  directors. 

Section  3.  Adoption  of  rules,  by-laws,  and  regulations. 

General  powers. — The  charters  of  the  exchanges  here  considered 
^  rarely  state  precisely  the  rules  or  by-laws  which  may  or  may  not  be 
adopted.  They  generally  lay  down  the  broad  objects  for  which  the 
association  was  created,  and  leave  the  adoption  of  rules,  by-laws 
and  regulations  to  the  discretion  of  the  association. 

In  the  adoption  of  rules  these  associations  are  subject  to  certain 
limitations  established  in  the  law  of  corporations:  (1)  The  rules  ^ 
must  be  within  the  objects  and  purposes  for  which  the  exchange 
w'as  organized.  (2).  They  must  not  contravene  public  policy  or  the  ^ 
law'  of  the  land.  (3)  They  must  not  be  uin’easonable  or  uncertain. 

In  general  trade  usage  every  contract  made  on  exchange,  or  by  or 
through  a  member  of  the  exchange,  is  subject  to  the  exchange  rules  as 
a  condition  thereof.^  This  is  clearly  recognized  in  the  trade  rules  of 
the  Grain  Dealers’  National  Association  (which  is  fairly  representative 
of  terminal  markets  throughout  the  United  States).  Rule  2  states 

Soc  17  Cyc.  8ol  and  cases  cited. 

^  In  correspoadonco  from  tlie  Secretary,  Chicago  Board  of  Trade,  June  3, 1916,  itis  stated  that  the  courts 
lia\  0  held  repeatedly  and,  so  far  as  he  knows,  never  to  the  contrary,  “that  all  contracts  made  on  the  Chi¬ 
cago  market  under  these  rules  have  as  a  part  the  condition  of  the  contract  and  the  said  rules.” 


200 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


that  *  *  whenever  applied  to  a  terminal  market,  the  wmrd  ^ terms  ^ 
shall  he  construed  to  mean  that  all  the  rules  governing  such  market 
shall  obtain/^  It  is  apparent,  therefore,  that  the  whole  marketing 
system  is  defined  and  governed  to  a  marked  extent  by  these  rules  of 
the  exchanges. 

Grain  exchange  corporations. — -In  the  more  strictly  grain 
exchange  corporations  (see  Table  69)  there  is  no  distinction  made, 
betwreen  rules  and  by-laws  in  the  method  of  adoption.  Both  by-laws 
and  general  rules  must  have  the  sanction  of  the  membership  of  the 
association. The  regulations  and  rulings  (under  the  rules),  how¬ 
ever,  are  issued  by  the  board  of  directors  or  an  appropriate 
committee.  That  is,  the  application  and  construction  of  substantive 
rules  is,  in  theory,  an  administrative  matter. 

For  example,  in  1915  when  the  directorate  of  the  Chicago  Board  of 
Trade  was  considering  a  closer  supervision  of  the  branch  offices  of 
private  wnre  companies,  the  counsel  to  the  board  advised  that  they 
might  legally  go  to  the  extent  of  rerpiiring  resident  and  correspond¬ 
ent  members  to.  submit  their  books  of  account  at  any  time  for 
examination  by  auditors  of  the  board,  but  he  insisted  that  such  a 
practice  should  be  instituted  only  by  authority  of  a  general  rule  and 
not  by  administrative  regulation,  fie  stated  that,  in  his  opinion,, 
“no  regulation  of  the  board  can  stand  the  legal  test  unless  it>is 
based  upon  the  rule  authorizing  the  board  of  directors  to  pass  such 
a  regulation.'*’  -s 

General  commercial  exchanges  and  stock  companies. — In 
the  government  of  the  general  commercial  exchanges  and  stock 
companies,  such  as  those  in  most  of  the  secondary  and  seaboard 
markets,  a  distinction  is  made  between  rules  and  by-laws.  The 
by-laws  are  adopted  at  stated  meetings  of  the  wffiole  membership, 
or  body  of  stockholders,  whereas  the  rules  are  promulgated  by  the 
managing  board  (or,  as  in  New  York,  by  the  members  of  the  par¬ 
ticular  trade). 

Procedure. — The  procedure  for  adopting  rules  is  quite  uniform 
among  the  former  group  of  associations,  the  main  distinction  lying 
-  in  the  requirement  of  a  mere  majority  on  some  exchanges  and  an 
extraordinary  majority  on  others.  ^ 

A  proposed  rule  may  be  initiated  by  petition  of  members  or  upon 
recommendation  of  a  committee.  On  eight  exchanges  it  must  be 
first  approved  by  a  majority  of  the  directors  before  it  can  be  sub- 

33  Except  Omaha  Grain  Exchange. 

*<Chi.:  By-laws,  Art.  X.  Mpls.:  Rule  23,  “any  and  all  amendments”  must  first  be  approved  by  a 
majority  ol  the  board  of  directors.  Dul.:  Rule  11,  must  be  approved  by  majority  of  directors.  Mil..  Rule 
25,  must  be  recommended  by  majority  of  directors.  St.  L.:  By-laws,  art.  10,  can  not  be  submitted  to 
vote  until  adopted  by  directors.  K.  C.:  Rule  19,  must  be  first  approved  by  directors  unless  petition  is 
signed  “by  at  least  a  majority  of  the  members  of  this  association.”  Peo.:  By-laws,  art.  8,  must  first 
be  recommended  by  vote  of  the  directors  at  a  regular  meeting.  Tol.:  By-laws,  art.  10,  must  be  approved 
by  majority  of  directors  or  proposed  in  writing  by  at  least  15  members. 


EXCHANGE  EULES  AND  REGULATIONS. 


201 


mitted  to  the  association  for  a  vote.  An  exception  is  the  members’ 
initiative  in  Chicago  which  is  provided  in  case  a  proposed  rule  is 
disapproved  hy  the  directory.  Under  this  clause  the  amendment 
can  be  brought  before  the  association  by  the  petition  of  100  members 
over  their  signatures. 

Also  in  Chicago,  after  a  proposed  amendment  has  been  posted,  25 
members  may  sign  a  petition  amending  the  proposed  amendment, 
post  it  for  3  days  in  the  exchange  room  prior  to  the  special  meeting, 
and  have  their  petition  voted  on  before  the  original  resolution  is 
considered. 

On  the  Kansas  City  Board  of  Trade  only’ a  majority  of  the  mem¬ 
bers,  by  signed  petition,  may  initiate  a  rule  not  proposed  by  the 
directors,  which  is  a  prohibitive  requirement.  In  Toledo  15  mem¬ 
bers  may  initiate  a  vote  on  a  proposed  amendment. 

A  proposed'  amendment  must  be  posted  conspicuously  for  a  week 
or  10  days  before  being  submitted  to  a  vote.  St.  Louis  requires  that 
the  proposition  be  also  mailed  to  nonresident  members  10  days 
prior  to  the  meeting  called  to  consider  it.^“ 

A  bare  majority  wiU  adopt  a  general  rule  (providing  a  stipulated 
quorum  are  voting)  in  Chicago,  Milwaukee,  and  Peoria.  A  two- 
thirds  majority  is  required  in  Minneapolis,  Duluth,  Kansas  City,  St. 
Louis,  and  Toledo.^® 

Omaha  is  exceptional  among  exchanges  in  primary  markets  in 
vesting  the  power  to  adopt  general  rules  with  a  majority  of  The  board 
of  directors.  This  is  a  more  prevalent  practice  among  the  eastern 
or  general  commercial  exchanges. 

Among  the  stock  corporations  and  general  commercial  exchanges 
the  adoption  of  by-laws  by  a  majority  of  the  members  or  stockholders 
based  on  a  prelimmary  approval  by  the  managing  board  is  the  more 
frequent  rule.^®  The  Commercial  Exchange  of  Philadelphia  provides 
that : 

Alteration  or  amendment  of  the  by-laws  shall  require  the  approval  of  the  board 
of  directors  by  a  two-thirds  affirmative  vote,  to  be  subsequently  ratified  by  a  ma¬ 
jority  vote  of  members  voting  by  ballot  at  an  election  held  for  the  purpose,  of  which 
10  days’  notice  shall  have  been  given,  stating  specifically  the  alteration  or  amendment 
proposed.^® 

and  the  New  York  rule  is  identical."*® 

By-laws;  art.  10. 

36  Rules  cited:  Chicago.— Must  be  300  votes  cast  on  the  ballot.  Milwaukee.— “Not  less  than  60  affirma- 
tive  votes.”  Peoria.— Must  be  25  members  present.  Minneapolis.— Must  be  100  present  and  voting. 
Duluth. — Must  be  40  present  in  person  and  voting.  St.  Louis. — No  requirement  as  to  votes  cast.  Kansas 
City.— No  requirement  as  to  votes  cast.  Toledo.— No  requirement  as  to  votes  cast. 

3?  Omaha.— By-law  10  and  rule  10. 

38  Bos.— By-laws,  art.  20;  Phila.— Art.  27;  N.  Y.— Rules  of  the  Grain  Trades,  sec.  59;  Cin.— Art.  17. 
The  Indianapolis  Board  of  Trade  by-laws  may  bo  amended  “only  by  a  two-thirds  vote  of  the  members 
present  at  any  meeting  of  the  Governing  Committee.”  (Sec.  12.) 

39  Art.  27. 

«  Sec.  59. 


202 


TERMIlJTAL  GRAIN  MARKETS  AND  EXCHANGES. 


The  Boston  Chamber  of  Commerce  requires  a  two-thkds  vote  ‘‘of 
the  members  voting  at  a  meeting  held  for  the  purpose.’^ 

As  already  stated,  the  general  rules  for  trading  in  grain  on  these 
exchanges  are  promulgated  by  the  managing  board  or  by  a  committee. 
For  example  (on  the  Boston  Chamber  of  Commerce) : 

The  directors  may  adopt  or  amend  rules  and  regulations  for  the  government  and 
proper  business  conduct  of  the  chambers/^^ 

It  is  clear  that  on  these  more  diversified  commercial  exchanges 
rules  and  regulations  are  practically  synonymous  and  by-laws  have 
a  broader  significance;  while  m  the  eight  western  associations  first 
considered,  rules  and  by-laws  carry  practically  the  same  authority. 

Uniformity  of  rules  and  the  Council  of  Grain  Exchanges — 
The  association  known  as  the  Council  of  Grain  Exchanges  was  organ¬ 
ized  in  1908  “in  order  to  secure  uniformity  of  method,  unity  of  action, 
and  intelligent  cooperation  of  membership.”  A  primary  object  of 
this  national  association  was  to  promote  uniformity  in  the  rules  of 
the  various  exchanges.  The  association  has  been  totally  lacking  in 
authority,  however,  and  most  of  its  efforts  in  this  regard  have  been 
ineffective.''^ 

The  constituent  exchange  members  of  the  council  have  apparently 
been  too  jealous  of  the  interests  peculiar  to  their  individual  markets 
to  delegate  any  measure  of  authority  to  such  a  central  body.  The 
secretary  of  the  Chicago  Board  of  Trade  declared  in  1915  that  he 
“almost  despairs  of  trying  to  inject  sufficient  interest  into  the  council 
to  make  it  an  active  force.”  While  stating  that  one  of  the  prin¬ 
cipal  objects  in  organizing  the  council  was  to  make  uniform  the  rules 
and  practices  of  the  exchanges,  he  said:  “In  attempting  to  do  this 
we  immediately  met  insuperable  objections,  and  first  of  all  at  Chicago 
itself.^’  « 

A  marked  uniformity  does  exist  in  the  rules  of  certain  groups  of 
exchanges  as  a  result  of  the  close  community  of  trading  interest 
existing  between  these  markets.  This  uniformity  Avill  become  ap¬ 
parent  as  the  rules  on  particular  subjects  are  discussed. 

^  Section  4.  Membership. 

It  has  already  been  indicated  .that  the  privileges  of  membership 
in  an  exchange  association  include  participation  in  trading  on  the 
exchange  floor,  enjoyment  of  members’  rates  of  commission  and 

By-laws,  art.  20. 

■*2  By-laws,  Art.  V,  Sec.  4. 

■*3  It  has  no  power  to  correct  abuses  that  creep  into  the  trade,,  no  means  to  compel  ai’bitration  of  differ- 
ences  between  members  of  the  diflerent  exchanges,  offers  no  privileges  of  membership;  in  fact,  member¬ 
ship  means  practically  only  the  privilege  of  attending  meetings  once  or  twice  a  year  for  the  discussion  of 
purely  academic  problems.  (The  Price  Current- Grain  Reporter,  Juno  19,.  191S,  p.  10).  See  also,  Tlie 
American  Elevator  and  Grain  Trade  (official  organ  of  the  Grain  Dealers’  National  Association)  for  Jidy 
15,  1918,  p.  44:  “Ji  the  council  has  done  anything  to  bring  about  greater  uniformity  or  unity,  the  trade 
has  been  kept  in  ignorance  of  the  deed.” 

Correspondence,  Secretary’s  Office,  Chicago  Board  of  Trade,  Dec.  24,  1915. 


EXCHANGE  RULES  AND  REGULATIONS. 


203 


brokerage,, adjustment  of  claims  and  disputes  at  relatively  low  fees, 
rights  to  official  inspection,  grading  and  weighing  facilities  (where 
such  are  controlled  by  the  exchange),  and  access  to  market  news 
services,  as  well  as  the  general  business  prestige  to  be  acquired. 

Limitation  of  membership. — The  personnel  of  the  exchange  asso¬ 
ciations  is  not  limited  by  rule  to  a  definite  number  of  members,  except 
in  St.  Louis.'^^  Membership  on  most  of*  the  major  exchanges  is  given 
jiractical  limitation  by  the  maintenance  of  initiation  fees  in  excess 
of  the  market  value  of  membership  certificates,  and  in  stock  corpora¬ 
tions  such  as  the  Omaha  exchange  by  the  limited  authorization  of 
stock.  According  to  the  rules  any  iierson  who  can  arrange  to  pur¬ 
chase,  by  transfer,  an  outstanding  certificate,  providing  he  has  a  fair 
business  rating  and  has  not  prejudiced  himself  by  acts  hostile  to  the 
exchange,  can  obtain  membership. 

The  indirect  method  by  which  membership  is  limited  should  bo 
understood.  For  example,  the  membership  of  the  Minneapolis 
Chamber  of  Commerce  was,  prior  to  1914,  limited  by  rule  to  550. 
The  limitation  was  removed  in  that  year  admittedly-because  of  allega¬ 
tions  to  the  effect  that  the  exchange  was  a  close  corporation  or  trust. 
The  directory  then  adopted  the  method  of  charging  an  excessive  fee 
for  an  additional  membership  certificate.  Since  the  average  market 
price  for  memberships  had  never  exceeded  S4,000  it  was  felt  safe  to  set 
the  ^Tnitiation  fee’’  at  $5,000.  As  explained  in  a  letter  by  one  of  the 
vice  presidents  in  1915 — ^^you  will  readily  see  that  there  is  not  much 
likelihood  of  additional  memberships  being  issued.  If  there  was  a 
iikehhood  of  this,  the  price  at  which  the  exchange  would  sell  member¬ 
ships  could  be  raised  from  time  to  time.  ” 

The  same  scheme  is  followed  in  Chicago.  The  minutes  of  the 
Board  of  Trade  show  that  on  August  29,  1916,  the  president  called 
the  attention  of  the  directors  to  the  recent  advance  in  the  value  of 
membership  shares,  suggesting  ah  increase  in  the  initiation  fee.  Ac¬ 
cordingly,  it  was  voted  to  recommend  that  the  fee  be  increased  from 
$10,000  to  $25,000,  and  that  a  proper  amendment  be  posted  for  ballot 
by  the  association.^''’ 

As  shown  in  the  table  below  this  method  is  practiced  by  the  Mil¬ 
waukee,  Duluth,  Kansas  City,  Omaha,  Peoria,  Cincinnati,  and  Toledo 
exchanges. 

In  case  of  Toledo  the  practice  of  progressively  increasing  initiation 
fees  is  disclosed  by  the  rules: 

The  membership  fee  shall  be,  for  the  first  100  members,  $250,  and  for  each  additional 
membership  $500.  Amended  December  28, 1878,  to  $1,000.  Amended  February  21, 
1880,  to  $2,000.  Amended  Decemi^er  10,  1881,  to  $3,000.  Amended  July  15,  1884, 


*'■>  Tho  rule  of  the  St.  Louis  Merchants’  Exchange  providing  for  the  issuance  of  now  certificates  was  repealed 
in  1002.  d‘ho  number  of  inomberships  is  now  limited  to  tho  outstanding  certificates. 

<6  Tho  market  price  of  memberships  in  Chicago  has  never  exceeded  ^11,000. 


204 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


by  striking  out  on  second  and  third  lines  as  follows;  “And  .resident  of  or  perma¬ 
nently  doing  business  in  Toledo.  ” 

Where  a  membership  is  purchased  and  transferred  from  a  living 
member,  a  transfer  fee  is  charged  on  most  exchanges,  which  is  usually 
included  in  the  market  price  quoted  for  such  membership.  The  fol¬ 
lowing  is  a  statement  of  initiation  fees  and  transfer  fees  provided  in 
the  rules: 


Initiation 
fee  for 
additional 
member¬ 
ships. 

Transfer 
fee.  1 

Chicago . 

000  00 

on 

Milwaukee . 

5,000. 00 

7  500  00 

10  oo 

Minneapolis . 

1 no 

^  000  or^ 

PL  on 

Kansas  City . 

W\.f 

15,000.00 
10, 000.  00 
(0 

1  non  nn 

c;no  nn 

Omaha . 

TOO  on 

St.  Louis  2 . 

Kf\(\  no 

ion  niv 

Cincinnati . 

2  .500  00 

Toledo . .  .  . 

^  000  m 

K  no 

Indianapolis  . 

6  20.  00 
100. 00 

8  250. 00 
tin 

0.  UU 

Bullalo^ . 

Philadelphia . 

Baltimore . . . 

1  nn 

New  York . . . 

pLo  f'^n 

V  / 

1  As  required  from  new  members  when  certificate  is  transferred  from  a  retiring  (not  deceased)  member 

2  No  provision  for  issuing  new  certificates.  Membership  can  be  acquired  only  by  transfer 

3  Organized  in  1918. 

*  Stock  company.  ■  ■> 

Per  share. 

*  J500  after  membership  reaches  600.  '  '  '  .  '  '  ' 

f  None. 

'  ■  -  - 

Membership  on  a  grain  exchange,  then,  may  be  acquired  by  a  quali¬ 
fied  applicant  (1)  by  payment  of  an  initiation  fee  or  (2)  by  purchase 
and  transfer  of  an  outstanding  certificate  and  payment  of  the  trans¬ 
fer  fee;  the  latter  is  the  more  frequent  procedure. 

Before  a  transfer  can  be  effected,  the  membership  certificate  of 
the  record  holder  must  be  free  of  assessments  and  unencumbered 
t>.y  any  unsettled  claims  or  controversies  in  which  exchange  members 
are  interested.  Such  outstanding  charges  must  be  met  either  by 
the  holder  (or  his  estate)  or  by  the  purchaser  of  the  membership 
at  the  time  of  transfer.  Due  time  is  allowed  for  filing  such  claims 
and  after  the  transfer  is  made  no  claim 'or  demand  is  allowed  to 
impair  such  a  membership  in  the  hands  of  an  innocent  transferee. 

On  four  of  the  exchanges  no  fee  is  required  for  the  transfer  of  an 
unencumbered  membership  left  by  a  deceased  member  when  trans¬ 
ferred  by  his  legal  representatives.^^ 

In  Minneapolis  and  Milwaukee  no  fee  is  charged  for  a  transfer 
between  members/*  These  provisions  for  free  transfers  between 
members  recognize  a  traffic  in  memberships  on  the  exchange.  Most 

Chi.,  10:2:  Mil.  (exception,  fee  ol  $10  required);  Mpis.,  12:4;  K.C.,R.  6;  Oma.,  3:2b:  Peo.,  (exception  ' 
lee  required).  ’  * 

^Mpls.,  12:4;  Mil.  12:7. 


EXCHANGE  RULES  AND  REGULATIONS. 


205 


of  the  exchanges  do  not  prohibit  a  member  from  acquiring  more  than 
one  membei*ship  certificate  (although  hut  one  vote  can  be  acquired 
except  m  a  stock  corporation).  In  Milwaukee  such  a  right  is  specifi¬ 
cally  recognized  in  the  rules,  with  the  restriction  that  the  purchaser 
of  such ‘^add  it  ion  al  membership’’  *  *  *  shall  acquire  *  *  * 

no  further  or  greater  rights  or  privileges  in  this  association.” 
Additional  memberships  are,  of  course,  subject  to  all  charges,  dues, 
and  assessments;  and,  furthermore,  the  Milwaukee  rules  distinguish 
sharply  between  such  “additional  memberships”  and  the  “primary 
membership”  to  the  effect  that  in  case  a  primary  membership  is  for¬ 
feited  or  offered  for  sale  “any  and  all  additional  memberships  held 
by  him  shall  at  the  same  time  be  likewise  forfeited  or  offered  for  sale” ; 
and  further  that  “  the  redisposition  of  or  trading  or  dealing  in  such 


additional  memberships  by  any  member  of  this  association  shall  in 
nowise  affect  the  primary  membership  of  such  member  except  in 
case  such  additional  certificate  shall  be  the  subject  matter  of  any 

trade  or  contract  in  violation  of  any  of  the  rules  or  by-laws  *  * 

In  Minneapolis,  as  a  further  example,  there  is  no  rule  with  regard 
to  the  number  of  memberships  which  a  member  may  hold,  although 
an  additional  membership  does  not  give  the  holder  additional  privi¬ 
leges,  and  a  member  is  required  to  pay  dues  on  all  the  certificates 
standing  in  his  name.  In  the  words  of  the  secretary: 


We  simply  refer  to  them  by  number,  i.  e.,  membership  certificate  No.  1,  No.  2,  No.  3, 
etc.,  and  when  transfers  are  made  the  notice  on  the  bulletin  board  and  the  circulars 
sent  to  members  specify  the  membership  certificates  being  transferred.  *  * 

We  have  15  or  20  individuals  now  holding  more  than  one  certificate  of  membership 
under  their  o^vn  name. 

Requirements  for  admission. — The  requirements  for  admission 
follow  the  usual  scheme  of  club  membership.  The  applicant  is  re¬ 
quired  (1)  to  satisfy  the  membership  committee  as  to  his  character 
and  credit  rating,  (2)  to  make  written  application  indorsed  by  two 
members,  (3)  to  have  his  application  posted  (usually  for  10  days)  on 
the  bulletin  of  the  exchange  in  order  to  allow  the  filing  of  any  objec¬ 
tions  and  unsatisfied  claims  against  the  membership  certificate,  and 
(4)  to  subscribe  to  the  articles,  by-laws,  rules,  and  regulations  of  the 
association.^® 

Applicants  are  commonly  admitted  by  vote  of  the  board  of  direc¬ 
tors,  in  most  cases  by  an  extraordinary  majority."'  Duluth  is  ex- 

«  Mil.,  12:7;  also  Pliila.,  by-laws,  art.  1,  sec.  4;  also,  Balto.,  art.  3,  sec.  4. 

5®  Chi.,  10:1;  Mil.,  12:2  (indorsemeut  by  1  member);  Mpls.,  12:2;  Dul.,9:2;  K.  C.,  6:1;  Oma.,  p.  16;  St.  L., 
13:1:  Peo.,  12:1:  Balto.,  Art.  II;  Phila.  (proposed  by  membership  committee),  Art.,  11:2;  Tol.,  10:1;  Ind. 
and  Buf.,  approved  stockholders  issued  trailing  permits;  N.  \  by-1.,  sec.  3. 

Chi.,  3  negative  votes  reject;  Mil.,  3  negative  votes  of  directors  or  objections  filed  by  7  members  may 
reject;  Mpls.,  requires  a  majority  vote  of  membership  committeeand  at  least  7  affirmative  votes  of  directors; 
K.C.,  10  directors  present  and  8  voting  in  affirmative;  Oma.,  6  affirmative  votes;  St.  L.,  “upon  the  approval 
of  the  board”;  Peo.,  8  affirmative  votes;  Tol.  requires  9  affirmative  votes;  Balto.,  two-thirds  of  directors 
present;  Phila.,  majority;  N.  Y.,  majority. 


X 


206 


TERMINAL  GRAIN  AIARKETS  AND  EXCHANGES. 


ceptional  in  that  the  applicant  must  be  acceptable  to  a  majority  of 
the  directors  and  must  be  elected  by  ballot  ''at  a  meeting  of  the  asso¬ 
ciation  at  which  not  less  than  15  members  shall  be  present  and  vote.^^ 

Assessments  on  memberships. — ^Assessments  upon  members 
must  be  paid  when  levied,  and  continued  delinc|uency  forfeits  mem¬ 
bership.^^  The  rules  of  the  major  exchanges  are  almost  identical  on 
this  subject.  It  is  usually  provided  that  a  member  be  suspended 
after  one  month’s  dehnquency  and  automatically  expelled  after  a 
year’s  continuous  failm’e  to  pay.  The  Chicago  rules  require  that — 

when  the  annual  assessment  is  made,  it  shall  be  considered  due,  and  any  member 
neglecting  or  refusing  to  pay  the  same  within  30  days  thereafter,  may  be  excluded 
from  the  rooms  of  the  association  until  such  assessment  is  paid.  And  in  case  of  the 
failure  of  any  member  to  pay  the  annual  assessment  during  the  whole  of  any  fiscal 
year  of  the  association  (said  fiscal  year  beginning  and  closing  with  the  day  of  the 
regular  annual  election)  such  failure  shall  of  itself  operate  as  a  forfeiture  and  cancella¬ 
tion  of  the  membership  of  such  member  and  of  all  rights  and  privileges  thereunder. 
*  *  "  Payment  of  annual  assessments  by  a  member  while  under  suspension  shall 
not  be  construed  as  in  any  way  affecting  such  suspension.®^ 

Ill  Duluth  a  membership  is  forfeited  for  a  year’s  delinquency  in 
paying  assessments  only  after  a  formal  complaint,  summons,  and 
hearing  before  the  board  of  directors. 

The  Indianapolis  Board  of  Trade  allows  only  30  days’  delinquency 
on  an  assessment,  or  on  an  award  in  arbitration,  whereupon  the 
member  is  to  be  formally  warned  by  the  secretary. 

• 

*  *  *  and  if  the  amount  so  in  default  shall  not  within  ten  (10)  days  from  the 
date  of  such  warning  be  fully  paid,  the  membership  shall,  by  reason  of  such  failure, 
at  the  expiration  of  such  ten  (10)  days  lapse  and  revert  to  the  association  and  this  com¬ 
mon  stock  shall  be  disposed  of  *  *  *. 


Firm  and  corporation  memberships.— Firms  and  corporations 
may  be  considered  as  members  for  trading  purposes  on  the  exchanges 
providing  they  arc  represented  in  the  personnel  of  the  exchange  by 
one  or  more  bona  fide  firm  heads  or  executive  officers  who  are  certifi¬ 
cate  holders.  The  primary  object  of  firm  and  corporation  member¬ 
ship  is  to  obtain  members’  commission  rates.  Since  membership 
certificates  are  granted  to  individuals  only  on  these  exchanges,  firms 


!>-  Also  provides  “if  not  more  than  25  per  cent  of  i  lie  total  number  ofballots  cast  appear  against  him.’' 

63  A  member  suspended  from  the  Chicago  Board  of  Trade  for  10  years  filed  a  mandamus  suit  against  the 
Ijoard  (1904)  “  to  secure  restoration  to  membership  upon  the  ground  that  he  was  under  no  obligation  to  pay 
dues  while  suspended,  and  also  upon  the  ground  that  he  was  under  no  obligation  to  pay  dues  while  sus¬ 
pended,  and  also  upon  the  ground  that  the  by-law,  by  which  nonpayment  of  dues  operates  ipso  facto  to 
terminate  a  membership,  v/as  illegal  because  not  providing  for  notice  to  the  defaulting  member  and  hear¬ 
ing.”  The  Circuit  Court  sustained  the  by-law  in  question.  (Annual  Report,  Chi.  Bd.  of  Tr.  for  1901,  p. 

-M. hi., ^10:3;  Mil.,  12:3;  Mpis.,  12:5;  K.  C.,  6:1G;  Oma.,  1:17  (not  canceled  until  delinquent  2  years). 
k.t.  L.,  lo:G;  Bco.,  12:4;  Balto.,  art.  3,  sec.  3  and  art.  4,  sec.  1  (excluded  from  chamber  after  20  days’  for¬ 
feiture  after  3  years’  arrears).  N.  Y,,  by-laws,  see.  2i  (suspension  after  5  days  arrears;  forfeiture  after 
3  months). 

^>5  Dul.,  9:9. 

66  Ind.,  Art.  9. 


EXCHANGE  KULES  AND  REGULATIONS. 


207 


and  corporations  are  required  to  show  in  the  case  of  individuals 
representing  them  that  the  business  relations  with  such  persons 
were  not  created  solely  to  obtain  members’  rates,  and  that  such 
representatives  own  a  substantial  financial  interest  in  the  concern. 

The  Minneapolis  rule  recites  that  such  a  firm  or  corporation  having 
formally  agreed  to  abide  by  the  Rules,  regulations,  usages  and 
customs  governing  the  members”  shall  be  ‘^deemed  a  member  of 
said  association  in  respect  to  and  for^the  purpose  of  all  trades, 
contracts,  or  transactions  made  in  its  behalf  on  the  floor  of  the 
chamber.  *  * 

The  general  principle  that  a  corporation’s  representative  trading 
on  the  exchange  assumes  liability  for  acts  of  the  corporate  body  is 
specifically  set  forth  in  the  rules  of  two  exchanges  as  follows : 

He  shall  be  liable  for  the  performance  of  all  the  duties,  contracts,  debts  and  trans¬ 
actions  of  such  firm  or  corporation,  made  upon  said  board,  or  by  virtue  of  its  mem¬ 
bership  therein,  in  the  same  manner  as  ff  they  were  his  own  acts,  contracts,  debts  or 
transactions  *  * 

The  rules  generally  prohibit  one  member  from  representing  more 
than  one  concern  whether  firm  or  corporation. 

The  origin  of  this  rule  in  Chicago  (1901)  is  described  in  Taylor’s 
History  of  the  Board  of  Trade  (Tol.  II,  p.  1021) : 

^^On  June  17  a  number  of  amendments  to  the  commission  rule 
were  voted  upon  and  carried  by  a  vote  of  524  to  10.  These  amend¬ 
ments  were  calculated  to  stop  evasions  of  the  rules  by  brokers  who 
made  a  practice  of  buying  one  or  two  shares  of  stock  in  a  corpora¬ 
tion  and  secured  their  election  to  an  executive  office  for  the  sole  pur¬ 
pose  of  taking  advantage  of  membership  rates.  Under  the  new 
amendments  a  corporation  could  be*  represented  on  the  exchange  by 
but  one  member  *  * 

Liens  on  membership  certificates.— It  is  recognized,  expressly 
or  by  implication,  in  exchange  regulations  that  a  claim  against  a 
member  becomes  a  lien  upon  his  membership  certificate. For  ex¬ 
ample,  the  Minneapolis  rules  provide  that — 

any  member  of  tliis  association  to  whom  another  member  is  indebted  upon  any  claim, 
demand,  or  transaction  arising  from  or  entered  into  by  virtue  of  membership  in  this 
association  shall  have  a  lien  upon  the  membership  of  such  debtor,  and  also  on  all 
membersliips  the  purchase  price  of  which  has  been  paid  by  such  debtor  for  the  amount 
of  such  claim,  demand,  or  indebtedness,  which  lien  may  be  enforced  at  any  time 
after  the  expiration  of  00  days  (except  in  the  case  of  expelled  members,  sec.  23,  Rule 
IV)  after  such  claim,  demand,  or  indebtedness  became  due  and  payable  by  a  sale 
of  said  membership  by  the  secretary  of  this  association. 

6T  Chi.,  14:8;  Mpis.,  12;12;  Dul.,  9:9;  K.C.  G;14;  Oma.,  8:9  (G).  None  of  the  exchanges  forbid  a  member 
from  trading  in  the  name  of  his  company. 

Dul., 9:9;  Oma., 1:16.  Cf.  Ballo.,art.  3,  sec.  4,  where  member  corporation  may  be  held  responsible  for 
acts  of  a  representative. 

59 Chi.,  14:S;  K.  C.,  G:ll;  Oma.,  8:9;  (G);  b't.  L.,  13:3;  I’hila.,  art.  2:2;  Baito.,  by-laws,  1:1;  Indpls., 
by-laws,  10:3. 

See  Dul.  9  : 12;  Mpls.  12 : 14;  K.  C  G :  17. 


208 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


Before  such  membership  may  be  sold  to  satisfy  a  lien  the  member 
is  allowed  a  hearing  on  the  claims  before  the  board  of  directors.  The 
rights  of  claimants  (in  Minneapolis)  are  further  protected  by  the 
restriction  that — 


Neither  the  discharge  in  bankruptcy  of  such  debtor  from  the  legal  obligation  of  such 
claim,  demand,  or  indebtedness,  nor  the  statute  of  limitations,  shall  impair ‘or  pre¬ 
clude  the  right  to  enforce  such  lien;  nor  shall  they,  or  either  of  them,  impair  the 
light  to  interpose  objection  to  the  transfer  of  a  membership  on  account  of  any  claim, 
demand,  or  indebtedness  affected  thereby. 

In  Kansas  City  this  light  is  restricted  from  abuse  by  setting  a 
lime  limit: 

No  claim  against  any  member  shall  constitute  a  lien  against  his  membership  unless 
it  be  filed  with  the  secretary  within  (>0  days  of  the  date  of  the  transaction  governed 
by  these  rules  and  regulations  from  wdiich  arose  the  liability  upon  which  the  claim 
is  founded,  and,  if  such  claim  be  not  acknowledged  to  be  correct  and  due,  unless  the 
claimant  bring  arbitration  proceedings  thereon  within  said  60  days. 

The  Omaha  rules  attempt  to  enhance  the  standing  of  exchange 
members  and  to  retain  control  of  the  stock  of  the  corporation  by  a 
specific  prohibition  against  encumbering  a  membership  in  any  way: 

Any  member  who  shall  pledge,  mortgage,  or  encumber  his  membership  in  the  ex¬ 
change  as  security  or  otherwise  shall,  upon  notice  of  the  same  being  brought  to  the 
attention  of  the  board  of  directors  of  the  exchange,  be  suspended  from  the  exchange, 
and  shall  remain  suspended  until  such  encumbrance,  mortgage,  or  pledge  has  been 
removed.®^  • 


Likewise,  in  Chicago  the  duty  is  imposed  upon  each  member  to 
maintain  his  financial  integrity: 


When  any  member  of  this  association,  knowing  himself,  or  the  firm  in  which  he  is 
a  partner,  or  the  corporation  of  wdiich  he^  is  an  executive  officer,  to  be  in  an  insolvent 
condition,  shall  make  any  contract  on  his  own  account,  or  on  account  of  such  firm  or 
corporation,  under  the  rules  of  this  association,  whereby  pecuniary  loss  shall  result 
to  any  other  .member,  or  to  any  firm  or  corporation  entitled  to  transact  business  on 
this  exchange,  he  shall  be  suspended  or  expelled,  at  the  discretion  of  the  board  of 
directors. 


The  secretary  of  the  Chicago  Board  of  Trade  reports  that— 


The  rules  of  the  board  now  (since  1917)  do  not  contemplate  the  issuance  of  member¬ 
ship  certificates.  When  a  member  is  expelled  and  is  indebted  to  other  members, 
the  membersnip  expires  and  ceases  to  have  any  value.  It  does  not  remain  as  an  asset 
for  the  satisfaction  of  claims  held  by  other  members,  even  though  siich  other  members 
may  be  adjudged  bankrupts.  In  other  w^ords,  wdien  a  member  of  the  Board  of  Trade 

Rule  1,  sec.  3. 


Rme  4,  sec.^31.  It  was  held  in  Board  of  Trade  of  the  City  of  Chicago  v.  Weston,  243  Fed  Rep  3.32 
(1917),  that  a  m.:>ml>ership  on  the  Chicago  Eoard  of  Trade  was  property  passing  to  a  member’s  tru«=toe  'in 
\.n  .ruptcy.  The  court  cited  the  rules  ofthc  board  with  regard  to  the  admission  of  members  anl  tranT('r 
of  mrmiiorships  (rule  4,  .sec.  7.  and  rule  10,  secs.  1  and  2, 1917),  ani  "  IkU,  that  a  membership  in  such  baird 
of  tra  io,  having  a  value  of  ab.out  .$4,000,  was  property  passing  to  the  member’s  trustee  in  bankruntcy 
nn  ler  bankruptcy  act,  section  70a,  though  other  members  of  the  board  of  trade  held  outstm  lin^  un\  i- 

.lusted,  an  1  unsettled  claims  ag.vinst  him,  aggregatm-i  about  ,$35,000,  an  I  protosteJ  or  objectea  against  the 
transfer  of  his  mem’oership.”  <  &  « 


EXCHANGE  RULES  AND  REGULATIONS. 


209 


is  guilty  of  conduct  requiring  his  expulsion,  he  is  expelled  and  the  value  of  his  mem- 
Ixuship  is  lost  to  him  or  his  trustee  in  bankruptcy. 

Membership  of  a  suspended  member. — Although  the  rules  fail 
to  define  the  status  of  a  suspended  member,  it  seems  clear  from  the 
general  use  of  the  term  that  a  suspended  member  does  not  lose  or 
surrender  any  of  the  rights  incidental  to  the  membership,  but  that 
for  the  time  being  he  can  not  exercise  theni.®^  This  theory  is  con- 
lirmed  by  a  ruling  of  the  directorate  of  the  Chicago  Board  of  Trade 
(July  18,  1915)  that  they  had  no  power  to  reinstate  a  certain  member 
who  was  under  suspension  for  three  years  solely  to  permit  him  to 
sell  Ins  membership. 

Membership  of  an  expelled  member. — There  are  two  theories 
with  regard  to  the  membership  of  an  expelled  member:  (1)  To  con- 
(‘ede  that  he  retains  the  property  rights  in  his  membemhip  (subject  to 
liens)  unaffected  by  the  expulsion;  (2)  to  mle  that  upon  expulsion 
all  rights  and  interests  in  the  membership  are  forfeited  and  the  cer¬ 
tificate  may  be  sold  or  reissued  at  the  will  of  the  association,  i.  e., 
that  the  member  has  no  vested  property  rights  hi  the  certificate. 
The  first  principle  is  followed  hi  the  Minneapolis  and  Duluth  rules, 
where  it  is  provided  that  an  expelled  member  shall  be  allowed  60  days 
after  expulsion  in  which  to  settle  all  claims  held  agahist  him  by 
members, .  and  failing  to  do  this  his  membership  shall  be  sold  and 
‘  ‘  the  proceeds  of  the  sale,  if  there  be  more  than  one  claimant,  shah  be 
])rorated  by  the  secretary,  and  the  remainder,  if  any,  shall  be  paid 
to  the  expelled  member  or  to  his  assign  ^  *  *y’64 

The  second  principle  is  maintained  in  the  rules  of  Kansas  City,. 
Omaha,  and  St.  Louis.®^  The  Kansas  City  rules  provide  that  ^‘when 
a  member  is  expelled  or  becomes  ineligible  for  remstatement,  he  shall 
be  deemed  to  have  surrendered  and  resigned  his  membership  m  this 
body,  and  all  the  privileges  and  property  interests,  if  any,  pertaining 
thereto  and  resulting  therefrom  *  *  *  shall  be  thereby  extin¬ 

guished.” 

The  expelled  member’s  interest  in  his  membership  being  thus 
extmguished,  an  extraordinary  procedure  is  provided  in  Kansas  City 
for  issuing  a  membership  in  place  thereof  and  for  satisfying  any  claims 
filed  against  the  certificate.  It  is  ruled  that  ^^a  new  membership 
may  be  issued  by  the  association  in  the  place  thereof  *  *  *  upon 

such  terms  *  *  *  as  to  price,  as  may  be  determined  by  the  board 

of  directors  by  at  least  eight  affirmative  votes  *  *  The  pre¬ 

ss  A  suspension  does  not  interfere  with  the  offending  meml>er’s  vested  rights  of  property.  See 
Haebler  v.  N.  Y.  Produce  Exchange,  149,  N.  Y.  414. 

(Quotation  from  Mpls.  rule:)  Mpls. — 4:23;  Dul.— 9:13  (substantially  the.  same).  No  provision  in  Mil. 
In  New  York  (by-laws,  see.  21)  a  forfeited  certificate  of  membership  may  be  sold  at  public  auction  and, 
after  charges  and  assessments  due  have  been  deducted,  the  proceeds  are  payable  to  the  original  holder. 

®  K.  C.— 6:10;  Oma.— 1:7;  St.  L.— 4:9.  For  Chicago  practice,  see  previous  page. 

168693*’— 20 - 14 


210 


TERMINAL  GRAIN  INIARKETS  AND  EXCHANGES. 


cccds  of  this  sale  are  to  be  applied  ‘Ho  the  following  purposes  in  the 
folio  whig  order  of  priority:” 

(1)  Payment  of  usual  transfer  fee  plus  all  fines,  dues,  and  assess¬ 
ments  due  agamst  the  expelled  member. 

(2)  Payment  of  claims  filed  by  member  creditors,  or  firms  regis¬ 
tered  in  the  Board  of  Trade,  “provided,  that  if  such  proceeds  shall 
be  insufficient  to  pay  said  claims  as  so  allowed,  in  full,  the  same 
shall  be  applied  to  payment  thereof  pro  rata.” 

(3)  The  payment  (in  full,  or  pro  rata)  “of  judgments  of  the  com¬ 
mittees  of  arbitration  or  appeal  and  of  all  filed  claims  arising,  from 
contracts  subject  to  the  by-laws,  rules,  and  regulations  of  the  board 
of  trade,  if  and  to  the  extent  that  the  same  shall  be  allowed  bv  the 
board  of  directors.” 

(4)  “The  surplus,  if  any,  of  said  proceeds  shall  belong  to  and 
become  the  property  of  the  association.”®® 

The  Omaha  rules  are  far  less  explicit  on  the  subject,  merely  pro¬ 
viding  that  the  board  of  directors  “may  thereafter  sell  such  mem¬ 
bership  at  pubhc  or  private  sale,  after  notice  thereof  has  been  posted 
upon  the  bulletin  of  the  exchange  for  at  least  10  days,”  and  that 
members^  claims  on  the  proceeds  shall  have  prior  consideration  to 
those  of  outside  creditors.®^ 

The  St.  Louis  rules  conform  in  pruiciple  to  those  of  Kansas  City 
and  Omaha,  providing  that  “upon  the  expulsion  of  a  member  all 
rights  under  his  certificate  of  membership  shall  thereby  be  forfeited 
and  annulled.”  ®® 

The  exchanges  at  Buffalo  and  Indianapolis  are  exceptional  in  this 
matter,  since  they  are  stock  companies  which  issue  trading  privileges 
to  nonstockholders  in  the  form  of  a  license  and  not  as  a  contract 
with  the  corporation.®** 

Section  5.  Discipline. 

Subject  matter. — Any  discussion  of  S3^s terns  of  discipline  pro¬ 
vided  in  the  rules  is  closely  related  to  the  question  of  arbitration, 
since  a  dispute  in  arbitration  may,  upon  investigation,  be  found  to 
involve  the  violation  of  a  rule;  and  the  failure  of  a  member  to  abide 
by  an  award  in  arbitration  proceedings  naturally  leads  to  disciplinary 
action.  However,  on  the  highly  organized  exchanges  the  codes  of 
discipline  may  be  considered  apart  and  distinct  from  the  arbritation 
rules,  after  the  analogy  of  the  criminal  laws  as  compared  with  laws 
providing  for  adjustment  of  violations  of  private  or  civil  rights. 

66  K.  C.— 6:11. 

67  Oma.— 1:7. 

63  St.  L.— 4:9.  Also  reported  to  be  the  present  interpretation  of  the  Chicago  rules. 

66  Articles,  Indianapolis  Board  of  Trade,  art.  13:  “Special  members  shall  have  no  legal  or  equitable 
interest  in  the  property  or  moneys  of  the  association,  all  of  which  shall  be  represented  by  and  appertain 
to  the  regular  memberships  held,  and  in  the  common  capital  stock  of  the  association  owned  by  regular 
members  according  to  the  plan  provided  in  these  articles  of  association.” 


EXCHANGE  EULES  AND  HKGULATIONS. 


211 


The  following  practices,  in  addition  to  violations  of  specific  rules, 
are  designated  as  uncommercial  conduct  and  subject  to  discipline: 

'  (1)  Willful  violation  of  a  business  contract.^^ 

(2)  Refusal  to  arbitrate. (See  p.  218.) 

(3)  Refusal  to  comply  with  an  award  in  arbitration.'^^ 

(4)  Making  or  reporting  false  or  fictitious  purchases  or  sales."^^ 

(5)  Acts  of  bad  faith,  attempts  at  extortion,  or  dishonest  conduct.'^^ 

(6)  Contracts  in  violation  of  the  criminal  statutes  of  the  State."^® 

On  none  of  the  exchanges  does  the  enumeration  of  specific  viola¬ 
tions  and  -causes  for  discipline  prevent  the  board  of  directors  from 
hearing  aii}^  complaint  of  commercial  irregularity.  The  Buffalo  by¬ 
laws,  for  example,  include  the  elastic  phrase,  “or  any  other  irregu- 
laritv,’'  in  the  enumeration  of  violations. 

The  exchanges  have  asserted  the  right  to  expel  members  on  grounds 
of  general  policy.  For  example,  on  April  22,  1907,  the  Minneap¬ 
olis  directors  had  before  them  a  circular  letter  of  Schmitt-Howe  & 
Co.  of  Duluth  whereby  this  firm  proposed  to  organize  a  joint  stock 
company  so  that  country  shippers  “would  have  an  interest  m  the 
profits  of  commissions  of  firms  made  bv  them  without  conflictmo^ 
with  the  rules  of  the  exchanges.’’  They  had  outlined  a  plan  of 
increasing  their  capital  stock  to  $125,000  by  means  of  subscriptions 
from  50  or  60  farmers  and  independent  elevators  and  they  had  then 
proposed  to  carry  on  a  much  larger  commission  busmess  at  a  pro¬ 
portionately  smaller  overhead  cost  and  thereby  not  only  increase  the 
earnings  of  the  stock  but  benefit  the  interested  local  elevators. 
This  plan  was  considered  objectionable  by  the  board  of  directors. 
The  commission  firm  was  so  advised,  but  replied  that  they  intended 
to  carry  out  the  scheme.  Thereupon,  September  7,  the  resolution 
recognizing  tliis  firm  as  a  member  of  the  chamber  was  rescinded  and 
they  were  expelled  from  the  membership. 

These  associations  may  discipline  their  members  for  defaults  on 
contracts  which  would  be  unenforceable  at  law  under  the  statute  of 
frauds.  A  formal  opinion  of  Henry  S.  Robbins,  attorney  for  the 


Chi,,  4:9;  Mil.,  4:12;  Mpls.,  4:9;  K,  C.,  8:1;  Oma.,  1:1;  St.  L.,  4:9;  Peo.,  7:8;  Ind.  (by-laws),  10:3;  Tol. 
4:12;  Buf.  (by-laws),  4:9;  Phila.  (by-laws),  25:2;  Balto.  (by-laws),  9:11;  N.  Y.  (by-laws),  see.  32. 

72  Chi.,  4:9;  Mil.,  4:12;  Mpls.,  4:9;  Dul.,  4.-9;  K.  C.,  8:1;  Oma.,  3:2;  St.  L.,  4:9  and  6:6;  Peo.,  9:1;  Ind, 

(Rules  for  Arb.  and  Ap.),  sec.  7;  Phila.  (by-laws),  25:2.  , 

73  Chi.,  4:9;  Mil.,  4:12;  Mpls.,  4:9;  Dul.,  4:9;  K.  C.,  8:1;  Oma.,  1:1  and  3:2;  St.  L.,  4:9;  Peo.,  7:8;  Ind. 
(by-laws),  10:3;  Tol.,  4:12;  Buf.  (by-laws)  4:9. 

71  Chi.,  4:9;  Mil.,  4:10;  Mpls.,  4:7;  Dul.,  4:7;  K.  C.,  8:5  and  10;  Oma.,  1:2;  St.  L.,  4:9;  Peo.,  7:8;  Ind. 
(by-laws),  10:3;  Tol.,  4:12;  Buf.  (by-laws),  4:9;  Balto.,  (by-laws),  7:5.  As  early  as  1885  two  members  of 
the  Minneapolis  Chamber  of  Commerce  were  indefinitely  suspended  for  reporting  prices  in  excess  of  those 
actually  paid  on  purchases  of  wheat. 

7iChi.,  4:9;  Mil.  4:10;  Mpls.,  4:7;  Dul.,  4:7;  K.  C.,  8:2;  Oma.,  1:2;  St.  L.,  4:9;  Peo.,  7:9;  Tol.,  4:12;  Buf. 
(by-laws),  4:9.  “A  board  of  trade  wliich,  though  incorporated,  is  a  mere  voluntary  association,  has  power, 
the  incorporating  act  not  denying  it,  to  provide  by  by-law  for  forfeiture  of  a  membership  for  fraud  of  the 
member  in  securing  his  acceptance  as  a  member;  it  being  reasonable,  and  not  contrary  to  public  policy 
or  the  law  of  the  land.”  (244  Fed.  Rep.,  108.) 

76  Chi.,  4:9;  Mpls.,  4:7  (“  *  *  *  or  if  any  member  shall  be  convicted  in  any  court  of  competent  juris¬ 
diction  of  any  crime  *  *  *”);  St.  L.,  4:9;  Ind.  (by-laws),  10:3. 


212 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


Chicago  Board  of  Trade  (Oct.  26,  1915),  cautions  the  members  to 
ha\'e  their  confirmation  slips  signed  in  order  that  contracts  may  be 
enforceable  by  action  in  the  courts.  He  points  out,  however,  that 
the  Illinois  uniform  sales  act  of  1915  does  not  prevent  the  board  from 
disciplining  a  member  for  failure  to  comply  with  the  terms  of  any 
business  obligation,  and  that  the  board  is  still  warranted  in  sus¬ 
pending  a  member  for  failure  to  fulfill  a  contract  not  so  reduced  to 
writing.” 

Procedltre. — The  administration  of  discipline  and  the  trial  of 
offenders  is  placed  in  the  discretion  of  the  board  of  directors  or  of 
complaint  committees.'^®  It  is  customary,  in  case  a  serious  charge 
is  made,  to  first  conduct  a  preliminary  or  informal  investigation,  in 
most  instances  through  a  committee  of  the  board  of  directors. 

In  Omaha  cases  of  discipline  are  first  heard  before  the  Alleged 
Violation  of  Rules  Committee  and  in  PhiladHphia,  Baltimore,  and 
New  York,  before  the  so-called  complaint  committees.  Appeal 
from  any  of  these  committees  lies  to  the  Board  of  Directors,’®  giving 
the  accused  hearing  before  two  separate  bodies.  If  the  prehminary 
report  confirms  the  charge,  a  formal  hearing  will  be  held  with  op¬ 
portunity  for  the  accused  to  be  heard  in  his  own  defense.  If  found 
guilty,  he  may  be  censured,  fined,  suspended,  or  expelled. 

The  exchanges  uiranimously  provide  a  form  of  trial  with  due  notice 
of  tlie  charges  against  him  and  an  opportunity  to  be  heard.®®  The 
rule  is  identical  in  Chicago,  Minneapolis,  and  Milwaukee,  as  follows: 

It  shall  be  the  duty  of  the  board  of  directors,  in  case  any  grave  offense  or  act  of 
dishonesty  committed  by  any  member  involving  the  good  name  or  dignity  of  the 
association,  or  any  act  of  dishonesty  on  the  part  of  a  member,  shall  come  to  their 
knowledge,  either  by  complaint  or  public  report,  to  chaise  a  preliminary  or  informal 
investigation  to  be  made  by  a  committee  of  their  number  into  the  truth  or  falsity  of 
such  complaint  or  report;  and  if  the  said  committee,  after  investigation,  shall  deem 
any  member  guilty  of  such  offense,  they  shall  so  report  to  the  board  of  directors, 
with  specific  charges;  whereupon  the  member  thus  implicated  shall  be  notified  to 
appear  before  the  board  of  directors  in  manner  as  provided  by  Section  16  of  this 
rule,  and  if  found  guilty  the  said  member  shall  be  suspended  or  expelled,  as  herein¬ 
before  provided.®^ 

As  an  example  of  the  application  of  this  rule,  on  November  19, 
1915,  the  Minneapolis  Directory  referred  a  complaint  (alleging  dis- 


”  See  Green  v.  Board  of  Trade,  174  Ill.,  585,  where  the  court  said:  “As  heretofore  said,  where  such  by¬ 
laws  infringe  no  public  policy  or  rule  of  law,  and  are  not  unreasonable,  courts  will  never  interfere  to 
control  their  enforcement,  but  such  corporations  or  associations  will  be  left  to  enforce  their  rules  and 
regulations  in  the  manner  they  have  adopted  for  their  own  government  and  methods  of  discipline.” 

4:9;  Mil.,  4:10-12;  Mpls.,  4:7;  Dul.,  4:7;  K.  C.,  8:7;  St.  L.,-4:9,  p.  12;  Ind.,  Sec.  35;  Tol.,  4:12,13,14; 
Buf.  (by-laws),  Art.  4,  Sec.  9;  Cin.,  no  provision;  Peo.,  7:8;  Phila.  (by-laws).  Art.  25.  See  also,  17  Cyc., 
857,  note  46  and  cases  cited. 


Oma.,  1:7;  Balto.  (by-laws).  Art.  9,  Sec.  11;  Phila.,  Art.  25,  Sec.  2;  N.  Y.  (by-laws),  32. 

^0  Chi.,  4:18;  Mil.,  4:17;  substantially  the  same  in  Dul.,  4:12;  K.  C.,  8:6-7;  Oma.,  1:7-13;  St.  L.,  4:9;  Peo., 
7:10;  Cin.,  no  provision;  Tol.,  4:18;  Phila.,  Art.  25,  Sec.  2;  N.  Y.,  (by-laws).  Sec.  32;  Balto.,  7:5. 

«  Sections  cited  above. 


EXCHANGE  EULKS  AND  REGULATIONS.  213 

iumest  conduct  of  ii  member)  to  the  Committee  of  Investigation  with 
instructions  to  go  to  the  books  of  tlie  parties  implicated. 

On  most  of  the  exchanges  the  directors  make  final  disposition  of 
cases  of  disciphne  and  prescribe  penalties.  In  Peoria,  however  — 

*  *  *  no  vote  of  said  board  of  directors  expelling  a  member  shall  be  of  any  effect 
until  the  same  shall  have  been  sii])mitted  to  a  meeting  of  the  association  called  for 
that  purpose  and  shall  be  approved  by  a  majority  of  the  members  present  (the  numljer 
being  not  less  than  25),  the  vote  being  taken  by  ballot.®^ 

To  expel  a  member  an  extraordinary  majority  of  the  board  of 
directors  is  usually  required, and  on  some  exchanges  the  same  is 
true  of  suspension.*' 

Trial  procedure. — The  procedure  to  be  followed  in  trials  before 
a  board  of  directors  or  disciplinary  committee  of  the  exchange  is  not 
usually  stated  in  the  general  rules.  The  follomng  provisions  (Cin¬ 
cinnati)**  may  be  considered  typical,  however,  of  the  practice  gen¬ 
erally  followed  by  the  exchanges  in  trials  of  this  nature: 

RULES  FOR  THIS  MANAGEMENT  OF  TRIALS  BEFORE  THE  BOARD. 

Rule  1,  No  trial  before  the  board  shall  be  proceeded  with  in  the  absence  of  either 
party,  until  after  proof  of  sciA  ice  of  notice,  by  the  secretary  or  an  employee  of  this 
company,  personally,  or  at  the  place  of  business  of  the  party,  or  by  mail  to  his  last 
known  residence,  if  he  has  no  place  of  business  in  Cincinnati.  Unavoidable  absence 
from  the  city,  sickness,  or  the  absence  of  material  witnesses  shall  be  considered,  at. 
the  discretion  of  the  board,  cause  for  adjournment  of  trial. 

Rule  2,  The  trial  shall  be  opened  by  a  verbal  or  written  statement  of  the  case  by 
the  complainant,  and  shall  be  followed  by  a  verlml  or  written  statement  by  the 
respondent.  Interruptions  shall  not  be  permitted. 

Rule  3.  All  testimony  introduced  in  trials  before  the  board  shall  be  under  oath; 
to  be  administered  by  a  judge  or  justice  of  the  peace  of  the  County  of  Hamilton,  State 
of  Ohio,  or  other  officer  authorized,  or  to  be  authorized,  to  administer  oaths  in  such 
cases. 

Rule  4.  All  questions  as  to  the  relevancy  or  admissibility  of  testimony  shall  be 
decided  by  the  presiding  officer.  The  party  against  whom  the  question  of  evidence 
is  decided  shall  have  the  right  of  apiDeal  to  the  board  trying  the  case. 

Rule  5.  All  interrogatories  by  contestants  shall  be  put  by  only  one  person  on 
each  side  unless  by  consent  of  the  board. 

Rule  6.  The  order  of  testimony  shall  be  as  follows; 

I.  The  evidence  for  the  complainant. 

II.  The  evidence  for  the  respondent. 

Minutes  of  Minneapolis  board  of  directors. 

Peo.,  7:10. 

•"t  Chi.  (4:9),  an  affirmative  vote  of  at  least  12  members;  Mpls.  (4:8),  two-thirds  vote  of  directors  present, 
l.Hit  in  every  case  at  least  7  affinnative  votes;  Mil.  (4:11)  and  Dul.  (4:12),  same  language  as  Mpls.  except 
6  affirmative  votes  required  as  minimum;  K.  C.  (5:6),  affirmative  ballots  of  9  directors  required  to  expel; 
Bt.  L.  (4:9),  affirmative  votes  of  9  directors  required  to  expel;  Ind.  (Art.  10,  See.  3),  “the  Governing  Com¬ 
mittee  shall  have  power  to  reprimand,  suspend,  or  expel  such  member  by  a  two-thirds  vote”  of  a  quorum 
of  the  committee;  Buf.  (By-law  4,  Sec.  9),  affirmative  vote  of  5  directors  required  to  expel;  Phila.  (By¬ 
law  25,  Sec.  2),  majority  of  directors  present  is  sufficient;  N.  Y.  (by-laws.  Sec.  32),  two-thirds  vote  of 
members  of  Complaint  Committee  present  required  to  censure,  suspend,  or  expel. 

85  Mpls.,  4:8;  Dul.,  4:12;  N.  Y.  (bjMaws  Sec.  32).  These  rules  are  the  same  for  both  suspension  and 
expulsion. 

8*  By-law  13. 


214 


TErxMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


III.  The  evidence  for  the  complainant  in  regard  to  new  matter  presented  in  the 
evidence  for  the  respondent. 

The  evidence  shall  then  close,  exce])!  that  it  may  be  reopened  in  the  interest  of 
justice,  by  vote  of  the  board. 

Rule  7.  The  cross-examination  of  witnesses  need  not  be  confined  to  matters  testified 
to  in  the  direct  examination,  but  can  be  extended  to  any  matters  necessary  to  make 
out  the  case  of  the  party  making  the  cross-examination. 

Rule  8.  The  reexamination  in  chief  shall  be  strictly  confined  to  new  matter  intro¬ 
duced  in  the  cross-examination. 

Rule  9.  Witnesses  will  only  be  permitted  to  testify  as  to  facts  within  their  own 
personal  knowledge,  and  can  not  be  allowed  to  state  information  given  them  by  others. 

Rule  10.  The  testimony  must  be  confined  to  the  matters  in  controversy,  and  all 
irrelevant  facts  must  be  excluded. 

Rule  11.  Whenever  books  of  accounts  require  any  extended  examination,  or 
the  papers  presented  are  voluminous,  the  board  may  refer  the  matter  to  one  of  their 
number,  or  to  an  accountant,  for  examination  and  report. 

Rule  12.  Whenever  the  genuineness  of  the  signature  of  any  material  paper 
presented  in  evidence,  is  contested  the  board  shall  dismiss  the  case,  unless  both 
litigant  parties  shall  agree  to  a  final  decision  without  reference  to  the  question  of  the 
genuineness  of  the  signature. 

Rule  13.  Proof  of  agency  must  be  established  before  the  admissions  of  an  agent 
can  be  received. 

Rule  14.  The  board  reserves  the  right  to  dismiss  any  case  where  the  conflict  in 
the  testimony  is  such  that  it  may  be  deemed  improper  to  proceed  to  give  a  decision. 

Rule  15.  In  trials  or  investigations  before  the  board  of  directors,  arbitrators  or 
committee  on  arbitration,  or  any  other  committee  of  tlie  compa,ny,  no  party  shall 
bo  allowed  to  be  represented  by  an  attorney  at  law. 

Suspension,  expulsion,  and  reinstatement. — On  most  of  the 
exchanges  a  suspended  member  is  automatically  reinstated  upon  the 
expiration  of  the  period  of  suspension  unless  suspended  indefinitely  or 
conditionally;  in  which  case  positive  action  of  the  board  of  directors 
is  required  for  reinstatement.  In  the  latter  case  a  majority  vote  of 
a  quorum  of  the  board  is  required  to  reinstate  and  the  directors  may 
attach  further  conditions  to  such  reinstatement.®^ 

Most  frequently  suspension  is  for  a  definite  period.  As  illustration, 
on  January  27,  1914,  a  member  of  the  Kansas  City  Board  of  Trade 
was  suspended  for  10  days  by  a  7  to  6  vote  of  the  directors  on  the 
charge  of  selling  No.  3  corn  as  No.  2.  To  consider  a  more  serious 

Chi.,  4:14;  Mil.,  4:16;  Mpls.,  4:12;  Dul.,  4:16  (Mil.,  Mpls.,  and  Dul.,  “such  reinstatement  may  be  made 
to  depend  *  *  upon  such  conditions  to  bo  observed  and  performed  by  the  suspended  member  as 
the  board  of  directors,  by  a  vote  as  aforesaid,  may  sec  fit  to  prescribe. St.  L.,  4:9;  Peo.,  7:18  (the  Peoria 
rule  on  reinstatement  may  be  considered  as  typical  of  the  attitude  of  the  exchanges  on  the  matter): 

“Any  member  suspended  may  bo  reinstated  bj'  a  majority  vote  of  the  whole  board  of  directors.  Appli¬ 
cation  lor  relief  from  suspension  must  be  made  to  the  board  of  directors  in  writing  by  the  party  suspended. 
Notice  of  the  application  shall  be  posted  upon  the  bulletin  of  the  exchange  for  at  least  one  week  previous 
to  any  such  hearing  by  the  board  of  directors,  when  if  no  other  just  claims  be  filed  against  such  applicant, 
he  may  be  reinstated;  and  if  the  board  of  directors  shall  be  satisfied  that  his  failure  was  mere!}’  from  financial 
inability  or  misfortune,  such  member  having  given  satisfactory  evidence  that  he  has  adjusted  or  settled 
such  outstanding  obligations,  shall  be  reinstated,  and  such  reinstatement  in  either  case  shall  thereafter 
serve  a.s  a  bar  to  any  further  discipline  by  the  association  on  account  of  any  claims  maturing  at  a  date  prior 
to  the  reinstatement  of  such  applicant.” 

Cin.,  no  provision;  Peo.,  4:15;  Buf.  (by-laws),  4:13;  Phila.  (by-laws),  25:4  (by  majority  vote  of  board). 
InJ.  and  Balto.  have  no  provisions  for  reinstatement  after  suspension;  N.  Y.  (by-!hws),  section  35  (by 
majority  vote  of  board  of  managers). 


EXCHANGE  RULES  AXD  EEGULATIOKS. 


215 


offcnsc;  on  July  11,  1916,  a  member  of  the  Chicago  Board  of  Trade 
was  suspended  from  aU  privileges  of  the  board  for  a  period  of  two 
years  on  the  charge  of  accepting  and  clearing  a  future  trade  for  ac¬ 
count  of  an  employee  of  Logan  &  Bryan,  the  latter  firm  being  a  party 
to  the  trade. 

Suspension. — ^The  Kansas  City  rules  make  it  possible  for  any 
member  with  a  valid  objection  to  prevent  the  readmission  of  a  sus¬ 
pended  member.  The  suspended  member  is  required  to  adjust  and 
settle  aU  outstanding  claims  held  by  members  against  him  before 
his  application  for  relief  from  suspension  wiU  be  entertained.  Then, 
after  the  application  has  been  posted  for  10  days,  ^‘if  no  objection  to 
his  reinstatement  be  made  the  applicant  may  be  reinstated  by  the 
board  of  directors.”  Omaha  adds  to  this  the  provision  ^‘that  if  it 
appear,  in  any  case,  that  the  suspension  was  due  to  mere  financial 
inability  to  meet  his  obligations,  and  not  to  any  unwillingness  to 
do  so,  he  shall  be  so  reinstated  by  the  board  of  directors.” 

The  Minneapolis  and  Duluth  rules  post  a  suspended  member  under 
authority  of  the  following  provision ; 

Any  member  suspended  by  tbe  board  of  directors  shall  not  be  allowed  to  trade  Upon 
the  floor  of  the  exchange,  either  personally  or  through  a  broker  or  employee.  Any 
member  of  the  association  trading  or  offering  to  trade  either  as  a  broker  or  employee 
in  the  name  of  a  suspended  member  shall  be  considered  as  having  \iolated  a  rule  of 
the  association,  and  shall  be  liable  to  discipline  therefor,  as  in  these  rules 
provided. 

Expulsion. — ^It  is  required  by  the  rules  of  12  exchanges  that  an 
exjDeUed  member  may  not  be  readmitted  except  as  a  new  member 
and  general  approval  by  an  extraordinary  vote  of  the  board  of  direc¬ 
tors  is  required.®^  Omaha  requires  that  an  expelled  member  be  ad¬ 
mitted  only  as  a  new  applicant  ^^and  not  then  until  he  shall  have 
fuUy  purged  himself  of  the  offenses  for  which  he  was  expelled.” 

In  Chicago  this  rule  has  been  materially  altered  by  construction. 
In  1914  an  expelled  member  was  petitioning  for  reinstatement  and 
it  was  insisted  before  the  board  of  directors  that  the  framers  of  the 
rule  intended  that  an  expelled  member  might  be  reinstated  only 
upon  the  payment  of  the  regular  initiation  fee  and  annual  assessment, 
and  that  he  could  not  be  reinstated  through  the  mere  purchase  and 
transfer  of  an  unimpaired  membership  certificate.  Yet  the  counsel 
to  the  board  advised  otherwise.  He  pointed  out  that  the  rule  had 
on  a  previous  occasion  been  construed  to  permit  an  applicant  to  ten- 

88  K.  C.,  8:10. 

89  Oma.,  1:9. 

80  Dul.,  4:15;  Mpls.,  4:23;  idem.  Ind.  (rules  of  the  grain  trade),  section  34:12. 

91  Chi.,  4:15;  Mil.,  4:17;  Mpls.,  4:14;  Dul.,  4:17;  K,  C.,  8:10;  Oma.,  1:9;  St.  L.,  4:9;  Peo.,  7:19  (Peoria  similar 
to  Chicago):  Ind.  (by-laws,  10:3;  Tol.,  4:10;  Buf.  (by-laws),  4:13;  Phila  (by-laws),  25:1  (Philadelphia  offers  a 
slight  exception  again  in  the  provision  that,  ‘‘he  (the  expelled  member)  may  appeal  in  writing  to  the 
exchange,  and,  at  a  special  meeting  called  for  the  purpose,  be  reinstated  by  an  affirmative  vote  of  two-thirds 
of  the  members  present.”):  Balto.,  no  provision;  N.  Y.  (by-laws),  section  35,  three-fourths  vote  of  board  of 
managers  required. 


216 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


(ler  ail  unimpaired  membership  in  lieu  of  the  initiation  fee.  He 
stated  further  that  when  this  rule  was  first  adopted  there  was  probably 
little  dilference  between  the  value  of  a  membership  and  the  initiation 
fee  (the  latter  then  not  exceeding  $1,000);  and  that  it  had  been  felt 
by  later  boards  of  directors  that  to  require  an  expelled  member  to 
pay  the  $10,000  (now  $25,000)  fee  would  be  prohibitive  except  to 
rich  members. 

In  answer  to  this,  one  of  the  directors  stated  that  in  1913  it  was 
proposed  to  amend  the  rule  so  as  to  allow  reinstatement  by  presen¬ 
tation  of  a  transferred  membership  and  that  this  was  voted  down. 
He  considered  this  to  be  the  latest  interpretation  of  the  section, 
irrespective  of  earlier  precedents.  vSince  the  expelled  member  in 
question  was  not  approved  for  reinstatement  no  definite  ruling  on 
this  point  exists  at  this  time. 

Blacklisting  nonmembers. — On  the  part  of  several  exchanges 
there  has  been  an  effort  to  regulate  the  conduct  of  nonmembers. 
Under  the  rules  nonmembers  may  be  blacklisted  for  delinquencies 
resulting  out  of  transactions  had  with  or  through  members  of  the  ex¬ 
changes  in  vSt.  Louis,  Duluth,  Buffalo,  Baltimore,  and  New  York  in 
substantially  identical  provisions.  The  rule  applies  to — 

any  corporation,  firm  or  individual  not  a  member *  *  *  *  who  shall  be  accused 
of  any  proceedings  inconsistent  with  just  and  equitable  principles  of  trade,  or  who 
has  failed  to  comply  promptly  with  any  contract,  either  verbal  or  written,  in  relation 
to  a  transaction  had  through  or  with  any  member  of  this  association,  or  who  has  neg- " 
lected  or  refused  to  comply  promptly  with  the  award  of  any  board  of  arbitration  or 
board  of  appeals  rendered  in  conformity  wdth  the  rules  or  regulations  of  the  association. 

*  *  *  If ,  in  the  opinion  of  the  directors,  the  chai’ge  or  charges  against  the  accused 
shall  be  substantiated,  the  directors  may,  by  a  vote  of  not  less  than  two- thirds  of  all 
the  members  present,  prohibit  the  accused  representation  on  the  floor  of  the  exchange; 
and  any  member  of  the  association  who  shall,  with  knowledge  of  such  prohibition, 
or  after  notice  of  such  proliibition  shall  have  been  posted  on  the  bulletin  five  days, 
represent,  or  transact  business  for  or  on  behalf  of  such  accused  upon  the  exchange, 
may  upon  complaint  of  any  member,  be  fined,  suspended  or  expelled.®^ 

A  rule  common  to  the  Minneapolis  and  Milwaukee  Chambers  of 
Commerce  provides  for  denial  of  representation  ^Tor  any  business 
object  or  purpose  whatsoever”  to  any  “party  or  parties,  whethei 
corporation,  comiiany,  firm,  or  individual,  who  shall  be  in  default 
and  shall  have  remained  so  in  default  for  the  space  of  one  month,  to 
any  member  of  the  chamber,  upon  any  contract  or  agreement  made 
with  such  member  *  *  *”  Members  are  forbidden  to  represent 

such  a  party  on  the  floor  or  “enter  into  any  contract  or  agreement 
whilst  said  party  *  *  *  shall  be  and  remain  in  default  as  afore¬ 

said,  and  with  the  knowledge  of  such  default” — under  penalty  of 
suspension  or  expulsion.  It  is  reported  that  the  rule  at  Minneapolis 

-2  Dul.,  4:10;  St.  L.,  4:9;  Buf.,  3:1;  Balto.  (by-laws),  art.  9;  sec.  11;  N.  Y,  (by-laws),  sec.  36. 

*3  Rule  8,  sec.  3  on  both  exchanges.  Procedure  under  the  Minneapolis  rule  is  defined  in  circular  361, 
issued  May  7,  1912. 


EXCHANGE  RULES  AND  REGULATIONS. 


217 


has  not  been  invoked  against  iionmembers  during  the  past  12  years 
and  probably  not  prior  thereto;  and  that  the  rule  in“ Milwaukee  has 
not  been  invoked  in  recent  years. 

The  rules  of  the  Milwaukee  and  Buffalo  exchanges  provide  for 
posting  a  nonmember  and  denying  him  representation  on  the  floor, 
only  in  case  of  default  in  a  transactioii,  conducted  through  a  Hiember 
who  can  show  that  he  has  acted  as  agent  of  the  nonmember  principal, 
and  that  he  has  disclosed  such  principal  at  the  time  that  the  transac¬ 
tion  was  made.®*  To  cite  the  Buffalo  rule: 

"  *  *  if  such  principal  shall  not  be  a  member  of  the  exchange,  the  directors  by 
sucli  vote  may  prohibit  said  principal’s  representation  on  the  floor  of  the  exchange, 
and  any  member  of  the  exchange  who  shall  with  knowledge  of  such  prohibition,  seek 
to  represent  or  transact  business  for,  with  or  on  behalf  of  said  principal,  after  notice 
of  such  prohibition  shall  have  been  posted  on  the  bulletin  during  five  days,  shall 
be  deemed  guilty  of  a  wilful  violation  of  these  rules  and  subject  to  the  penalties  pre¬ 
scribed  in  rule  4,  Section  II. 

The  Omaha  Grain  Exchange  not  only  posts  the  nonmeinber  foi 
failure  to  abide  by  an  award  in  arbitration  but  goes  so  far  as  to  black¬ 
list  him  for  refusal  to  arbitrate  any  dispute  arising  in  grain  trans¬ 
actions  with  a  member.  The  rule  enforced  by  this  exchange 
provides  for  blacklisting  (boycotting)  nonmembers  who  decline  to 
submit  to  an  exchange  agency  in  the  settlement  of  business  disputes. 
The  rule  leaves  no  other  recourse  to  a  nonmember  providing  he  finds 
it  necessary  to  deal  through  a  member  of  the  Omaha  Grain  Exchange, 
viz.  : 

No  member  shall  make  advances  on  any  shipment  nor  handle  on  consignment  or 
buy  grain  from  any  person,  firm  or  corporation  against  whom  a  judgment  of  the  board 
of  arbitration  remains  unsatisfied  or  who  has  failed  or  refused  to  submit  to  arbitration 
any  matter  in  dispute  with  a  member  of  the  Omaha  Grain  Exchange  after.  10  days’ 
notice  and  demand  in  writing  for  arbitration  by  such  member.  Nor  shall  any  mem¬ 
ber  of  this  exchange  consign  grain  to  or  sell  grain  to  any  person,  firm  or  corporation 
against  whom  a  judgment  of  the  board  of  arbitration  remains  unsatisfied  or  who  has 
failed  or  refused  to  submit  to  arbitration  any  matter  in  dispute  with  a  member  of  the 
Omaha  Grain  Exchange  after  10  days’  notice  and  demand  in  writing  for  arbitration 
by  such  member.  Provided,  Notice  of  such  judgment  of  the  board  of  arbitration  or 
refusal  of  such  person,  firm,  or  corporation  to  submit  to  arbitration  shall  have  been 
posted  for  5  days  on  the  trading  floor  of  the  exchange  in  the  usual  and  customary 
manner  and  notice  in  writing  thereof  given  to  the  active  members  of  said  exchange. 

Provided  further,  That  no  person,  firm,  or  corporation  shall  be  posted  as  hereinbe¬ 
fore  provided  for  until  notice  in  writing  of  the  refusal  of  such  person,  firm,  or  corpora¬ 
tion  to  satisfy  the  judgment  of  the  board  of  arbitration  or  refusal  to  submit  to  arbitra¬ 
tion  any  matter  in  dispute  shall  have  been  filed  with  the  secretary  of  this  exchange, 
and  such  person,  firm,  or  corporation  has  been  given  a  reasonable  opportunity  to  appear 
before  the  board  of  directors  of  this  exchange  and  show  cause  why  such  person,  firm, 
or  corporation  should  not  be  posted  as  hereinbefore  provided,  and  until  the  board  of 
directors  has  ordered  the  posting  of  said  person,  firm,  or  corporation  and  the  giving 
of  written  notice  to  the  active  members  as  hereinbefore  provided. 


«  Mil.,  8:2;  Buf.,  3:6. 


1918  Rules,  p.  65. 


218 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


From  May  4,  1915,  to  September  21,  1916,  eight  firms  were  jiosted 
on  the  Omaha  Exchange  for  refusal  to  arbitrate  disputes  with  mem¬ 
bers.  The  firms  were  variously  located  in  Texas,  Oklahoma,  Ne¬ 
braska,  Missouri,  and  Massachusetts.  On  February  5,  1914,  a  dealer 
in  Modal,  Iowa,  was  blacklisted  by  the  directorate  of  the  Omaha 
p]xchange  ^Tor  not  paying  a  bona  fide  claim.” 

On  September  21,  1916,  the  directors  adopted  a  motion  that  the 
secretary  be  instructed  to  issue  to  the  members  of  the  Omaha  Grain 
•  Exchange  a  list  of  the  nonresident  mcmbcrs'who  were  posted. 

^-feection  6.  Arbitration. 

Boards  of  arbitration  and  appeal. — ^Arbitration  of  disputes  by 
the  exchange  agency  is  practically  one  of  the  terminal  market  terms” 
under  which  contracts  between  members  are  made.  The  recom¬ 
mended  grain  contract”  which  is  written  into  the  rules  of  the  St. 

•  Louis  Exchange  stipulates  that — 

*  *  *  it  is  hereby  agreed  that  any  dispute  or  difference  in  connection  herewith 
shall  be  referred  for  settlement  to  the  duly  constituted  committees  of  the  merchants’ 
exchange,  and  that  we  will  abide  by  their  decisionf^^ 

There  are  two  different  modes  of  commercial  arbitration  provided  by 
the  various  exchange  rules:  (1)  Where  submission  of  a  dispute  to  the 
arbitration  committee  is  voluntarily  made  by  both  parties  and  it  is 
agreed  beforehand  that  the  decision  of  the  highest  tribunal  of  the 
exchange  shall  be  final  and  binding  between  the  parties  (as  in  Chicago, 
Toledo,  Cincinnati,  Baltimore,  and  New  York), and  (2)  compulsory 
arbitration,  where  the  arbitration  committee  acts  on  the  complaint 
of  one  party  and  formal  notice  of  such  complaint  is  served  on  the  sec¬ 
ond  party  (providing  he  is  a  member)  forcing  him  to  agree  to  arbitrate 
or  incur  the  penalty  provided  for  such  default,  which  may  be  suspen¬ 
sion  or  expulsion  (as  in  Minneapolis,  Milwaukee,  Duluth,  Kansas  City, 
Omaha,  Peoria,  Indianapolis,  Buffalo,  and  Philadelphia).®^ 

Thcrule  was  adopted  Aug.  28, 1914.-  Sec  Minutes  of  Omaha  Board  of  Directors,  1915, 1916. 

Rule  8,  sec.  1. 

i'S  Chi.,  Rule  8;  Balto,  (hy-laws),  9-2;  Tol.,  8:1;  Cin,,  by-law  11;  N.  Y.  (by-law),  sec.  29;  in  Chicago,  how¬ 
ever,  charges  against  any  member  for  “default,  misconduct,  or  offense’^  may  be  filed  with  the  board  of  direc¬ 
tors  and  tried  as  by  the  arbitration  committee,  although  a  trial  before  the  board  of  directors  is  regarded  a»a 
disciplinary  procedure  (Rule  4,  sec.  16);  and  in  Baltimore,  when  parties  can  not  agree  to  arbitrate  the  com¬ 
plainant  may  file  his  complaint  with  the  complaint  committee  which  shall  try  the  case  in  the  usual  way. 
Appealfrom  the  complaint  committee  lies  to  the  board  of  directors.  (By-laws,  ai't.  9,  sec.  11.) 

Arbitrationis  “voluntary”on  the  Toledo  Produce  Exchange,  but  “when  formal  complaint  is  made  to  the 
secretary  and  the  services  of  the  arbitration  committee  is  requested,  the  defendant  is  given  copy  of  the 
charge  and  furnished  with  an  agreement  to  sign  agreeing  to  abide  by  said  committee’s  decision.  If  the  same 
is  returned  withrefusal  to  arbitrate,  the  directors  take  up  the  matter  and  if  they  decide  a  willful  violation  of 
a  business  contract  has  occurred,  the  defendant  'shall  be  censured,  suspended,  or  expelled  by  the  board  of 
directors,  as  they  may  determine  from  the  gravity  and  nature  of  the  offense  committed.’  The -directors 
really  take  charge  and  may  conduct  the  case  as  if  it  were  in  the  hands  of  the  arbitration  committee,  and  may 
enforce  the  award  made  as  a  majority  decides.” 

(Letter  from  secretary  of  the  exchange,  dated  Nov.  14, 1919.) 

‘•^Mil.,  4:12;  Mpls.,  7:1-4;  Dul.,  8;  St.  L.,6:6;  K.  C.,  8:1;  Oma.,  1:1;  Peo..  9:1;  Buf.,  art.  5;  Ind.,sec.  12; 
Cin.,  2:2;  Phila.  (by-laws),  16:1;  N.  Y.  (by-laws),  sec.  29. 

See  statement  or  facts  in  Evans  v.  Chamber  of  Commerce  (Minn.),  June  20, 1902  (91  N.  W.,  8). 


I 


EXCHANGE  RULES  AND  REGULATIONS. 


219 


The  distinction  between  voluntary  and  compulsoiy  arbitration 
can  be  set  forth  no  more  clearly  than  by  stating  the  respective  rules 
of  the  Chicago  and  Minneapolis  exchanges. 

(1)  The  Chicago  rules  state  that: 

It  shall  be  the  duty  of  the  committee  of  arbitration  to  hear  and  determine  all  cases 
of  disputed  claims  voluntarily  submitted  for  their  adjudication  by  members  of  the 
association.  (Rule  8,  sec.  1);  and 

Parties  desiring  the  services  of  either  of  the  foregoing  committees  shall  notify  the  sec¬ 
retary  to  that  effect  in  writing  and,  before  the  hearing  of  the  case,  shall  file  an  agree¬ 
ment  with  him,  signed  by  the  parties  to  the  controversy,  binding  themselves  to 
abide,  perform,  and  fulfill  the  final  award  or  finding  which  shall  be  made  touching 
the  matter  submitted,  without  recourse  to  any  other  court  or  tribunal.  (Sec.  9.) 

(2)  TVhile  in  Minneapolis  it  is  provided  that : 

Any  party  desiiing  to  submit  a  matter  in  controversy  to  the  board  of  arbitration 
shall  file  a  complaint  in  writing  with  the  secretary.  *  *  *  A  copy  of  such  com¬ 
plaint  shall  be  served  by  the  secretary  on  the  adverse  party,  and  if  the  party  com¬ 
plained  against  shall  fail  to  appear  and  answer  such  complaint  within  six  business 
days  after  service  of  copy  thereof,  as  aforesaid,  he  shall  be  deemed  to  be  in  default, 
and  to  have  incurred  the  penalties  of  refusal  to  join  in  submission  to  arbitration. 
(Rule  7,  sec.  2.) 

Moreover,  it  is  expressly  or  impliedly  stated  in  certain  rules  that 
arbitration  is  the  only  method  open  to  members  to  settle  business 
disputes  among  themselves  (unless  a  complaint  has  been  filed  and 
refused)  and  resort  to  the  courts  without  first  requesting  arbitration 
is  forbidden^®®  (e.  g.,  Kansas  City,  Omaha,  Indianapolis,  Peoria,  and 
Buffalo).^ 

The  Kansas  City  rule  recites  that: 

All  disputes,  differences,  or  disagreements  of  a  financial,  mercantile,  or  commercial 
character  *  *  *  among  members  of  this  association  or  between  members  and  other 
parties,  when  such  others  assent  thereto,  must  and  are  hereby  agreed  to  be  submitted 
to  the  committee  of  arbitration  for  adjustment,  *  *  *  but  if  arbitration  shall  have 
been  proposed  and  refused,  then  an  action  or  actions  at  law  may  be  commenced,  and 
the  members  failing  or  refusing  to  arbitrate  may  be  suspended  or  expelled,  as  the  board 
of  directors  may  determine.  (Rule  11,  sec.  2.) 

In  a  certain  legal  sense,  commercial  arbitration  is  always  voluntary 
for  both  parties;  either  through  agreement  to  submit  a  specific 
case,  or  agreement  to  abide  by  exchange  rules  which  require  arbu 
tration  of  commercial  disputes.  The  theory  of  exchange  rules  (with 
the  exceptions  noted)  is  that  all  members  consent  to  the  arbitration 
of  controversies  between  themselves.  On  this  theory,  the  refusal  to 
arbitrate  is  defined  to  be  ‘^an  act  detrimental  to  the  interests  and 
welfare  of  the  Exchange.”^  It  must  be  understood,  however,  that 
the  right  to  compel  arbitration  relates  only  to  transactions  entered 

100  This  is  “compulsory  arbitration”  in  the  view  of  the  courts.  Cf.  paragraph  5  in  syllabus,  “Evans  v. 
Chamber  of  Commerce  of  Miimeapolis,”  85  Minn.,  41S,  91  N.  W.,  S. 

1  K.  C.,  8:1;  Oma.,  1:1;  Ind.  (Rules  for  Arb.  &  Ap.,  sec.  7);  Pco.,  9:1;  Buf.  (bj'-laws),  art  5. 

2  St.  L.,  rule  6,  sec.  6;  Mpls.,  rule  4,  sec.  9;  Mil.,  4:12;  Dub,  8:2. 


220  . 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


into  “  by  virtue  of  membership’’  on  the  exchange,  i.  e.,  to  obligations 
which  might  constitute  a  lien  upon  such  membership. 

Special  arbitration  committees. — On  a  majority  of  the  ex¬ 
changes  boards  of  arbitration  are  presumed  to  care  for  all  commercial 
disputes  of  importance  and  to  render  unnecessary  any  resort  to  the 
old  common-law  methods  of  arbitration.  There  are,  however,  cases 
where  special  committees  are  appointed  to  adjust  an  alleged  default, 
such  as  the  provisions  for  failure  to  deliver  on  future  contracts.*^ 
The  Cincinnati  Exchange  allows  disputants  to  submit  their  arbi- 
tratio]!  agreement  to — - 

{a)  One  of  the  members  of  The  Exchange  as  sole  arbitrator;  or 
{h)  Any  two  members  to  act  as  arbitrators,  who  in  turn  shall  designate  from  the 
membership  of  The  Exchange  a  third  person  to  be  associated  with  them  as  arbitrators ;  or 
(c)  The  Committee  on  Arbitration,  or  a  quorum  thereof. 

Finally,  there  is  a  recent  rule  of  the  Merchants’  Exchange  of  St. 
Louis,  applicable  to  cash  sales  of  grain  on  track,  which  provides 
the  common-law  method  for  adjustment  of  disputes: 

In  no  case  shall  a  rejection  or  claim  for  difference  in  value  be  made,  unless  for  good 
cause,  and  any  disagreement  between  purchaser  and  seller  in  relation  thereto  shall  be 
inmiediately  submitted  to  three  arbiters,  one  chosen  by  the  purchaser,  one  by  the 
seller,  and  the  third  by  the  two  arbiters  so  chosen,  and  their  decision  shall  be  final. 

Arbitration  for  nonmembers. — The  exchange  provisions  for 
arbitration  usuall}^  apply  to  disputes  between  members  and  non¬ 
members,  such  action  being  apparently  voluntary  on  the  part  of 
the  nonmember • 

In  most  instances,  also,  arbitration  can  be  arranged  between  two 
nonmembers.^  In  the  latter  case  a  larger  fee — generally  double  the 
regular  amount — is  exacted  by  the  arbitration  tribunal.® 

In  Indianapolis : 

When  either  party  to  an  arbitration  is  not  a  member  of  the  association  he  shall  pay 
in  advance  to  the  Secretary,  for  the  benefit  of  the  association,  the  sum  of  $10  and  give 
a  satisfactoiy  bond  to  cover  the  fees,  costs,  and  any  award  that  may  be  made  against 
him.' 

Compulsory  arbitration  for  nonmembers. — To  require  of  non¬ 
member  customers  that  they  settle  all  disputes  with  members  through 
arbitration  tribunals  of  the  terminal  market  exchange  wmuld  perhaps 
constitute  an  unfair,  or  at  least  a  questionable,  practice.  It  would 

3  See  sec.  18  below,  and  Vol.  V. 

<  Except  in  Omaha;  see  p.  217  seq. 

5  Chi.,  8:14;  Mil.,  7:2,  14;  Mpls.,  7:1-4;  Dul..  8;  K.  C.,  11:2;  Oma.,  3:4;  St.  L.,  6:6;  Peo.,  rule  9;  Ind.,  Rules 
for  Arb.  and  Ap.,  sec.  7;  Cin.  (by-laws),  11:8;  Buf.  (by-laws),  refer  to  membership  only;  Phila.  (by-laws), 
art.  16,  secs.  1  and  15;  N.  Y.  (by-laws),  sec.  33. 

Chi.,  8:14  (fees  “may  be  doubled’/);  Mil.,  7:14  (fees  “shall  be  doubled”);  Mpls.,  7:12  (“shall  be  doubled”); 
Dub,  8:11;  K.  C.,  no  provision  for  noiimembers’  fees;  Oma.  (fees  to  be  doubled  when  but  one  party  is  a  mem¬ 
ber);  St.  L.,  (Same  fees  for  all  arbitrations  “under  the  sanction  of  this  exchange.”);  Peo.,  9:12  (doubled  when 
neither  party  a  member);  Cin.,  no  provision  for  fees;  Tol.,  8:13,  double  fee;  N.  Y.,  action  upon  complaint  of 
one  party.  No  provision  for  arbitration  between  nonmembers. 

’Ind.,  Rules  for  Arb.  and  Ap.,  sec.  17. 


EXCHANGE  RULES  AND  REGULATIONS. 


221 


appear  that  they  could  not  properly  be  deprived  of  their  right  tu 
carry  a  case  into  the  coiuds  after  such  an  award  in  arbitration  liad 
been  made.  Such  nonmember  shippers  or  dealeis  are  frequently 
members  of  a  State  or  National  association  through  which  they  have 
})Iedged  themselves  to  commercial  arbitration  through  their  ow]i 
committees.  Yet  several  of  the  exchanges,  as  already  noted  (p.  216), 
])rovide  for  the  enforcement  of  contracts  between  a  member  and  a 
nonmember  by  summoning  the  latter  to  appear  before  the  board  of 
directors  or  an  appropriate  committee,  and  on  his  failure  to  appear, 
forbidding  him  representation  on  the  exchange.  And  the  Omaha 
'  Grain  Exchange,  as  stated,  authorizes  the  posting  of  nonmembers 
for  refusal  to  arbitrate  through  the  exchange  agency. 

Arbitration  agreements.— Although  enforcement  of  awards  in 
arbitration  are  provided  for  in  the  membership  agreement  of  exchange 
associations,  yet,  in  conformity  with  their  charters  or  with  the  State 
law,  exchanges  have  required  members  to  sign  a  preliminary  agree¬ 
ment  before  entering  into  arbitration.  These  instruments  bind  the 
parties  to  the  terms  of  the  final  award.® 

Agreements  which  foreclose  any  subsequent  resort  to  the  courts 
must  be  signed  by  both  members  and  nonmembers  seeking  arbitration 
according  to  the  rules  in  Kansas  City,  Omaha,  and  Peoria.®  Of  course 
in  all  grain  exchange  arbitrations  it  is  understood  that  the  award  of 
the  highest  tribunal  shall  be  '‘final  and  binding”  on  the  parties;  and 
the  defendant  in  a  subsequent  action  at  law  may  invoke  the  arbitra¬ 
tion  award  as  a  bar  to  such  action.  However,  only  in  the  three  mar¬ 
kets  mentioned  above  is  the  right  to  resort  to  the  courts  clearly  relin¬ 
quished  by  the  language  of  the  arbitration  agreement. 

Procedure. — The  steps  commonly  followed  in  arbitration  pro¬ 
cedure,  where  the  second  party  has  not  signed  the  agreement,  are: 
(1)  formal  complaint  to  a  committee  or  board  of  arbitration  of  ex¬ 
change  members;  (2)  service  of  such  complaint  upon  the  second 
party;  (3)  a  formal  reply  or  counter  demand  from  the  second  party; 

(4)  formal  hearing  and  trial  of  the  case  before  the  committee;  with 

(5)  possible  appeal  to  a  higher  tribunal  whose  decision  shall  be  final. 

®  Chi.,  8:9;  parties  file  agreement  to  abide  by  award  “without  recourse  to  any  other  court  or  tribmial.’* 
Mpls.,  1917,  p.  244;  nonmember  consents  in  writing  to  the  jurisdiction  of  the  board;  also,  Dul.,  1918  rules 
p.  27;  Mil.,  1918  rules,  p.  22;  decision  of  board  of  appeals  “shall  be  final  and  binding  upon  the  parties." 
K.  C.  (1917),  pp.  39-41:  “In  case  the  complainant  is  a  nonmember,  he  shall  also  sign  an  agreement  to  abide 
by  and  comply  with  all  the  the  terms  and  provisions  of  this  constitution  and  all  orders  and  resolutions  of 
t  he  board  of  directors,  and  any  committee  of  this  association  concerning  the  arbitration  of  said  demand,  and 
of  any  coxmter  demand  which  the  defendant  may  present."  Iso,  must  sign  formal  release  of  subsequent 
rights  of  action  (see  text).  Oma.  (1918),  pp.  31-34  (identical  with  K.  C.);  St.  L.  (1917),  p.  24;  both  parties 
(members  or  nonmembers)  sign  agreement  to  abide  by  the  award  and  to  have  it  entered  as  a  judgment  in 
the  circuit  court  of  St.  Louis.  Peo.,  rule  9,  sec.  8:  both  parties  bind  themselves  to  fulfill  the  final  award 
“  without  recourse  to  any  other  court  or  tribunal."  Also,  Ind.,  rules  for  Arb.  &  Ap.,  sec.  7;  Cih.,  no  pro¬ 
vision;  Phila.,  by-laws,  art.  16,  sec.  15:  Nonmembers  agree  to  abide  by  the  decision  without  recourse  to 
court;  N.  Y.  and  Balto.,  no  provisions. 

9  K.  C.,  11:6;  Oma.,  3:4;  Peo.,  9:8. 

Note  that  in  Chicago,  Baltimore,  Toledo,  and  New  i'ork  arbitratibn  follows  a  mutual  agreement  rather 
than  individual  complaint. 


222 


TERMINi'LL  GEAIN  MiHlKETS  AISTD  EXCHANGES, 


It  is  customary  for  the  secretary  of  the  exchange  to  receive  and 
serve  complaints,  administer  oaths  to  members  of  the  tribunal,  file 
appeals,  announce  the  awards,  and  perform  the  general  administrative 
duties  of  a  clerk  of  court.  The  arbitrating  body  on  the  major  ex¬ 
changes  is  possessed  of  the  ordinary  judicial  powers  to  compel  tesli- 
niony  under  oath,  rec|uire  the  production  of  papers,  and  assess  the 
fees  and  costs  as  allowed  in  the  rules  of  the  exchange. 

The  trial  procedure  in  a  grain  exchange  arbitration  is  generally 
understood  to  follow  the  usual  course  of  a  formal  public  hearing  and 
is  not  outlined  in  the  rules.  In  Cincinnati,  however,  the  exchange 
rules  describe  the  proceeding  as  follows : 

On  trial  of  any  case  before  said  committee,  the  complainant,  or  any  one  of  them,  if 
more  than  one,  shall  first  state  his  case  fully  and  the  evidence  by  wliich  he  proposes 
to  sustain  his  case,  giving  the  names  of  the  witnesses  and  what  he  believes  each  witness 
will  testify  to.  The  respondent,  or  any  one  of  them,  if  more  than  one,  shall  then  state 
his  answer  fully,  and  what  he  claims  in  the  transaction,  and  the  evidence  by  which  he 
proposes  to  sustain  his  side  of  the  case,  giving  the  names  of  the  witnesses  and  what  he 
believes  each  witness  will  testify  to.  The  decision  of  a  majority  of  the  committee 
present  and  trying  the  case  shall  be  held  as  valid  and  binding  and  shall  be  entered 
in  the  records  of  said  committee.^^ 

As  already  stated,  the  respondent  must  attend  and  answer  on 
service  of  a  complaint  or  become  liable  to  discipline  as  having  re¬ 
fused  arbitration.  Eight  of  the  exchanges  require  a  fine  of  either 
party  for  failure  to  attend  the  trial  or  for  requesting  a  postpone¬ 
ment.  In  Minneapolis,  Milwaukee,  Duluth,  and  St.  Louis  and 
Indianapolis  the  fine  may  not  exceed  half' the  regular  fees;  Kansas 
City,  Omaha,  and  Peoria  stipulate  a  fine  ''not  exceeding  $500.”^^  It 
is  similarly  provided  that  members  of  the  arbitrating  body  must  be 
present  under  penalty  of  fine. 

Philadelphia  is  exceptional  in  that  it  provides  for  an  ex  parte 
hearing :  - 

If  either  of  the  parties  to  the  dispute  shall  not  be  present  at  this  meeting,  or  shall 
refuse  to  submit  his  case  in  dispute  to  the  committee  on  arbitration,  as  provided  in 
these  by-laws,  the  committee  shall  decide  the  case  upon  the  evidence  submitted  by 
the  party  present.^'* 

Where  the  complaint  and  answer  method  is  not  followed  in  arbi¬ 
tration  (as  in  Peoria),  it  is  nevertheless  provided  that: 

Neither  party  shall  postpone  the  trial  of  a  case  longer  than  10  days  after  it  has  been 
submitted  unless  good  cause  can  be  shown  therefor,  satisfactory  to  the  committee. 

Nonmembers  must  be  represented  by  members  in  order  to  obtain 
arbitration  in  Philadelphia  and  Cincinnati,^®  while  the  New  York 

Rule  2,  sec.  S. 

12 Seep.  211. 

13  Mpls.,  7:13;  Mil.,  7:13;  Dul.,  10:12;  K.  C.,  11:18;  St.  L.,  6:12;  Oma.,  3:15;  Peo.,  9:8. 

X  Phila.,  by-laws,  art.  16,  sec.  7.  E.x  parte  hearing  of  cases  of  discipline  arc,  of  course,  more  frequent. 

15  Rule  9,  sec.  8. 

18  Phila.  (by-laws),  16:15;  Cin.,  2:2. 


EXCHANGE  TvULES  AND  llEGULATIONS. 


223 

Produce  Exchange  provides  that  ^  hionmcnihers  mav^  appear  in 
person,  or  through  authorized  representatives.  ’  ’  On  most  of  tiic 
exchanges  either  party  to  an  arbitration  (member  or  nonmember) 
is  required  to  attend  or  incur  a  severe  penalty;  and  IVIinneapolis 
provides  that  ‘  dn  no  case  shall  parties  appear  by  counsel  except  by 
permission  of  the  board  hearing  the  case.” 

Professional  counsel. — The  einplmmient  of  professional  counsel 
is  not  entirely  prohibited  from  exchange  adjudications.  The  require¬ 
ment  that  respondents  must  appear  and  answer  might  be  construed 
under  the  rules  of  nine  exchanges  as  allowing  members  to  appear 
by  counsel.  Uniformity  is  lacking  on  this  point.  The  St.  Louis  rules 
restrict  counsel  to  members : 

Either  party  to  an  arbitration  may,  having  notified  the  opposite  party  of  his  inten¬ 
tion,  be  represented  by  a  member  of  the  exchange  cither  as  legal  adviser  or  as  a  friend. 

In  ^liimeapolis,  as  stated,  members  are  specifically  forbidden 
from  appearing  by  counsel  in  any  case  unless  by  permission  of  the 
arbitrating  board.  Chicago  forbids  the  employment  of  professional 
counsel and  the  .Kansas  City  exchange  is  equally  explicit  on  the 
subject: 

In  investigations  before  the  board  of  directors  or  before  any  committee  of  the  asso¬ 
ciation,  no  parties  shall  be  allowed  to  be  represented  by  professional  counsel,  nor 
shall  any  member  be  permitted  to  appear  before  the  directors  or  any  committee  of 
this  association,  in  behalf  of  any  other  party,  who  receives  compensation,  directly  or 
indirectly,  for  so  appearing.  No  member  of  the  Board  of  Trade  shall  be  allowed, 
unless  personally  interested,  to  appear  as  counsel  for  or  represent  another  member 
before  the  arbitration  committee  or  appeals  committee,  if  objected  to  by  any  of  the 
members  interested  in  the  case.^'^ 

The  by-laws  of  the  Buffalo  Com  Exchauge  likewise  prohibit  the 
employment  of  professional  counsel,  except  by  mutual  consent. 

Appeals. — -All  the  exchanges  allow  appeal  from  an  original  hear¬ 
ing  in  arbitration  to  a  higher  committee  whose  decision  shall  be  final. 
The  committee  on  appeals  in  most  instances  confines  itself  to  a  review 
of  the  record  made  up  before  the  apbitration  committee.  But  they 
may  also  receive  new  and  important  evidence  under  oath  and  remand 
the  case  to  the  lower  committee  for  a  new^  hearing, on  the  ground 
that  relevant  testimony  was  excluded. 

IT  By-laws,  sec.  33. 

IS  Mpls,  7:6. 

IS  Mil.,  Dul.,  Oma.,  Pco.,  Ind.,  Cin.,  Phila.,  Ballo.,  and  N.  Y. 

•0  Rule  6,  sec.  16. 

21  K.  C.,  8:14;  Chi.,  4:19. 

22  Sections  cited. 

23  Art.  4,  sec.  16. 

21  Chi.,  8:3;  Mpls.,  7:4;  Mil.,  7:4;  Dul.,  8:4;  St.  L.,  6:2;  Ind.,  Rules  of  Arbitration  and  Appeal,  sec.  2;  Pco., 
9:2  (appeal  may  be  carried  to  board  of  directors  'Uor  revision '0;  Cin.,  2:10  (appeal  from  Com.  on  Grain  & 
Hay  Inspection  to  Com.  of  Arbitration);  Tol.,  8:3;  Buf.,  3:6-8  (appeal  from  Reference  Com.  to  Arbitration 
Com.);  Balto.,  by-la\^':s,  art.  9  (no  appeal  from  Arbitration  Committee,  appeal  from  complaint  committee 
lies  to  board  of  directors);  N.  Y.,  by-lav's  secs.,  27,  32  (same  procedure  as  Balto.). 


224 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


T]\e  Kansas  City  and  Omalia  rules  are  ambiguous  on  the  point  of 
new  evidence,  but  apparently  vest  plenary  power  in  the  committee 
on  appeals: 

It  shall  be  the  duty  the  committee  on  appeals  to  hear  and  determine  all  cases 
appealed  from  the  decision  of  any  committee  and  formally  brought  before  it,  and 
render  a  just  and  equitable  award  thereon  according  to  the  evidence  and  by-lav/s, 
rules  and  regulations  of  the  exchange  and  the  laws  of  the  land,  to  the  best  of  their 
ability.^"’ 

In  Philadelphia  the  appeals  committee  “may  hear  new  evidence 
and  may  affirm,  reverse,  alter  or  modify  the  decision  or  award  of  the 
arbitration  committee.  “  Also,  it  may  proceed  with  the  hearing 
“notwithstanding  one  of  the  parties  to  the  dispute  may  not  be 
present  or  shall  refuse  to  submit  his  case  in  dispute  to  the  appeals 
c.ommittec.  ’  ’  Indianapolis  is  exceptional  in  that  either  party  may 
liJe  a  bill  of  exceptions  to  the  decision  of  the  committee  on  appeals: 

In  all  cases  decided  by  the  committee  on  appeals,  either  party  thereto  who  shall  not 
liave  asked  for  a  new  trial  therein,  shall  have  the  right,  within  five  days  after  receiv¬ 
ing  proper  notice  of  the  award  or  decision,  to  appear  before  the  committee  and  file  a 
bill  of  exceptions  to  the  award  or  decision,  setting  forth  his  reasons  for  a  new  trial,  and 
the  committee  may,  in  its  discretion,  confirm  its  previous  award  or  remand  the  case  to 
the  committee  on  arbitration  for  a  new  trial. 

Fees. — Almost  complete  uniformity  has  been  reached  in  the  fees 
retpiired  by  the  exchange  rules  in  arbitration  cases.  The  same  fees 
are  usuall}^  exacted  for  the  benefit  of  either  arbitration  or  appeal 
committees.  Incidental  fees  required  for  additional  hearings  and 
postponed  cases,  or  the  small  fee  allowed  the  secretary  in  some' 
instances,  are  not  considered  in  this  analysis.-®  Tlie  fees  are  identical 
on  seven  exchanges,^®  varying  from  $10  for  a  controversy  involving 
less  than  $500  to  a  $50  fee  for  controversies  involving  more  than 
$2,500. 

Enforcement  of  awards.— With  regard  to  the  force  of  such 
awaixls,  the  counsel  for  the  Minneapolis  Chamber  of  Commerce  ad¬ 
vised  on  August  21,  1911,  (1)  that  the  theory  of  arbitration  by  ex- 
7^  change  boards  is  the  same  as  that  of  arbitration  at  common  law  or 

under  statutes  and,  (2)  to  the  extent  that  parties  give  consent  to 
such  arbitration  they  are  bound  by  the  award  as  if  by  a  judgment. 

25  Oma.,  3:9:  K.C.,  11:11. 

26  Phila.  (by-laws),  16:9. 

27  Ind.  rules  for  arb.  &  ap..  sec.  8. 

,  28  For  e.xample,  in  Omaha:  “The  fees  as  above  shall  be  paid  to  the  secretary  for  compensation  to  the 

members  sitting  as  arbitrators,  and  in  addition  there  shall  be  paid  to  the  secretary  for  his  fees  S;3  for  e^ch 
case  submitted  and  the  sum  of  $10  to  apply  on  stenographer’s  fees.  ”  (Rule  3,  sec.  14.)  Also,  St.  L.,  6:10. 

23  Chicago,  Milwaukee,  Minneapolis,  Duluth,  Kansas  City,  Omaha,  and  Toledo.  Other  fees  are  as 
follows:  Indianapolis,  minimum,  $10;  maximum,  $25.  St.  Louis,  minimum  $10;  maximum,  $20.  Peoria, 
“for  each  case,”  $15.  Cincinnati,  fee  not  to  e.xceed  $5  “and  to  be  payable  to  the  association.”  Buffalo, 
fee  of  $20  upon  filing  the  case.  Philadelphia,  for  A’alue  less  than  $1,000,  $15;  over  $1,000,  $25.  Baltimore, 
for  value  less  than  $1,000,  $3  per  committee  member  for  each  sitting;  over  $1,000,  $5  per  member.  New 
York,  arbitration  committee:  $5  per  member  for  each  sitting;  complaint  committee:  $10  “to  be  equally 
divided  among  the  members.” 


EXCHA^s^GE  RULES  AXD  REGULATIONS. 


225 


(3)  Exchange  members'  give  consent  to  ar})itration  of  all  such  con- 
trovei-sies  between  themselves^  when  they  subscribe  to  the  rules  and 
regulations. 

Under  the  incorporation  laws  of  some  States,  or  under  specific  arti¬ 
cles  of  incorporation,  the  award  of  an  exchange  arbitration  com¬ 
mittee  may  be  filed  in  the  appropriate  county  or  district  court  and  be 
entered  as  a  judgment  and  executed  against  the  delinquent.^®  This 
is  made  a  part  of  the  arbitration  agreement  in  Kansas  City,  Omaha, 
and  St.  Louis: 

And  we  do  further  agree,  that  the  awards  of  the  arbitrators,  as  aforesaid,  whetlier  made 
by  the  committee  of  arbitration  or  the  committee  of  appeals,  if  made  in  writing  and 
signed  by  the  arbitrators  and  attested  by  the  secretary  of  the  said  board  of  trade  and 
liave  affixed  thereto  the  seal  of  said  board  of  trade,  may  be  entered  on  the  records  of 
the  circuit  court  of  Jackson  County,  and  that  judgment  may  be  had  thereon  in  accord¬ 
ance  with  the  terms  thereof,  and  in  pursuance  of  the  provisions  of  the  statute  law  of 
the  State  in  cases  of  arbitration  under  said  statute. 

It  has  been  shown  that  on  five  exchanges  (see  p.  219)  the  rules  pre-  . 
vent  the  members  from  resorting  to  the  courts  after  arbitration. 

In  exchange  practice,  however,  enforcement  of  awards  in  any  case 
is  rarely  by  proceedings  in  court.  It  is  accomplished  rather  by  the 
regular  disciplinary  processes  of  the  exchange.  As  early  as  August 
13,  1883,  a  member  was  suspended  from  the  privileges  of  the  Minne¬ 
apolis  Chamber  for  refusal  to  abide  by  an  award  in  arbitration.  The 
counsel  for  the  association  approved  the  action  of  the  board  of  dhec- 
tors  as  within  their  power  to  punish  for  contempt. 

To  cite  a  more  recent  case,  on  February  4,  1913,  the  Chicago,  Mil¬ 
waukee  &  St.  Paul  Kailroad  Co.  was  prohibited  from  representation 
on  the  floor  of  the  Milwaukee  Chamber  or  in  the  city  of  Milwaukee  by 
a  member  so  long  as  they  refused  to  execute  an  award  of- the  board  of 
arbitration  and  board  of  appeals. 

Section  7.  Uniform  commission  rules. 

Table  68  following  shows  the  minimum  cash  commission  rates  for 
receiving  and  selling  in  14  markets.  It  will  be  noted  that  in  some 
instances  the  commission  consists  of  a  percentage  of  the  selling  price 
with  a  stipulated  minimum  per  bushel;  in  other  cases  the  percentage 
obtainable  is  limited  by  both  maximum  and  minimum  flat  rates  per 
bushel;  and  in  others  a  single  flat  minimum  rate  in  cents  per  bushel 
is  charged.  For  example,  if  the  price  of  wheat  is  in  the  neighborhood 
of  $1.50  the  rate  of  1  per  cent  of  gi’oss  receipts  (as  in  Chicago)  will 
allow  the  commission  house  practically  the  same  profit  as  a  flat  rate 
of  1^  cents  per  bushel  (as  in  Minneapolis).  Should  the  price  rise  to 
$2,  however,  the  percentage  basis  would  be  more  profitable. 

Chi.,  Charter,  secs.  7,  8;  Peo.,  Arts,  of  Incorporation,  sec.  7;  Mpls.,  Incorporation  Act  and  R.  7, 
sec.  16;  Dul.,  8.15;  Mil,— Charter,  sees.  8,  9;  K.  C.,  11:5;  Oma.,  3:4;  St.  L.— 6:6. 

«K.  C.,ll:6;  Oma., 3:4;  St.  L.  ll:5w 

168693°— 20 - 15 


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EXCHANGE  EULES  AND  TxEGULATIONS 


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228  TERMINAL  GRAIN  MARKETS  AND  EXCHANGES.  u 

« 

It  is  argued  in  favor  of  the  fiat  rate  that  it  is  fairer  to  base  the 
ciiarge  on  the  service  performed  rather  than  the  purchase  price;  and 
that  a  flat  rate  offers  a  constant  charge  which  can  more  conveniently 
be  deducted  in  making  'Ho  arrive’'  and  "on  track”  bids. 

On  the  other  hand,  it  may  be  maintained  that  the  percentage 
l)asis  offers  an  inducement  to  the  commission  men  to  secure  the  high¬ 
est  market  price  for  the  shipment;  that  it  prevents  "scalping”  and 
operates  to  prevent  any  agreements  hostile  to  the  producers’  interests 
in  the  terminal  market. 

The  question  of  a  fair  basis  for  computing  commissions  is  compli¬ 
cated,  however,  by  considerations  of  the  extent  of  competition  in  the 
consignment  business  and  for  that  reason  will  not  be  discussed  further 
at  this  point. 

Members’  rates. — The  table  above  shows  that  8  of  the  markets 
considered  provide  special  cash  commission  rates  for  members  vary¬ 
ing  from  three-quarters  to  one-half  of  the  regular  rates  charged  to 
nonmembers.32  Members’  rates  (that  is,  rates  for  handling  members’ 
business)  are  a  more  important  factor  in  the  business  of  buying  for 
slnpment  out  of  the  market  and  in  future  trading  than  for  the  pure 
consignment  business.  Nevertheless,  members’  rates  have  been  recog¬ 
nized  by  the  exchanges  from  earliest  adoption  of  the  commission  rule 
in  the  larger  primary  markets.  For  example,  the  commission  rule  for 
Minneapolis  was  recommended  by  a  special  committee  in  1887  prac¬ 
tically  as  it  exists  to-day,  and  members’  rates  were  provided  to  be 
not  less  than  one-half  of  the  regular  rates  for  cash  grain  on  all  grains 
"providing  no  advances  of  money  are  made.”^^ 

It  is  apparent  that  uniform  commission  rates  cleared  the  way  for 
bu^^ing  and  selling  grain  on  its  merits.  They  eliminated  rate  wars  and ' 
reduced  the  handling  and  carrying  charges  to  a  fixed  basis.  However, 
such  commission  rules  are  in  effect  price  regulations  and  have  consti¬ 
tuted  points  of  attack  for  numerous  investigations  and  controversies 
in  which  the  exchanges  have  been  involved.  It  is  not  proposed  to 
discuss  these  controversies  at  this  point  nor  to  offer  any  opinion  upon 
the  legal  validity  of  the  rules  in  question.  It  is  rather  intended  to 
discuss  the  existing  rules  in  a  comparative  way  and  to  define  their 
scope  by  reference  to  interpretations  in  actual  exchange  practice. 

The  following  classes  of  business  come  within  the  application  of  the 
commission  rule:  (1)  Receiving  and  selling  on  arrival  or  to-arrive;  (2) 
buying  to-arrive  or  on-track  in  the  country  for  shipment  to  the 
terminal  market;  (3)  buying  on  commission  in  the  terminal  market 
foi:^hipment  elsewhere;  (4)  buying,  selling,  or  buying  and  selling 
on  cd'mmission  for  future  delivery. 

32  The  commission  rates  in  San  Francisco,  which  are  on  a  bag  or  cental  basis,  have  not  been  in¬ 
cluded  in  these  abstracts.  The  principle  of  one-half  rates  to  members  is  also  maintained  on  that  exchange. 
(Rules  of  Grain  Trade  Association,  San  Francisco  Chamber  of  Commerce,  Rule  22.)  ' 

«  Minutes  of  the  Board  of  Directors,  Chamber  of  Commerce. 


EXCHANGE  RULES  AND  REGULATIONS. 


220 


Tlie  first  two  classes  of  transactions  apply  to  purchasing  and  bring¬ 
ing  in  the  country  grain.  Tlie  other  two  classifications  apply  to  buying 
and  selling  terminal  market  gi'ain  and  grain  in  this  position  has  gen¬ 
erally  been  inspected,  weighed,  and  covered  by  warehouse  receipts 
prior  to  delivery;  so  that  the  enforcement  of  exchange  rules  is  a  far 
simpler  matter.  In  exchange  usage,  the  term  ‘‘our  uniform  com¬ 
mission  rule”  usually  refers  to  a  rule  which  applies  to  country  pur¬ 
chases. 

The  uniform  commission  rule  as  applied  to  the  consign¬ 
ment  BUSINESS. — The  minimum  cash  commission  rates  shown  in 
Table  68  (p.  226)  apply  specifically  to  the  consignment  business. 
Violations  of  the  commission  rule  by  those  engaged  in  the  consignment 
business  consist  of  attempts  to  evade  directly  or  indirectly  these 
regular  rates  of  commission  by  special  favors  to  shippers.  Just  what 
practices  constitute  evasions  of  the  commission  rule  are  not  clear; 
and  the  interpretations  by  individual  exchanges  in  some  instances 
not  only  differ  but  are  in  direct  conflict.  In  general,  however,  there 
is  a  relatively  large  degree  of  uniformity  among  grain  exchanges  in 
interpreting  the  violations  of  their  respective  commission  rules  as  they 
apply  to  consigned  grain.  It  'will  be  shown  below  that  uniformity 
of  regulation  does  not  exist  to  the  same  extent  as  applied  to  other 
methods  of  purchasing. 

Rebates. — ^Twelve  of  the  exchanges  enforcing  minimum  rates 
specifically  forbid  rebates  of  any  sort.^^  On  December  28,  1916,  a 
Muineapolis  firm  was  fined  $1,000  and  suspended  until  paid,  for 
having  rebated  commissions  in  business  done  in  February,  1915, 
nearly  two  years  previous. 

The  Chicago  definition  of  rebate  is  fairly  typical  and  has  also  been 
incorporated  verbatim  in  the  Omaha  rules,  i.  e.: 

*  *  *  any  evasion  thereof  by  making  rebates  in  prices,  by  making  any  con¬ 
tract  or  observing  any  contract  already  made,  by  furnishing  a  membei'ship  in  this 
exchange,  by  giving  any  bonus,  gift,  donation  or  otherwise,  *  * 

Gifts,  compensation,”  premiums,  etc. — Anything  savoring 
of  bribery  or  a  valuable  consideration  to  influence  shipments  is 
forbidden.^*  The  members  in  Duluth  are  forbidden  to  “give,  either 
(IRectly  or  indirectly,  compensation  to  station  agents,  elevator 
agents,  bankers,  brokers,  merchants  or  any  other  parties,  at  any 
locality  whatsoever,  to  influence  shipments  or  consignments  of 
grain  *  * 

Expensive  gifts  or  premiums  to  country  customers  arc  disallowed. 
To  offer  an  automobile  to  the  shipper  sending  in  the  most  consign- 

^  Chi.-14:9  (F);  Mil.-22:11;  Mpls.-8:11;  Dul.-13;8;  K.  C.-21:9  (I);  Oma.-1918  Rules,  p.  68;  the  St.  Louis  Ex¬ 
change  merely  forbids  violations  or  evasions  ‘'in  any  form  or  manner  whatsoever,”  leaving  interpretation 
oftherule  to  the  Board  of  Directors;  Peo.-leaves  interpretation  to  Board  of  Directors;  Ind.-Sec.  29;  Balto. 
(By-laws)  24:2;  Phila.-19l8  Report,  p.  157,  Sec.  4;  N.  Y.-(Rules  of  the  Grain  Trade),  R.  37,  Sec.  5.  • 

Sections  cited. 


230  TERMIi^AL  GEAIX  MARKETS  AlsD  EXCHANGES. 

inonts  has  been  ruled  to  be  a  violation  in  Chicago.  Solicitors  arc  not 
allowed  to  spend  money  entertaining  to  any  such  extent  as  is  prac¬ 
ticed  by  brokers  m  some  other  trades.  One  commission  firm  was 
denied  the  privilege  of  placing  special  registers  in  country  elevators, 
for  registering  purchase  checks,  whereby  the  elevator  would  bo 
required  to  sign  a  contract  to  sliip  a  minimum  of  15  cars  to  the  com¬ 
mission  house  and  to  pay  a  small  rental  on  the  machine. 

Employment  of  solicitoks. — None  of  the  exchanges  regard  the 
employment  of  traveling  men  on  salary  to  solicit  consignments  as 
per  se  a  violation  of  the  commission  rules.  This  is  specifically 
allowed  by  the  rules  in  Minneapolis,  Duluth,  and  Ivansas  City,  with 
the  condition  that  “the  rule  *  *  *  shall  prohibit  a  division  of 

commissions  with  such  travclhig  men  who  are  not  resident  members 
of  the  association.”^®  The  solicitor  in  this  connection  is  understood 
to  be  on  a  fixed  salary  and  to  give  his  entire  time  and  services  to  his 
employer.  The  Milwaukee  rules  add  the  condition  (which  would 
always  be  implied)  “that  all  business  shall  be  conducted  in  the  name  , 
of  the  parent  firm  or  member,  and  said  firm  or  member  shall  be  i 
responsible  to  the  customer  in  every  transaction  and  also  for  the 
conduct  of  the  employ ee.^^ 

Keeping  books  of  customers. —In  Minneapolis,  where  it  is  the 
practice  of  commission  men  to  finance  country  shippers,  the  rules 
committee  issued  an  opinion  on  January  6,  1914,  that  “to  keep 
the  books  of  a  country  shipper,  or  to  offer  to  do  so  without  full  com¬ 
pensation,  for  the  purpose  of  obtaining  shipments,  is  contrary  to 
the  commission  rule.”^® 

Financing  country  shippers. — -The  practice  of  financmg  the  busi¬ 
ness  of  country  elevators  by  commission  houses— extending  them 
credit  to  purchase  grain  and  thereby  binding  them  to  ship  to  the 
financing  house — -has  not  been  considered  a  violation  of  the  commis¬ 
sion  rule.  This  question  would  arise  chiefly  in  the  Northwest  where 
commission-house  financing  is  most  extensive.^®  When  the  matter 
of  regulating  such  financing  was  under  discussion  before  the  board 
of  directors  of  the  Minneapolis  Chamber  of  Commerce  in  1917  the 
counsel  of  the  chamber  advised  that  under  the  existing  provisions  -for 
violations  of  the  commission  rule  financing  is  not  forbidden  “and 
complaint  based  thereon  should  not  be  recognized  by  the  board  of 
directors,  and  can  not  be  sustained  by  that  board.”  In  giving  their 
opinion  the  counsel  had  before  them  the  provision  of  the  rule  making 
any  member  guilty  of  violation  who — 

shall,  with  intent  to  evade  the  regular  rates  of  commission  established  by  the  rules  of 
the  association,  directly  or  indirectly  pay,  or  give,  or  offer  so  to  do,  any  money,  or 
other  consideration  of  whatsoever  nature  to  any  person,  to  procure  or  influence  ship¬ 
ments  or  consignments  of  grain  or  seed  in  any  form  *  *  * 


* 


S6  Identical  rules:  Mpls.-8:11;  Dul.-13:8;  K.  C.-21:9  (I), 
37  Mil.-32:2. 

3*  Mpls.,  1918  Rules,  p.  85,  Circular  509. 


*9  Vols.  I  and  III. 
*0  Mpls.,  8:11. 


EXCHANGE  EULES  AND  REGULATIONS. 


231 


There  can  be  no  question  that  the  extension  of  an  open  line  of 
credit  does  operate  to  “influence  shipments.’’  The  counsel  in  this 
o})inion  evidently  reasoned  that  no  consideration  was  being  given 
“with  intent  to  evade  the  regular  rates  of  commission.”  It  is  note¬ 
worthy  that  the  Minneapolis  Directcu'atc  has  taken  the  position  that 
financing  becomes  a  clear  violation  of  the  commission  rule  when  no 
interest  is  charged.  On  March  20,  1902,  they  fined  two  commission 
firms  $500  each,  one  for  loaning  money  without  interest  and  the  other 
for  offering  to  loan  money  on  that  basis. 

Current  rate  of  interest. — ^Thc  commission  rule  requires  not 
only  that  the  uniform  rates  be  followed  but  also  that  the  “termmal 
charges”  such  as  interest,  when  entered  on  the  account  sales,^-  be 
uniform  as  regards  identical  services.  Such  charges  as  are  made  for 
freight,  demurrage,  switching,  weighing,  inspection,  storage,  and  the 
like,  are  known  and  established  tariffs  in  a  given  market  and  any 
deviation  would  be  readily  detected.  Howeycr^Jhiijrate-of  interest 
to  be  charged  for  advances  made  on  bdls  of  lading  is  not  definitely 
fixed,  with  the  result  that  the  exchanges  have  laid  down  specific  rules 
to  be  followed. The  Chicage  rule  requires  that  the  receiver  “shall 
charge  the  current  rate  of  interest  on  any  sum  advanced  on  such 
consignment,  or  purchase;  provided  always,  that  the  minimum  rate 
of  interest  so  charged  shall  be  at  the  rate  of  5  per  cent  per  annum.” 
The  rules  of  the  other  exchanges  are  of  a  similar  tenor. 

Any  violation  makes  a  member  liable  to  suspension  or  expulsion, 
in  the  discretion  of  the  board  of  directors.  Chicago  and  New  York 
are  the  only  markets  which  stipulate  a  5  per  cent  minimum.  The 
Milwaukee  Chamber  instructs  the  finance  committee  to  determme  the 
“current  rate”  the  first  of  each  month.  In  Kansas  City,  Omaha, 
vSt.  Louis,  and  Peoria,  6  pen  cent  is  required  as  a  minimum;  and 
Iklinncapolis,  Duluth,  Buffalo,  Baltimore,  and  Philadelphia  require  the 
“legal  rate”  in  force  in  their  respective  States. 

Free  wire  service. — ^In  connection  with  the  business  of  commis¬ 
sion  men  operating  private  wires  the  question  has  been  raised  on  at 
least  three  exchanges  as  to  whether  free  telephone  and  telegraph 
communication  in  connection  with  to-arrive  bids  is  a  service  to  ship¬ 
pers  of  such  value  as  to  violate  the  commission  rule.  In  Chicago  it  is 
flatly  stated  in  the  rules  that  “free  telegraphic  communication  shall 
not  be  construed  as  a  violation  of  this  rule.”“  This  should  be  com- 


See  chapter  on  Financing,  Vol.  III. 

See  chapter  on  Receiving  and  Purchasing  from  Country  Points,  Vol.  III. 

«  Chi.,  22:5;  Mil.,  32:9;  Mpls.,  8:10;  Dul.,  12:7;  K.  C.,  21:9;  Oina.,  Rule  8:  Reg.  11;  St.  L.,  4:15;  Peo.,  17:3: 

16:2;  Balto.,  by  laws,  23:1;  Phila.,  1918,  report,  p.  157;  X’.  Y.  (Rules  of  the  Grain  Trade),  37:1. 

Chi.,  11:9  (F).  The  following  extract  shows  the  conflict  of  opinion  on  this  construction  of  the  commis¬ 
sion  rule  in  Chicago: 

u  r.  :i:  Pfcvious  to  this  time  (1901)  the  small  commission  merchants  had  circulated  a  petition  asking 
the  directors  of  the  board  of  trade  to  prohibit  private  wire  houses  from  distributing  quotations  over  their 
wires,  and  this  petition,  referred  to  the  committee  on  violation  of  the  rules,  stirred  up  a  good  deal  of  comm  nit. 
On  March  20  a  proposed  amendment  to  the  rules,  restricting  the  use  of  [)rivato  wires,  was  posted  for  ballot, 
but  lost  by  a  vote  of  45^3  to  16 1  in  April  *  *  (Tayloi’,  History  of  the  Chicago  Board  of  Trade, 
\'ol.  ir,  pp.  1022-1023). 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


^  U 


pared  with  the  ruling  laid  down  in  the  neighboring  market  of  Mil¬ 
waukee: 

I'hat  tlie  practice  of  paying  for  telephone  and  telegrapli  messages  of  shippers  and 
buyers  of  grain  at  interior  points  by  members  of  the  association  is  clearly  a  violation  of  ‘ 
tire  existing  rules  of  the  chamber  of  commerce,  section  11  of  rule  32,  providing  that 
members  are  prohibited  from  paying  “directly  or  indirectly”  any  money  or  other 
consideration  of  whatever  nature,  to  any  person,  to  procure  or  influence  shipments 
or  consignments  of  grain  or  seeds  in  any  form.''^ 

Two  rulings  wore  made  on  this  point  by  the  Minneapolis  directors 
durintr  1910,  and  the  rule  for  that  exchange  was  finally  set  forth  in  a 
summary  resolution  on  May  10,  1911 : 

ResoJud,  Tliat  the  board  of  directors  deems  it  a  violation  of  the  commission  rules 
for  members  to  assume  the  expense  of  telegraph  messages  sent  collect  by  customers, 
or  reversed  telephone  calls  from  customers,  the  assumption  of  these  charges  by  a 
member  of  the  chamber  of  commerce  amounting,  in  the  opinion  of  the  board  of 
directors,  to  a  rebate  of  a  portion  of  the  commission  charge,  making  the  member 
subject  to  the  penalties  provided  in  section  11  of  Rule  VIII  of  the  general  rules  of 
iliis  association. 

1'his  resolution  applies  to  all  messages  received  by  members,  or  their  agents,  at 
any  of  their  offices  outside  of  Minneapolis,  as  well  as  those  received  at  Minneapolis.”*® 

A  similar  rule  is  followed  in  Omaha/’  but  none  exists  in  Kansas 
City,  and  the  question  is  of  little  importance  in  markets  where  there 
are  no  private  wire  operators.  Of  course,  no  violation  occurs  in  any 
case  unless  the  payment  of  wire  service  relieves  the  shipper  of  some 
"expense.  On  the  whole,  it  is  apparent  that  violations  of  the  commis¬ 
sion  rule  among  strictly  commission  men  are  determined  largely  by 
tlie  accepted  usages  prevailing  in  the  market.  Beyond  that  class  of 
])raclices,  which  are  clearl}^  an  attempt  to  cut  or  rebate  the  regular 
rates,  there  remain  other  services  given  in  competition  for  country 
Imsiness  which  are  considered  violations  only  as  they  bring  excep¬ 
tional  and  individual  advantage;  and  not  when  they  are  generally 
known  to  the  trade  and  open  to  all  on  fairly  equal  terms.  To  return 
to  the  case  of  free  wire  communication,  in  case  a  majority  of  com¬ 
mission  men  are  opposed  to  such  a  competitive  method  and  do  not 
practice  it  either  by  use  of  private  or  of  public  wires  it  is  tabooed 
as  an  attempt  to  obtain  a  special  price  advantage  and  is  ruled  to  be 
a  violation  of  the  commission  rule.  Where  the  prevailing  majority 
favors  it,  it  is  not  considered  such  a  violation. 

It  is  very  apparent  that  the  commission  rule  is  defined  largely 
by  reference  to  the  prohibitions  against  violations.  These  rules 
will  be  considered  in  detail  after  showing  the  application  of  the  rule 
to  purchases  direct  from  the  country. 

/  Section  8.  The  commission  rule  as  applied  to  buying  and  shipping  on 

order. 

The  commission  rates  provided  in  exchange  rules  for  buying  and 
shipping  out  of  the  market  apply  solely  to  the  operations  of  ship- 
]>ei*s  on  commission  and  are  set  forth  in  the  following  table: 


Rulings  of  the  board  of  directors,  Jan.  4, 1910. 
«  Mpls.,  p.  68  (Circular  249). 

<'  Oma.,  1918  rules,  p.  C9. 


Table  69. — Commission  rates  for  buying  and  shipping  on  order  at  specified  exchanges  in  191S. 


EXCHANGE  RULES  AND  REGULATIONS 


233 


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234 


TEEMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


It  lias  been  at  times  suggested  that  shippers;  alsO;  should  bo 
rcH|uired  to  add  to  their  charges  a  margin  equivalent  to  these  rates 
just  as  buyers  are  required  to  deduct  such  a  margin  when  bringing 
grain  into  the  market.  Such  an  extension  of  the  rule  was  suggested 
in  Minneapolis  in  1910.  The  amendment  suggested  at  that  time 
would  have  undertaken  ''to  require  members  of  the  chamber  of 
commerce  selling  grain  or  seed  to  outside  members  of  eastern  buyers 
to  exact  a  profit  over  and  above  the  Minneapolis  prices  for  such  grain 
or  seed  which  should  be  equal  to  the  commission  charged  for  buying 
and  shipping  the  same;  and  in  addition  to  charge  all  other  expenses, 
such  as  interest  on  advances,  etc.,. which  the  commission  merchant 
buying  and  shipping  grain  for  the  outside  mill  or  eastern  buyer  would 
bo  compelled  to  charge.” 

Such  a  provision  would  liave  been  a  radical  departure  from  a 
universal  exchange  practice  in  merchandising  grain  out  of  the  market. 
The  attorneys  of  the  chamber  advised  against  such  an  amendment. 
They  felt  that  there  might  be  "some  legitimate  contention  for  claim¬ 
ing  that  such  a  rule  would  be  a  restraint  of  trade.” 

As  in  the  case  of  consignments,  however,  shippers  on  commission 
must  charge  "all  legitimate  expenses”  in  addition  to  the  prescribed 
rates. 

It  is  shown  in  Volume  III  that  the  rule  in  force  on  the  large  primary 
markets,  although  designed  ostensibly  to  enforce  uniformity  among 
shippers  on  commission,  sometimes  operates  to  the  advantage  of  then 
competitors,  the  terminal  elevator  shippers.  This  is  especially  true 
under  a  rule  of  enumerated  charges,  such  as  has  been  finally  "worked 
out  in  Kansas  City. 

In  1917  the  Kansas  City  Board  of  Trade  adopted  an  amendment 
to  its  commission  rule  for  buying  to  ship  on  order,  to  the  effect  that 
in  addition  to  the  rates  of  commission  prescribed  the  expense  in¬ 
curred  for  transferring  such  grain  should  be  charged  to  the  party  or 
parties  for  whom  the  property  was  handled. On  June  28,  1918,  the 
board  again  amended  the  rules  so  as  to  enmnerate  precisely  the  "ter¬ 
minal  costs”  which  must  be  charged  to  the  outside  buyer  in  each 
case.  Under  this  provision — 

In  addition  to  tlic  rates  of  commission  prescribed  in  this  article  all  legitimate  ex¬ 
penses,  such  as  demurrage,-  sampling,  weighing,  inspection,  storage,  insurance,  ex¬ 
change,  interest  (at  not  less  than  6  per  cent  per  annum),  elevation,  etc.,  incurred  in  the 
handling  of  and  caring  for  property  bought  or  sold  for  a  commission  charge,  shall 
be  charged  to  the  party  or  parties  for  whom  the  property  is  handled;  it  being  the  in¬ 
tent  of  this  rule  that  the  net  amount  received  for  performing  the  service  shall  be  the 
prescribed  commission. 

<3  Chi.,  14:7;  Mil.,  32:8;  Mpls.,  8:10;  K.  C.,  21:9  (K);  Onia.,no  provision;  St.  L.,  4:12;  Peo.,  17:2;  Balto., 
(bj'-laws),  24:11. 

<3  Amendment  to  sec  9  (K)  of  art.  21. 


EXCHANGE  RULES  AND  REGULATIONS. 


235 


Section  9.  The  uniform  commission  rules  applied  to  trading  in  futures. 

The  commission  rates  for  trading  in  futures,  as  in  case  of  shipping 
on  commission,  concern  only  a  particular  class  of  traders.  While 
tliey  have  required  special  interpretation  (discussed  in  Vol.  V)  they 
do  not  involve  any  such  questions  as  have  been  outlined  under  the 
'‘  uniform  commission  rule’’  for  receiving  cash  grain. 

In  Table  70  following,  covering  seven  active  markets,  it  will  ])e 
noted  (1)  that  the  principle  of  half-rates  to  members  is  pretty  regu¬ 
larly  observed  on  seven  exchanges  (Kansas  City  makes  a  distinctio)n 
between  resident  and  nonresident  members);  (2)  that  all  the  ex¬ 
changes  considered,  except  Kansas  City,  provide  a  rate  for  clearing 
the  floor  trades  of  members  "who  personally  do  their  own  buying  and 
selling”  (indicated  as  floor  trades);  (3)  that  Kansas  City  and  New 
York  provide  special  rates  for  members  who  clear  trades  the  same 
day  (1-day  limit);  and  (4)  that  the  seven  exchanges  provide  a  pit 
brokerage  for  executing  trades  on  a  piece  basis. 

Section  10.  The  uniform  rule  as  applied  to  purchases  at  country  points. 

Application  of  the  rule. — The  "uniform  commission  rule” 
herein  discussed  applies  only  to  the  seven  primary  markets  of  Chicago, 
Minneapolis,  Milwaukee,  Duluth,  Kansas  City,  Omaha,  and  St.  Louis. 
These  markets,  as  shown  elsewhere,  have  been  developed  as  great 
concentration  centers  for  marketing  the  grain  from  producing  areas, 
and  consequently  have  regarded  the  commission  rule  as  more  or  less 
essential  to  their  system.  It  has  been  already  shown  that  minimum 
rates  of  commission  for  handling  on  consignment  have  been  prescribed 
in  all  grain  markets  maintaining  an  active  exchange.  However,  the 
commission  rule  as  extended  to  direct  car-lot  purchases  exists  only  in 
the  seven  markets  enumerated.  (See  Table  71,  p.  239.) 

Three  of  these  exchanges — Minneapolis,  Duluth,  and  Mihvaukce _ 

in  extending  the  rule  to  direct  purchases  adopt  the  rates  listed  for 
handling  on  consignment.  Buyers  arc  required  to  make  their  bids, 
offers,  and  purchases  on  the  basis  of  market  values  "loss  commission 
or  a  profit  at  least  equal  to  the  established  rates  of  commission.”^- 
The  apparent  purpose  of  the  rule  is  to  place  to-arrive  buyers  and 
track  buyers  precisely  on  the  same  basis  as  commission  merchants. 

S'®  Chi.,  14:4  (II);  Mil.,  32:1;  Mpls.,  8:6;  Dili.,  8:5;  K.  C.,  21:9;  St.  L.,  4:  p.  IS;  N.  Y.  (rules  of  the  grain 
trade),  36U;  Balto.  (by-laws),  art.  24. 

For  explanation  of  this  practice  see  Vol.  V,  ch.  2,  sec.  9. 

-  Mpls.,  8:10;  Dul.,  13:8;  *  *  or  purchase  or  offer  to  purchase,  sell,  or  ofTer  to  sell,  any  grain  or  seed 

on  track,  at  any  railway  station  outside  of,  and  for  delivery  at,  the  city  of  Duluth  or  Superior;  or  purchase, 
directly  or  indirectly,  for  his  o  wn  account,  or  otherwise,  from  any  person  not  a  member  of  the  association, 
any  grain,  seed,  or  other  commodity  dealt  in  upon  the  board,  without  charging  and  deducting  from  the 
purchase  price  the  regular  rate  of  commission,  and  interest  if  any  *  shall  be  deemed  guilty  of  a 

violation  of  the  rules  of  the  association  establishing  rates  of  commission,  and, -upon  conviction  thereof,  shall 

le  fined  not  less  than -fl, 000,  nor  more  than  $2,000,  as  the  board  of  directors  may  determine  *  *  Mil., 

32:11. 


% 


238 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


On  the  other  four  exchanges  (Chicago;  Kansas  City,  Omaha,  and 
St.  Louis),  the  commission  rule  takes  on  a  different  aspect.  These 
exchanges  have  set  up  special  schedules  of  “charges’^  to  be  included 
in  making  purchases  at  points  outside  for  shipment  to  the  market 
(the  term  “market’'  being  defined  as  all  places  where  the  local 
inspection  and  weighing  prevails).  These  rates  are  known  as  “han¬ 
dling  charges”  which  (to  quote  the  St.  Louis  rules),  “in  addition  to 
all  charges  prescribed  by  the  rules  of  the  exchange  *  *  shall 

he  deducted  from  each  and  every  such  bid  before  same  is  forwarded 
to  persons  located  outside”  of  the  market. A  brief  examination  of 
the  table  given  below  shows  that  operators  who  buy  direct  in  these 
markets — chiefly  the  terminal  elevator  interests — are  given  a  differ¬ 
ential  of  one-fourth  cent  under  the  consignment  rates,  and  that  the 
commission  rule  fails  to  be  “uniform”  by  precisely  that  margin. 
Moreover,  the  very  rules  which  specify  these  handling  charges  permit 
bidders  under  certain  conditions  to  depart  from  the  closing  price  and 
create  new  price  levels  as  they  see  fit. 


Section  11.  Solicitors  and  brokers. 

wSupplementary  to  the  rules  for  commission  men  arc  those  governing 
solicitors  and  brokers.  Because  of  the  diversity  of  trading  methods 
and  the  combination  and  overlapping  of  functions  these  three  classes 
of  agents  would  be  confused  were  it  not  for  explicit  rules  on  the  sub¬ 
ject.  Since  brokerage  rates  are  considerably  lower  than  commission 
rates,  an  attempt  has  been  made  to  clearly  define  the  term  broker  so 
as  to  prevent  evasions  of  the  commission  rules. 

In  the  seven  markets  which  maintain  the  “uniform”  rule  the 
activities  of  such  employees  or  agents  are  closely  regulated.  Thus 


in  the  Chicago  Board  of  Trade  rules  the  following  appears: 

The  employment  by  members  of  all  persons  soliciting  orders  for  the  purchase  or 
sale  of  property  for  future  delivery  upon  this  exchange,  or  for  the  purchase  or  sale  of 
property  to  be  shipped  to  this  market,  or  for  the  consignment  of  property  to  this 
market  for  the  purpose  of  sale,  or  for  the  disposition  in  any  manner  of  property  dealt 
in  upon  this  exchange,  shall  be  in  accordance  with  regulations  established  and  pro¬ 
mulgated  by  the  board  of  directors.  All  persons  soliciting  the  business  above  de¬ 
scribed  shall  be  divided  into  two  classes  first,  “Solicitors,”  and  “Brokers.”  ^3 


Employment  of  solicitors  in  primary  markets. — There  are  rela¬ 
tively  more  solicitors  and  fewer’ brokers  in  primary  than  in  secondary 
markets.  In  order  that  they  may  be  subject  to  exchange  control, 
solicitors  (in  Cliicago,  Kansas  City,  Minneapohs,  and  Duluth)  arc 
required  to  give  their  entire  time  and  services  to  one  employer  at  a 
fixed  salary,^®  which  shall  not  be  changed  oftener  than  once  in  six 
months.  That  is,  they  may  not  operate  on  a  percentage  basis. 


03  St.  L.,  1918  rules,  pp.  61  and  78;  Chi.,  p.  22;  K.  C.,  p.  101;  Oma.,  p.  72. 

61  Chicago,  Milwaukee,  Minneapolis,  Duluth,  Kansas  City,  Omaha,  and  St.  Louis. 

M  Chi.,  4:33. 

*■6  Clu.,  4:33;  K.C.,  6:18;  Mpls.,  Circular  286;  DuL,  Terms  of  license  under  rule  4,  sec.  25. 


nonmembers  and  nonresident  members,  at  seven  specified  exchanges. 


EXCHANGE  RULES  AND  REGULATIONS 


239 


s 


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From  (nonresident)  members  (no  special  rate). 
Minneapolis..] “Established  Rates  of  Commission” ^ — as  in 

Duluth . ^  Table  68,  p.  226  (rates  for  receiving  and 

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240 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


■  This  rule  does  not  obtain  in  Milwaukee,  where,  possibly  because  of 
the  difficulty  of  maintaining  the  flow  of  grain  to  that  market,  the 
om})loyment  of  solicitors  for  cash  grain  on  a  percentage  basis  is  not 
held  to  be  a  violation  of  the  commission  rule  and  is  allowed.^^  . 

In  the  resolution  adopting  the  requirement  for  solicitors,  the 
Minneapolis  directorate  stated  that: 

It  lias  come  to  the  knowledge  of  this  board  that  many  of  the  regular  traveling  repre¬ 
sentatives  of  members  of  this  association  are  unfamiliar  vdth'the  purposes  and  objects 
of  this  association;  that  they  are  sometimes  employed  for  short  intervals  under  cir- 
(  umstances  which  amount  to  an  evasion  of  the  commission  rules;  that  they  not  infre¬ 
quently  reflect  wrongfully  upon  this  association  or  its  members  in  their  eager  efforts 

to  obtain  or  further  individual  business.  *  *  * 

Whereas,  such  regular  traveling  representatives  should  be  bound  by  and  informed 
upon  the  charter,  rules,  regulations,  customs,  and  resolutions  of  this  association,  which 
in  the  judgment  of  this  board  can  best  be  accomplished  through  the  system  of  license 
herein  provided.  *  *  * 

On  the  four  exchanges  mentioned  it  is  presumed  that  solicitors  in 
the  majority  of  cases  will  be  nonmembers,  that  is,  traveling  employees 
of  a  member  of  the  exchange,  and  so  long  as  they  are  not  on  a  broker¬ 
age  basis,  membership  is  not  reeptired  as  a  qualification.  In  Omaha, 
however,  the  distinction  between  solicitor  and  broker  is  not  sharply 
made  and  it  is  required  that  '‘such  traveling  representative,  solicitor, 
or  broker  shall  be  a  member  of  the  Omaha  Grain  Exchange  in  good 
standing,”"®  unless  he  take  out  a  broker’s  (solicitor’s)  special  license, 
which  license  is  restricted  to  trading  outside  of  Nebraska  and  Iowa. 

Yet  this  Omaha  rule  is  not  sueh  a  radical  requirement  as  it  might 
seem,  since  the  general  purpose  of  all  regulations  applied  to  traveling 
representatives  is  to  make  them  as  amenable  to  the  government  of 
the  association  as  if  they  were  members.  In  fact,  the  Minneapolis 
legulation  makes  it  part  of  the  license  agreement— , 
tbat  in  all  his  dealings  as  solicitor  he  shall  assume  a  fair  and  equitable  attitude  to¬ 
ward  this  association  and  all  its  members,  and  abide  by  and  be  subject  to  the  charter, 
rules,  regulations,  customs,  and  resolutions  of  this  association,  the  same  as  if  he 
Avere'a  member  of  this  association  *  *  "  and  that  he  may  be  tried  by  the  board 

of  directors  of  this  association  herein  upon  the  same  procedure  as  a  member  could 

be  tried.  *  *  * 

Considering  the  cost  of  membership  certificates  it  would  be  mani¬ 
festly  impractical  to  require  solicitors  to  be  members  of  the  exchange 
ii\  markets  where  competition  for  the  country  grain  is  largely  carried 
on  through  these  traveling  representatives.  This  is  obviated  by 
ruling  that  the  approval  of  the  membership  committee  of  the  board 
of  directors  (or  of  the  whole  board)  is  prerequisite  to  the  appoint¬ 
ment  of  solicitors  in  Minneapolis,  Duluth,  Chicago,  Kansas  City,  and 
Omaha."^  _ _ _ _ _ 

Ruling  of  Oct.  4, 1909;  still  in  force  but  does  not  apply  to  solicitors  for  futures  business;  who  must  be  on 
a  fixed  salary  only,  as  indicated  in  sec.  2  of  rule  32. 

-8  By  laws.  III,  5.  ■  ri 

bnipls.  Circular  286;  Dul.  4:25  must  be  approved  by  board  of  directors;  Chi.  4:33;  K.  C.  6:18;  Oma. 

(By-Laws)  3:5  must  be  a  member. 


EXCHANGE  RULES  AND  REGULATIONS. - 


241 


Employ:ment  of  brokers  under  the  uniform  commission 
RULE. — The  seven  primary  markets  already  mentioned  define  “bro¬ 
ker’^  so  as  to  distinguish  clearly  from  receivers,  shippers,  and  other 
dealers,  and  the  rules  are  designed  to  prevent  these  latter  members 
from  operating  on  a  brokerage  ba^is.  Brokers  are  required  to  dis-  1 
close  an  acceptable  principal  at  the  time  of  making  the  transaction 
or  assume  liability  for  the  fulfillment  thereof.'^®  That  is,  only  the 
broker  is  recognized  in  the  rules  of  the  grain  markets; 
otherwise  he  is  a  commission  man. 

The  St.  Louis  rules  give  the  definition  of  broker  prevailing  in 
these  primary  markets,  i.  e. : 

One  wlio  executes  contracts  or  transactions  in  the  name  or  behalf  of  another,  and 
who  does  not  receive,  deliver,  ship,  pay  for,  or  collect  for  the  property  contracted, 
either  in  whole  or  in  part,  but  who  merely  executes  transactions  or  contracts  in  the 
name  and  for  the  account  of  those  who  employ  him  for  that  purpose. 

The  brokerage  rates,  which  are  listed  in  Table  72  (p.  242)  below,  are 
allowed  on  business  with  members  only.®^  They  do  not  apply  to  coun¬ 
try  purchases,  which  operations  must  be  handled  on  a  strictly  com¬ 
mission  basis.®3  They  may  apply  to  the  business  of  securing  ship¬ 
ments  out  of  the  market,  or  to  the  export  business  which  docs  not 
interfere  with  the  present  commission  rules. 

«0Chi.  14:1  (c):  Mil.  8:1;  Mpls.  8:1;  Dul.  Rule  13;  K.  C.  21:8;  Oma.  1:4;  St.  L.  13:3. 

61  St.  I..  4:12.  Cf.  Definition  adopted  by  Grain  Dealers’  National  Association,  Oct.  13, 1919: 

“Rule  36.  Brokers:  (a)  A  broker  is  one  who  is  engaged,  for  others,  on  a  commission  basis,  in  negotiating 
contracts  relative  to  property  with  the  custody  of  which,  actual  or  constructive,  he  has  no  concern! 

“A  person  is  not  a  broker: 

“First,  who  has  possession  and  absolute  control  of  merchandise  shipped  to  him  to  sell  and  colled  the  ])rice. 
(Therefore,  a  commission  merchant  to  whom  grain  is  consigned  for  sale  is  not  a  broker.) 

“Second,  who  receives  a  salarj'^  instead  of  a  commission  or  brokerage. 

“Third,  who  acts  for  one  principal  to  the  exclusion  of  all  others. 

“(b)  A  broker  has  power  to  bind  his  principals  only  to  the  extent  of  his  instructions,  and  the  principals 
are  not  liable  for  any  acts  of  the  broker  in  excess  of  such  instructions. 

“(c)  A  broker  who.  in  good  faith  or  otherwise,  exceeds  his  authority  is  liable  for  resulting  damages. 

“(d)  A  broker  who  negotiates  a  contract,  without  disclosing  his  principals,  is  responsible  as  principal 
until  the  real  principal’s  name  is  given  up  a)id  accepted  by  the  other  party. 

“(e)  A  broker  who,  in  good  faith,  negotiates  a  contract  which  Is  in  accord  with  instructions  from  both 
his  principals,  who,  at  the  time  of  negotiation,  advises  each  principal  the  name  of  the  other,  and  who  com¬ 
pletes  such  negotiaticiis  in  accordance  with  the  rules  and  customs  governing  such  tran.sactions,  thereby 
fulfills  all  his  obligations,  and  has  no  further  liability  to  either  of  his  principals.  The  contract  so  nego¬ 
tiated  is  valid  and  binding  between  the  buyer  and  seller,  the  same  as  if  it  had  been  negotiated  directly  be¬ 
tween  them.” 

(The  American  Elevator  &  Grain  Trade,  Chicago,  Oct.  1.'),  1919  p.  3390 

62  The  Chicago  rules  (rule  14,  sec.  1),  in  stipulating  that  “members  may  act  as  brokers  between  othe 
members  only,”  add  a  proviso  allowing  members  to  “give  up”  principals  who  are  not  members  on  c.  i.  f. 
c-ontracts  for  shipment  out  of  the  market.  This  is  with  the  understanding  “that  in  such  cases  brokers 
shall  be  held  liable  both  for  the  acceptance  of  such  contracts  and  for  their  faithful  performance  under  the 
rules  of  this  association.”  Kansas  City  has  a  similar  provision  (6  : 12). 

«*Chi.4  :33  (exception  as  to  nonresident  members);  Mil.  32: 10;  Mpls.  8: 13.  Jn  Duluth  the  only 
brokerage  is  for  flaxseed  futures.  The  payment  of  any  compensation  to  brokers  “to  influence  consign¬ 
ments  or  shipments  of  grain”  is  listed  as  a  violation  of  the  commission  rule  (rule,  13,  sec.  8).  K.  C.  21°;  9 
(G);  Oma.,  1918  rules,  p.  68  (G).  St.  L.,  rule  13,  sec.  3,  requires  members  to  act  as  brokers  for  members 
only,  and  rule  4,  see.  12,  forbids  brokers  to  “receive,  deliver,  ship,  pay  for,  or  collect  for  ”  liic  grain. 

168G93°— 20 - 16 


Table  72. — Cash  hroherst'  rales  on  15  specAfied  exchanges. 


1 

1 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


<S> 


PP 


:3 

pq 


<73 

u 


•2  : 
o  : 


•  Hm 


)  O 
)  O 


o 

4^ 


JO 


o 

iO 


o 


a;) 


c3 

O 


Co  , 

o  : 


»o 

C4 


o 

o 


C3 

O 


o  o 


>.o 


o 


lO 


3 

PP 


o 

o 


o 


o  : 


lO 

(M 


O 

o 


O 

lO 


s 


.  filiO  Wco  *“1» 


r^50 


rSiO^'f  r“,95 


30 -t« 


3 


o 

c 


r<^  r-!'je  H;<d  H30  • 


C3 

o 


<^8  :  : 


lO 


O 

^9 


lO 


O 

»o 


o 


O 

o 


a 

PQ 


Co 

O 


C*^ 


o 

o 


a. 


c3 


cj 


CD 


.  h!5»5  «!»  H50 


c3 

u 


oo 
lO  o 


40 


o 


o 

40 


o 


C3 

<D 


PP 


•yoi 

CM 


O 

o 


r*;-^  r->,A 


c3 

o 


>  o 

i  o 


o 


lO 


o 

»o 


O) 


1  ^ 


d 


!  P^  c3 

:a£i  :s 

,  c3  <a^  <D  3 

:  a  a  o 

:  a  0^0 

^  w  O  **-*  . . 

,  'rt  vh  ^  O  o 

.  o-Q 

^  •  tj  M  a>  o3 
jH  •  tjO®  «X2  «-i 

c3  ®^>ag.^Sfq 

^  O  O  r  s  ^  ^ 

c3  T?  ^ 


O) 

G3 

Ui 


O 

O 


;  •  a? 

I  •  bJO 

•S 


O 


bO 


W  ^  ,  C3  . 

c1Cx3  o 

CD4-> 

P3  d  P- 


a.s  m’SJ:  S 

a  ®5  a  a  3  g  3  c3 

rap:cA>o2dW“jO  ■ 


C/j  r/>  L.  —a  i—J 

3c3(aP^3Q3c3 

w  dM^qp^-c: 

.-,  3  c3  a  .2 

Sfi  w  o 


Hr 

'»*. 

y 

f« 


i 


EXCHANGE  RULES  AND  REGULATIONS. 


243 


31x0  Milwaukee  rules  stipulate  tliat  the  casli  brokerage  rates  of  ^ 
cent  do  not  apply  to  sales  “for  ^spot’  delivery  or  Ho  arrive’  which 
tire  to  be  filled  by  car  shipments”;  that  is,  they  do  not  apply  to  the 
business  normally  handled  by  receivers  on  commission,®^ 

Tn  Minneapolis,  where  tlie  commission  rule  is  most  rigidly  enforced, 
the  term  “broker”  is  to  be  “construed  by  the  members  of  the  chamber 
of  commerce  and  by  all  courts  to  mean  a  member  of  the  Chamber 
of  Commerce  of  Minneapolis  who  acts  for  another  member  in  making 
any  trade  on  the  floor  of  the  chandxer,  and  who  reports  the  name  of 
the  member  for  whom  he  acts  at  the  time  of  makins:  the  trade. 


As  already  noted,  in  Chicago  a  concession  was  made  to  nonresident 
members  so  that  they  might  act  as  “  commission-participatihg  solicit¬ 
ors”  at  a  -^r-cent  brokerage  under  strict  regulation.  It  is  generally 
true,  however,  that  the  brokerage  rates  for  the  seven  enumerated 
primary  markets  apply  to  trades  on  the  floor  between  members  en¬ 
gaged  in  either  cash  or  future  trading. 

The  law  of  principal  and  agent  of  course  applies  to  such  trades. 
This  is  recognized  in  the  provisions  of  Chicago  and  Kansas  City  that 
the  brokerage  compensation  shall  not  apply  on  grain  purchased  from 
a  concern  in  which  the  broker  has  any  financial  interest  whatsoever.®® 


Employment  of  brokers  in  secondary  and  export  markets. — ■ 


Peoria  is  classed  as  a  primary  market,®'  ])ut  for  the  purposes  of 
this  discussion  its  rules  are  similar  to  those  of  the  secondary  ter¬ 
minals.  There  is  no  rule  for  solicitors  provided  by  this  exchange 
and  the  rule  for  “brokerage”  presumes  that  shipments  of  grain  will 
Ixe  solicited  by  brokers  (who  need  not  be  members).  Such  business 
may  be  handled  under  brokerage  rates  by  persons  c[ualified  under  the 
definition  of  “broker,”  that  is,  “having  no  ownership  directly  or 
indirectly  in  the  grain  bought  or  solicited  for  consignments  nor  can 
he  be  in  the  employ  of  the  owner  of  such  grain.”  ®® 

In  Cincinnati  and  Buffalo  the  distinction  between  brokerage  and 
handling  on  commission  is  based  on  the  payment  of  advances  by  the 
factor.  Members  of  these  exchanges  may  operate  as  brokers  at  the 
minimum  brokerage  rate  “so  long  as  they  do  not  finance  the  trans¬ 
actions;  in  which  case  the  commission  rule  shall  apply.”  ®® 

Export  brokers. — At  export  points  the  brokerage  rates  for 
cash  transactions  and  the  rules  for  their  enforcement  are  relatively 
more  important  than  in  most  of  the  inland  markets.  This  difference 
is  reflected  in  the  broader  application  given  to  these  rates. 


M  Rule  32,  sec.  10.  See  p.  329. 

65  Mpls.,  8:13.  63  Rule  18. 

66  Chi.,  4:33;  K.  C.,  6:18;  Peo.,  rule  18.  Cin.,  15:2;  Buf.,  16:1. 


N 


244 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


For  example,  the  by-laws  of  the  Baltimore  Chamber  of  Commerce 
list  the  following  services  for  which  ^‘brokers  or  agents’’  may  make 
a  minimum  charge  of  f  cent  per  bushel: 

1 .  Shipping  grain  for  export. 

2.  Receiving  and  shipping  grain  for  export. 

3.  Exchanging  inland  for  ocean  documents. 

4.  And/or  engaging  ocean  freight. 

If  such  brokers  ^‘buy  or  sell  the  grain,  or  perform  any  service  other 
tlian  as  above  specified”  the  regular  commission  rates  must  be 
cliarged.  The  brokerage  charge  is  also  allowed  in  Baltimore  on  the 
following  classes  of  business: 

1.  Sales  of  ex-lake  grain  for  export,  or 

2.  Grain  for  export  sold  on  ‘Gvestern  terms,”  i.  e.,  western  weights  and  grades;  also 

3.  Grain  sold  for  export  f.  o.  b.  vessel  or  c.  i.  f.  to  or  through  this  or  other  Atlantic 
or  Gulf  ports,  or 

4.  Grain  sold  from  Baltimore  c.  i.  f.  to  New  York  or  Philadelphia,  when  one  or 
both  principals  reside  in  Baltimore  and  either  is  a  member  of  the  Baltimore  Chamber 
of  Commerce.'® 

Analysis  of  this  rule  and  of  usage  in  Philadelphia  and  New  York 
shows  that  these  export  brokers,  like  those  of  the  western  markets 
(i.  e.,  traders  operating  under  brokerage  rates),  must  act  solely  as 
agents  and  that  they  do  not  assume  responsibility  for  delivery  or 
collection  after  a  contract  is  made. 

Section  12.  Regular  warehouses.  • 

General  requirements. — Grain  in  storage  is  the  basis  for  all 
future  trading  on  the  exchange  as  well  as  for  considerable  cash  trad¬ 
ing  carried  on  by  shippers  and  consumers  in  the  terminal  market. 
Coordinate  with  the  maintenance  of  contract  grades,  the  exchanges 
have  established  a  supervision  over  warehouse  grain  with  a  view  to 
insuring  the  C[uality,  cpiantity,  and  sound  condition  of  such  grain 
when  deliverable  on  warehouse  receipts.  In  order  to  insure  the  con¬ 
stant  validity  of  the  receipts  deliverable  on  future  contracts  the 
licensmg  and  control  of  ‘‘regular”  warehouses  has  been,  a  funda¬ 
mental  necessity. 

The  elevators  and  warehouses  declared  regular  in  Chicago,  Min¬ 
neapolis,  St.  Louis,  and  Peoria  are  those  of  firms  engaged  as  “public 
warehousemen”  as  defined  by  the  State  laws.'^^  On  the  other  hand, 
the  rules  of  Duluth  and  Kansas  City  expressly  authorize  both  “pub¬ 
lic”  and  “private”  warehouses  to  be  declared  regular.'^^ 

Warehouses  may  become  “regular”  (or  licensed)  upon  application 
to,  and  approval  by,  the  board  of  directors.  The  following  form  of 
application  is  prescribed  in  Duluth:’^ 

w  Balto.  (by-laws),  art.  24,  secs.  2,  4;  see  also  N.  Y.  (Rules  of  the  Grain  Trade),  rule  33. 

7)  Chi.,  21:1;  AIpls.,  21:1;  St.  L.,  regulations  governing  regular  warehouses.  Nos.  8  and  9;  Peo..  14:1. 

In  a  resolution  of  August  7,  1889,  the  Minneapolis  directory  required  all  elevators  to  conform  to  the  State 
law  in  order  to  be  considered  regular  and  that  no  receipts  could  be  delivered  on  contract  except  such  as  had 
been  registered  by  the  State  registrar. 

n  Dul.,  17:1;  K.  C.,  13:1. 

«Dul.,  17:18. 


EXCHANGE  RULES  AND  REGULATIONS. 


245 


FORM  OF  APPLICATION^. 

To  the  president  of  the  Duluth  Board  of  Trade: 

Sir:  The  undersigned  liereby  makes  application  to  the  Duluth  Board  of  Trade  to 

have - elevator - of  the' town  of  State  of _ declared  ‘‘regular”  by  the 

Duluth  Board  of  Trade,  to  the  end  that  said  elevator _ and  all  the  warehouse  and 

elevator  receipts  issued  for  grain  stored  by  the  said  ....  shall  have  and  be  entitled 
to  the  same  rights,  privileges,  and  qualities  as  are  accorded  to  the  elevators,  and 
warehouses  now  admitted  as  “regular”  and  to  elevator  and  warehouse  receipts  regu¬ 
larly  issued  for  grain  stored  therein,  and  does  agree  that  the  said  elevator  ....  will 
be  managed  strictly  in  accordance  with  the  laws  of  the  State  in  which  it  is  located 
relating  to  such  grain  warehouses  and  elevators  and  that  the  business  therein  to  be 
carried  on  and  be  conducted  will  be  in  strict  accordance  with  the  rules,  regulations, 
and  decisions  of  the  Duluth  Board  of  Trade  and  its  directors  relating  to  inspection, 
weighing,  registering  of  elevator  and  warehouse  receipts,  general  storage  and  elevator 
charges  and  in  other  particulars  as  are  now  or  may  hereafter  be  prescribed. 

This  application  is  accompanied  by  a  bond  in  the  sum  of . ($ . )  dollars 

in  the  form  prescribed  by  your  board  and  the . will  furnish  any  other  additional 

bond  which  may  be  required  by  the  board  of  directors  of  the  Duluth  Board  of  Trade. 

Signed . 

As  a  rule  such  authorization  must  be  renewed  annually  and  is 
revocable  at  any  time.  ‘Regular  warehouses  are  required  to  conform 
to  at  least  the  following  conditions: 

(1)  They  must  store  only  grain  which  has  boon  ofllcially  inspected 
and  weighed. 

(2)  In  five  markets  (Chicago,  Duluth,  Kansas  City,  Peoria,  and 
New  York)  the  receipts  must  be  registered  and  signed  by  an  exchange 
registrar  or  other  officer  appointed  for  that  purpose."^^ 

(3)  The  proprietors  must  be  of  good  financial  standing  and  credit 
and  must  give  bond  as  surety  for  the  grain  handled.'^'’ 

7<Chi.,  21:1,  also  “eleventh”  regulation  on  p.  119  of  1918  rules;  Mil.,  31:1,  5:  Mpls.,  21:1;  Dul.,  17:8;  K.  C., 
13:5;  Oma.,  4:3;  St.  L.,  1917  rules,  p.  69;  Peo.,  14:2  (“When  grain  is  received  into  a  warehouse  without 
having  been  inspected,  it  must  be  stored  in  a  special  bin,  and  not  mixed  with  the  grain  of  other  owners”); 
Cin.,  11:1;  Phila.,  4:2;  N.  Y,  (rules  of  the  grain  trade),  5:2. 

'a  Chi.,  21:1;  Duh,  17:15;  K.  C.,  13:7;  N.  Y.  (rules  of  the  grain  trade),  4:3. 

76  Chi.,  21:1;  Mil.,  31:2,  10;  Mpls.,  21:2  (no  bond  re.'iuired  in  Mpls.  rules  or  Minnesota  warehouse  law); 
Dul.,  17:2;  K.  C.,  13:2,  5.  “Proprietors  or  managers  *  >i<  *  shall  be  in  unquestioned  good  financial 
,  ^t^nding  and  credit.”  Insurance  in  a  “board”  company  must  be  obtainable.  Must  file  with  the  regis¬ 
trar  “a  bond  with  good  and  sufficient  sureties,  to  be  approved  by  the  board  of  directors,  for  the  penal  sum 
of  no  less  than  10  cents  per  bashel  upon  the  capacity  of  the  house.”  Oma.,  5:18:  St.  L.,  8:10  and  p.  70, 
par.  12.  No  provision  as  to  bond  in  other  exchange  rules.  * 

The  Omaha  rule  arranges  a  sliding  scale  so  that  “all  elevators  and  warehouses  desiring  to  issue  warehouse 
receipts”tobecomeregularunderthcserules,  shall  give  bond,  in  the  form  prescribed  and  to  be  approved 
by  the  board  of  directors,  in  the  following  amounts: 


Capacity. 

Unencum¬ 

bered, 

Encum¬ 

bered. 

50,000  to  100,000 . 

S10,000 
15  000 

100,000  to  1.50,000 . 

oo  nfv\ 

1.50,000  to  200,000 . 

20  000 

UW 

30,000 

200,000  to  2.50,000 . 

25,000 
.30  000 

2.50,000  to  300,000 .  '  ' 

45,000 

Vi  Am 

;i00,(XXI  to  350,000 . 

35,000 
40  000 

3.50,000  to  400,000 . 

UU*J 

AAA 

400,000  to  .500,000 . •. .  . 

45  000 

AAA 

500,000  upward . 

.50  000 

*7^  n/krt 

the  State  of  bonds  required  as  stated  above,  de  duction  may  be  made  of  the  bond  required  by 


246 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


V' 


(4)  They  must  agree  to  furnish  exchange  officials  with  regular 
reports  of  grain  received  and  delivered  showing  the  corresponding 
receipts  issued  and  canceled,  and  with  periodic  statements  of  bal¬ 
ances  in  storage. 

These  requirements  vary  in  detail  on  the  various  exchanges.  The 
Chicago  Board  of  Trade  gives  the  registrar  broad  discretion  as  to  the 
requirement  of  reports,  the  warehouses  to  furnish  him  ‘^all  needed' 
information  to  enable  him  to  keep  a  correct  record  and  account  of 
all  grain,  together  with  the  grade  thereof,  received  and  delivered  by 
them  daily  and  of  that  remaining  in  store  at  the  close  of  each  wcek.^' 
Many  of  the  exchanges,  however,  outline  the  specific  requirements. 
The  following  regulation  adopted  by  the  Milwaukee  Chamber  of 
Commerce  in  1896  typifies  exchange  supervision  of  regular  ware- 
liouses: 

The  proprietor  or  proprietors  of  every  warehouse,  made  and  declared  regular  for  the 
storage  of  grain  under  the  rules  of  the  Chamber  of  Commerce  of  the  City  of  Milwaukee, 
shall  make  a  daily  report  to  the  secretary  of  said  chamber  of  commerce  of  the  quan¬ 
tity  and  grade  of  each  kind  of  grain  received  into  and  delivered  out  of  such  regular 
warehouse,  respectively,  during  the  24  hours  ending  at  the  close  of  business  of  the 
preceding  day,  and  a  weekly  report  every  Monday  of  the  quantity  and  grade  of  each 
kind  of  grain,  or  ungraded  grain,  remaining  in  store  in  such  regular  warehouse  at 
the  close  of  business  on*  the  last  business  day  of  the  preceding  week.  Said  weekly 
report  shall  include  all  grain  stored  in  said  warehouse  at  the  time  specified,  whether 
in  special  bins  or  otherwise.'^ 

(5)  Regular  warehouses  must  bo  conveniently  situated  with  regard 
to  transportation  facilities  and  must  possess  modern  equipment  for 
the  receiving,  handling,  and  delivery  of  grain  in  bulk.  The  Chicago 
requirement  is  that  they  so  situated  that  they  can  be  conven¬ 
iently  approached  by  vessels  of  ordinary  draft,  and  shall  be  connected 
by  railroad  tracks  with  one  or  more  of  the  eastern  railway  lines.’' 

In  Minneapolis  the  qualification  is  based  on  switching  charges,  viz: 

All  elevators  to  become  “regular”  under  the  rules  of  the  chamber  of  commerce  shall 
be  connected  by  railroad  tracks  with  one  or  more  of  the  eastern  railway  lines  and  all 
local  flour  mills,  so  that  the  switching  charges  from  the  said  warehouses  and  elevators  • 
to  each,  and  all  of  the  said  eastern  railway  lines  and  mills,  shall  not  be  in  excess  of 
$3  per  car,  and  if  in  excess  of  that  amount  such  excess  shall  be  absorbed  by  the  ele¬ 
vator  company.^ 

It  is  generally  understood  that  regular  elevators  shall  be  of  com¬ 
paratively  large  capacity.  Peoria,  for  example,  still  stipulates 
100,000  bushels  as  a  minimum, but  with  the  continuous  increase  in 
size  of  elevators  in  the  major  markets  to-day  it  is  considered  unnec¬ 
essary  to  prescribe  the  size  by  rule. 


”  Chi.,  1918  Rules,  p.  118  “Fourth”;  see  also  Mpls.,  21:1. 

78  Mil.,  1917-1918  Report,  p.  112;  see  also  Dul.,  17:11;  K.  C.,  13:5  (g);  Oma.,  4:5;  St.  L.,  p.  07,  par.  2;  Cin. 
11:1;  Phila.  (Rules  of  the  Grain  Trade),  4:8;  N.  Y.  (Rules  of  the  Grain  Trade),  5:9. 

78  Chi.,  1918  Rules,  p.  118;  Mil.,  31;  3,4;  Dul.,  17:8;  K.  C.,  13:3;  Oma.,  4:1;  St.  L.,p.67;  Peo.  ,14:1;  Cin., 
0:2;  Phila.  (Grain  Rules),  4:2;  N.  Y.  (Rules  of  the  Grain  Trade),  5:2. . 

80  Mpls.,  21:3. 

87  Peo.,  14:1. 


EXCHANGE  RULES  AND  REGULATIONS. 


247 


(6)  ‘‘Public’^  warehouses  are  generally  prohibited  by  State  ware- 
Iiouse  laws  from  making  any  discrimination  between  persons  offering 
grain  for  storage.  Restrictions  against  discrimination  by  regular’' 
warehouses  are  also  found  in  exchange  rules  in  Milwaukee  and  St. 
Louis. The  St.  Louis  Exchange  requires  that — • 

I'ho  proprietors  or  managers  of  such  ele^'ators  or  ^varehouses  shall  receive  for  storage 
any  grain  that  may  be  tendered  them  in  the  usual  manner  'With  which  elevators  or 
warehouses  are  accustomed  to  receive  the  same  in  the  ordinary  and  usual  course  of 
business  and  shall  not  discriminate  between  persons  desiring  to  avail  themselves  of 
elevator  or  warehouse  facilities,  and  the  schedule  of  charges  for  said  elevator  or  ware¬ 
house  service  shall  be  uniform,  regardless  of  quantities  of  lots  so  offered  or  received. 

(7)  The  mixing  of  different  grades  of  grain  in  regular  warehouses 
is  forbidden  by  rule  in  Chicago,  Milwaukee,  Omaha,  St.  Louis, 
Philadelphia,  and  New  York,  but  not  in  the  rules  of  other  cx- 
changes.^3  Mixing  of  different  lots  of  the  same  grade  is  the  regu¬ 
lar  warehouse  practice  except  where  grain  is  special  binned  (which  is 
not  ''good  delivery”  on  future  contracts).  To  cite  the  Milwaukee 
rule: 

In  no  case  shall  grain  or  llaxsc-ed  of  different  grades  be  mixed  together  while  in 
store,  but  if  the  owner  or  consignee  so  request,  and  the  warehouseman  consent  thereto, 
his  grain  of  the  same  grade  may  be  kept  in  a  bin  by  itself  apart  from  that  of  the  owners 
of  other  grain  or  flaxseed,  which  bin  shall  thereupon  be  marked  and  known  as  a  sepa- 
tate  bin  or  special  bin.*^ 


Liability  for  damaged  grain. — Regular  elevators  as  bailees  arc 
legally  liable  for  losses  and  damages  resulting  through  their  neglect. 
When  grain  becomes  out  of  condition  through  causes  beyond  their 
control  they  may  generally  invoke  rights  established  either  in  State 
law  or  by  exchange  regulation  for  waiving  such  liability.  The 
Illinois  railroad  and  warehouse  law  lays  down  the  rule  for  Chicago 
and  Peoria  which  is  followed  in  substance  by  exchange  rules  in 
Kansas  City,  Omaha,  Philadelphia,  and  New  York.®^ 

With  regard  to  the  responsibility  of  warehousemen  for  damaged 
grain,  this  Illinois  act  provides  that — 

no  public  wareliousoman  sliall  1)e  lield  responsible  for  any  loss  or  damage  to  i)roperty 
by  fire  while  in  liis  custody,  provided  reasonable  care  and  vigilance  be  exercised  to 
protect  and  preserve  the  same,  nor  shall  be  held  liable  for  damage  to  grain  by  heating, 
if  it  can  be  shown  that  he  has  exercised  proper  care  in  handling  and  storing  the  same 
and  that  such  heating  or  damage  was  the  result  of  causes  beyond  liis  control. ' 


82  Mil.,  21:1;  St.  L.,1917  Rules,  p.  G9. 

83 Ill.  constitution  oflSTO,  see.  2,  and  Chi.,  1918  rules,  p.  118;  Mil.,  31:1.  See  Minnesota  Railroad  and  Ware¬ 
house  Conunission,  “Laws,  Rules,  and  Regulations,”  191G,  p.  6,  where  the  storage  contract  specifics,  “This 
grain  has  been  received  and  stored  with  gram  of  the  same  lawful  grade.”  K.  C.  (c)  (“The  mixing  together 
of  grain  of  different  kinds,  the  mi.xing  of  unsound  and  sound  grain,  the  introduction  of  foreign  substances 
of  any  kind  whatsoever  into  grain  of  any  kind,  and  the  mixing  of  damaged  corn  with  com  of  higher  grades  * 
by  elevators  or  warehouses  made  regular  by  this  board  of  trade,  except  as  may  be  provided  by  the  laws 
of  the  State  in  which  said  elevator  or  warehouse  is  located,  is  hereby  forbidden:  raid  any  such  elevator  or 
warehouse  violating  this  regulation,  either  for  itself  or  on  account  or  liy  order  of  any  person  or  persons 
whatsoever,  shall  be  declared  irregular'-);  Oma.,  4:3;  St.  I/.,  1917  rules,  p.  GO;  Phila.,  4:9;  N.  Y.,  5-0 
8<  Mil.,  31:1. 


83  Hurd,  Rev.  Stats.,  Illinois,  1917,  p.  2368;  Peo.,  14:3;  K.  C.,  13:5  (d);  Oma.,  4:G;  Phila.,  4:6;  N.  Y.,  5:7. 


248 


TERMINAL  GRAIN  AIARKETS  AND  EXCHANGES. 


Bui  it  is  also  stated  that — 

any  warehouseman  guilty  of  any  act  or  neglect,  the  effect  of  which  is  to  depreciate 
proj>erty  stored  in  the  warehouse  under  his  control,  shall  be  held  responsible  as  at 
Common  law,  or  upon  the  bond  of  such  warehouseman,  and  in  addition  tliereto,  the 
license  of  such  warehouseman,  if  his  warehouse  be  of  class  A,  shall  be  revoked.^® 

In  case,  however,  any  warehouseman  of  class  A  or  B  shall  discover  that  any  portion 
of  the  grain  in  his  warehouse  is  out  of  condition  or  becoming  so,  and  it  is  not  in  his 
power  to  preserve  the  same,  he  shall  immediately  give  public  notice,  by  advertise¬ 
ment  in  a  daily  newspaper  in  the  city  in  which  such  warehouse  is  situated  and  by 
])osting  a  notice  in  the  most  public  place  (for  such  a  purpose)  in  such  a  city,  of  its  actual 
condition;  as  near  as  he  can  ascertain  it;  shall  state  in  such  notice  the  kind  and  grade 
ol  the  grain  and  the  bins  in  which  it  is  stored;  and  shall  also  state  in  such  notice  the 
receipts  outstanding  upon  which  such  grain  muII  be  delivered,  giving  the  numbers, 
amounts,  and  dates  of  each — which  receipts  shall  be  those  of  the  oldest  dates  then  in 
circulation  or  uncanceled. 

The  provision  for  ‘‘posting”  damaged  grain  incorporated  in  the 
exchange  rules  in  Chicago,  Milwaukee,  Duluth,  St.  Louis,  and  Cin¬ 
cinnati  is  based  on  the  unwillingness  of  the  warehouse  to  replace- 
the  damaged  grain; 

Tlie  proprietors  or  managers  of  such  elevators  or  warehouses  shall  promptly,  by 
written  notice  to  the  Secretary  of  the  Merchants’  Exchange,  which  notice  shall  imme¬ 
diately  be  posted  upon  the  bulletin  board  of  the  exchange,  advise  the  trade  and  public 
nf  any  damage  to  grain  held  in  store  by  them,  whenever  such  damage  shall  occur  to  an 
extent  that  will  render  them  unwilling  to  purchase  and  withdraw  from  store,  at  their 
own  cost,  all  such  damaged  grain.®® 

In  Duluth,  however,  the  regular  warehouses  must  assume  liability 
for  the  condition  of  all  contract  grain  except  corn.®® 

This  latter  rule  recognizes  the  fact  that  frequent  “postings”  of 
“out  of  condition”  grain  operate  to  prejudice  an  elevator  in  the 
e^ms  of  the  trade  and  that  warehouse  receipts  will  command  gi’ain 
equivalent  to  that  for  which  they  were  issued,  except  in  extreme 
eases. 

^ Section  13.  Contracts  of  sale — sundry  trading  rules. 

(IrsTOMS  OF  THE  MAiMvEi'. — Ill  ordcT  to  insure  the  prompt  fulfill¬ 
ment  of  contracts  for  the  immediate  or  future  delivery  of  grain 
and  to  eliminate  frequent  resort  to  litigation  the  exchanges  have, 
fiwri  time  to  time,  adopted  rules  defining  the  customs  and  require- 

“  Hurd,  idem,  p.  2368. 

Idem. 

St.  L.,  1917  rules,  p.  67;  Chi.,  1918  rules,  p.  118  “Fifth;”  Mil.,  31:6;  Dul.,  17:5;  Cin.,  11:2. 

A  letter  from  the  Secretary  of  the  Chicago  Board  of  Trade,  dated  July  21,  1914,  fully  explained  the  State 
la  w  and  lioard  rules  in  regard  to  warehouses  and  posting  of  grain.  To  show  a  nonresident  member  why  it 
was  impossible  to  recover  damages  when  grain  had  l^een  posted  as  spoiled,  he  stated  that  the  shipper  should 
liavc  Imown  that  winter  shelled  corn  could  not  lie  carried  into  July  safely.  “There  comes  a  time  when 
if  makes  the  turn  from  sweet  corn  to  sour  and  does  this  in  the  course  of  a  few  hours.” 

"  There  is  nothing  that  the  commission  man  could  do  in  the  matter  and  he  would  be  no  more  responsible 
for  the  grain  being  posted  than  you  yourself  would  be;  nor  could  he  do  anything  to  prevent  it,  nor  is  there 
anything  he  could  do  or  that  can  be  done  under  the  law  to  recover  damages.  It  is  a  risk  that  every  man 
must  take  who  takes  ownership  of  grain  in  a  public  house.” 

Dub,  17:5. 


EXCHANGE  EULES  AND  EEGULATIONS. 


249 


jueiits  of  the  market  ou  reciuTent  points  of  the  law  of  sales.  As^ 
noted  elsewhere,  these  rules  are  regarded  as  conditions  of  each  con- 
ti'act  made  on  the  particnlar  oxdiange;  and,  in  fact,  many  of  the 
confirmation  forms  used  members  for  contracts  with  nonmembers 
not  only  specify  terminal  market  terms  (e.  g.,  ^‘Minneapolis  terms”) 
but  also  specify  the  rules  and  regulations  of  the  exchange  as  a  con¬ 
dition  of  the  contract. 

‘^Regular  trading.  ” — Under  certain  conditions  trading  off 
exchange  is  irregular.  There  has  been  a  general  effort  to  confine 
trading  in  time  contracts  to  regular  exchange  hours  and  to  trading 
on  the  exchange^  floor.  Certain  exchanges  have  adopted  rules  also 
to  regulate  the  time  and  place  of  cash  trading  so  as  to  maintain 
calculable  market  levels.  Yet,  owing  to  its  highly  technical  charac¬ 
ter,  the  rules  for  ‘Y’egular  trading  in  time  contracts”  are  more  severe 
than  those  for  cash  grain. 

Hours  for  future  trading. — The  principal  western  exchanges 
confine  trading  in  contracts  for  future  delivery  to  the  regular  exchange 
hours,  i.  e.,  9.30  a.  m.  to  1.15  p.  m.  every  business  day  but  Saturday, 
when  the  hours  are  9.30  to  12  o’clock.®® 

The  eastern  markets  generally  begin  the  session  at  10:30,  which 
allows  for  an  hour’s  difference  in  time.  On  some  of  the  smaller 
interior  markets,  such  as  Peoria,  the  closing  hour  is  a  matter  of  con¬ 
venience  among  the  traders. 

Curb  trading  prohibited. — Curb  trading — that  is,  trading  in 
futures  off  exchange — is  prohibited  by  drastic  rules  in  Chicago,  Min¬ 
neapolis,  Milwaukee,  Kansas  City,  and  St.  Louis. The  following  is 
the  rule  forbidding  such  curb  trading  in  Minneapolis  and  Milwaukee: 

Members  of  the  association  are  hereby  prohibited  gathering  in  any  place,  public 
or  private,  except  within  the  exchange  room  of  the  Chamber  of  Commerce  Building, 
and  forming  a  market  for  the  purpose  of  making  any  trade  or  contract  for  the  future 
delivery  of  grain  or  provisions;  and  any  member  Avho  shall  make  any  trade  or  con¬ 
tract  in  the  manner  herein  prohibited  shall  be  deemed  to  have  violated  this  rule, 
and  he  may  therefor  be  fined  in  a  sum  not  exceeding  $5  for  the  first  offense,  and  not 
exceeding  $50  for  each  and  every  subsequent  offense,  and  shall  stand  suspended  from 
all  privileges  of  membership  until  such  fine  or  fines  shall  have  been  paid,  and  until 
he  shall  have  been  reinstated  upon  his  application.  At  the  time  of  imposing  such 
fine  he  shall  also  be  subjected  to  such  additional  discipline,  other  than  by  fine,  as 
the  board  of  directors  may  determine  to  inflict.®* 

The  penalty  in  Chicago  for  not  executing  future  trades  in  the  o})en 
market  in  the  Exchange  Plali  during  the  hours  of  regular  trading’'’ 

•  is  expulsion  from  the  association. 


*®Chi.,  16:1;  Mil.,  rule  33;  Mpls.,  Circular  No.  141,  hours  not  specified;  K.C.,  21:2,  trades  “  at  any  other 
time  or  place”  are  not  subject  to  margin  and  are  not  enforceable  by  any  tribunal  of  the  association;  St.  L., 
1917  rules,  p.  80;  Dul.,  rule  12;  Oma.,  8:1;  N.  Y.,  rule  13,  time  trades  by  members  limited  to  hours,  10.30 
a.  m.  to  2.15  p.  m.  (12  m.  on  Saturdays), 
sj  Mpls.,  11:7;  Mil.,  11:9;  Chi.,  4:8;  11:7;  K.  C.,  21:2;  Oma.,  8:1  (c);  St.  L.,  9:1. 

The  Milwaukee  rule  was  sustained  in  State  v.  Milwaukee  Chamber  of  Commerce,  47  Wis.,  070;  3  N,  W., 


760. 


250 


TERxklll^AL  GRAIN  MARKETS  AND  EXCHANGES. 


it 


Prohibition  of  personal  or  private  trades. — Not  only  must 
contracts  for  future  delivery  be  executed  in  the  open  market  in  tlic 
exchange  hall  during  regular  hours,  but  the  sales  must  be  public  to  the 
extent  that  they  can  not  be  restricted  or  specified  for  acceptance  by 
any  particular  member.®"  ’  ' 

The  Chicago  rule  is  the  result  of  an  investigation  by  the  rules  com¬ 
mittee  (Apr.  13,  1915)  and  designed  to  meet  the  abuses  which  were 

then  reported,  namely, 

(1)  Making  personal  bids  and  oilers. 

(2)  Bidding  for  and  offering  larger  quantities  and  refusing  to  ac¬ 


cept  less. 

(3)  Making  pretended  or  fictitious  offers  to  bu^TTri’  sell. 

The  rule  prohibits  all  three  of  these  practices. 

Minneapolis  has  no  general  rule  on  the  subject,  but  an  order  of  the 
board  of  directors  (Dec.  10,  1907)  recites  ^Ahat  so-called ‘personal 
bids’  or  ‘personal  offers’  in  pit  trading  arc  not  permissible  and  aic 
hereby  forbidden.  The  spirit  of  this  order  is  that  pit 

trading  shall  be  open  and  free,  and  that  our  maikct  shall  maintain 
the  fuU  breadth  and  fairness  for  all  for  whicli  it  is  noted.” 

The  same  requirements — that  bids  and  offers  be  not  limited  m 
(qianiity,  that  they  be  open  for  acceptance  by  any  member,  and  that 
they  be  made  in  good  faith — are  in  force  in  bt.  Louis. 

Cash  trading  off  exchange. — The  rules  forbidding  curb  trading 
for  Chicago,  Milwaukee,  and  Minnea])olis,  apply  solely  to  trading  m 
futures.®^  Chicago  specifically  excepts  cash  trades  from  the  applica¬ 
tion  of  the  rule  for  regular  trading  and  Buffalo  qualifies  its  statement 
of  the  “regular  tradmg  hours”  to  the  effect  that:  “This  rule  is 
not  to  be  construed  that  members  arc  prohibited  from  dealing  in 
cash  grain  after  the  close  of  the  hours  designated.”  ®® 

After  market  bids  for  grain  to-arrive  are  permissible  in  all  the  mar¬ 
kets  (see  p.  326)  although  required  by  some  exchanges  to  be  based  on 


genuine  price  levels. 

Rules  that  cash  trading  between  members  must  be  carried  on  only 
in  the  exchange  hall  exist  only  in  Kansas  City,  Omaha,  St.  Louis, 
and  Indianapolis.  The  Omaha  rule  is  the  most  explicit  in  providing 
that  ‘Call  consigned  grain  must  be  publicly  offered  for  sale  by  sample 


92  Chi.— 22:10.  \ 

9S  Cii’cixlar  61. 

94  Rule  9,  secs.  4,  5. 

Chi.— 4:8;  Mpls.  and  Mil.  verified. 

99  Rule  10. 

97  K.  C.,  21:2;  Oma.,  8:1  (c);  St.  L.,  9:1. 

Indpls. —  ,  ,  ,  .  t  1  _ 

"Trading  in  grain  shipped  to  this  market  on  consignment  must  take  place  only  during  exchange  hour.^ 

and  on  exchange  floor,  unless  grain  arrived  in  such  condition  tliat  it  would  be  hazardous  to  hold  it  over  to 
the  next  business  day,  then  members  are  permitted  to  sell  such  gi-ain  and  report  immediately  upon  the 
opening  of  the  exchange  the  following  business  day.” 

(Letter  from  the  secretary  of  the  Indianapolis  Board  of  Trade,  dated  Oct.  1-3,  1919.) 


EXCHANGE  RULES  AND  REGULATIONS.  251 

and  sold  on  the  floor  during  trading  hours,  and  if  carried  over,  must 
he  brought  back  onto  the  floor  during  trading  hours  each  succeeding 
day  until  soldd’ 

Confirmation  of  trades. — Certain  exchanges  require  by  rule  that 
trades  made  on  the  floor  be  confirmed  by  written  memorandum 
within  a  short  time  thereafter.  These  requirements  have  been 
adopted  more  particularly  with  reference  to  contracts  for  future 
delivery. 

Futures. — Transactions  for  future  delivery  on  the  Chicago  Board 
of  Trade  must  be  confirmed  by  memorandum  filed  with  the  clearing 
house  before  6  p.  m.  of  the  day  the  trade  is  made.  “Such  memoran¬ 
dum  shah  be  in  writing,  and  shah  state  on  its  face  the  date  of  the 
transaction,  the  quantity  and  kind  of  property  covered  by  the  same, 
the  month  of  delivery,  the  price,  and  the  name  of  the  party  to  whom 
sold  or  of  whom  bought,  and  shall  be  signed  by  the  party  or  firm 
making  the  samc.’'*’^ 

Likewise,  a  member  making  an  offset  of  an  outstanding  contract 
for  future  delivery  must  file  a  similar  memorandum  with  the  clearing 
house. 

Similar  rules  applicable  to  future  contracts  arc  foUowcd  in  Kansas 
City,  St.  Louis,  Philadelphia,  and  New  York.  In  Kansas  City  non- 
compliance  with  this  rule  “shall  be  deemed  uncommercial  conduct 
and  punishable  accordingly.  ” 

The  St.  Louis  and  Philadelphia  exchanges  have  adopted  formal  grain 
contracts  ^  for  the  future  option  business ;  according  to  the  rule  in 
St.  Louis,  “it  shall  be  the  duty  of  the  buyer  and  seller  to  prepare 
contracts  for  signatures  and  send  same  to  the  office  of  the  other  con¬ 
tracting  party  on  the  day  of  sale  or  to  present  same  for  exchange 
between  8.45  a.  m.  and  9.15  a.  m.  on  the  next  business  day  *  * 

The  Philadelphia  rule  provides  merely  that  “  cither  party  is  entitled 
to  demand  a  wTitten  contract  in  due  form  * 

The  New  York  Produce  Exchange  authorizes  either  party  to  a 
contract  for  clearance  through  the  clearing  association  “to  require 
of  the  other  party  to  the  contract  a  slip  properly  confirming  said 
contract  *  *  ^ 

Cash  trades. — Confirmation  of  cash  trades  has  not  been  ruled 
on  b}^  most  of  the  exchanges.  The  Minneapolis  Chamber  of  Com¬ 
merce,  however,  has  ruled  that  “in  all  cash  transactions  or  sales  to 
arrive  a  written  confirmation  of  same  shall  bo  made  within  24  hours 
thereafter.'’  ^  Such  confirmations  are  largely  required  by  usage  in 
the  market,  whereby  shipping  instructions,  biUs  of  lading,  ware¬ 
house  receipts,  or  other  documents  must  pass  and  bo  acknowl- 

— -  •  ' 

1  St.  L.,  1917,  Rules,  p.  33;  Pliila.,  1918,  annual  report,  p.  124. 

2  Rules  or  the  grain  trade.  Rule  35. 

5  Rule  18,  sec  2. 


E8  Rule  22,  see.  7. 
80  Ibid.;  sec.  8. 
Rule  14,  sec.  6. 


252 


TERMINAL  GRAIN  AIARKETS  AND  EXCtlANGES 


odgod  ill  order  to  make  a  sale.  The  Grain  Dealers’  National  Associa¬ 
tion  has  adopted  minute  regulations  on  the  subject.**  In  the  case 
of  contracts  for  future  delivery,  however,  there  frequently  would  be 
no  otlier  documents  to  stand  as  evidence  in  case  of  a  subsequent 
dispute  were  it  not  for  the  required  confirmation  slips. 

Advances  required  on  grain  for  shipment  (call  for  mar¬ 
gins). — On  sales  of  grain  for  deferred  shipment,  margins  of  cash 
security  may  be  called  for  under  certain  rules.  The  seller  of  grain 
for  shipment  from  Minneapolis  may  require  a  10  per  cent  margin  and 
‘^further  security  from  time  to  time  to  the  extent  of  any  decline  in  the 
market  value”  below  the  contract  price.'^ 

The  Omaha  and  St.  Louis  exchanges  have  set  up  a  procedure  for 
cash  margin  deposits  applicable  to  purcliases  or  sale  “for  which  ship¬ 
ment  or  delivery  extends  beyond  10  days  from  date  of  contract,” 
and  similar  to  the  procedure  for  deposit  of  margins  on  futures,® 
although  different  in  detail.  In  St.  Louis  the  original  deposits  for 
grain  contracts  are  limited  to  3  cents  per  bushel. 

Failure  to  deposit  such  margins  within  a  stated  time,  when  called 
for,  constitutes  a  default  on  the  contract  authorizing  the  party  making 
call  for  margin  to  collect  damages  as  provided  in  the  rules  for  defaults.^ 
AU  deposits  so  made  must  be  released  upon  performance  of  tiie  con¬ 
tract,  or  applied  on  payment.® 

Shipping  instructions. — The  binder  is  obligated  to  furnish  the 
seller  (or  his  agent)  full  shipping  instructions  from  point  of  shipment 
to  destination.®  Failing  to  do  so  (Minneapolis)— 

■<  Rule  4.  (a)  Confirmation:  It  shall  be  the  duty  of  both  buyer  and  seller,  on  day  of  trade,  to  mail,  each 
to  the  other,  a  confirmation,  in  writing  (the  buyer  a  confirmation  of  purchase,  and  the  seller  a  confirmation 
of  sale),  setting  forth  the  specifications  as  agreed  upon  in  the  original  articles  of  trade.  Upon  receipt  of  said 
confirmation,  the  parties  thereto  shall  carefully  check  all  specifications  named  therein  and  upon  finding  any 
differences,  shall  immediately  notify  the  other  party  to  the  contract,  by  wire,  except  in  the  case  of  manifest 
errors  and  differences  of  minor  character,  in  which  event  notice  by  return  mail  will  suffice. 

{h)  When  a  trade  is  made  through  a  broker,  it  shall  be  the  duty  of  the  broker,  on  the  day  of  trade,  to  send 
a  written  confirmation  to  each  of  the  principals  (to  the  buyer  a  confirmation  of  sale,  and  to  the  seller  a  con- 
tirmation  of  purchase)  setting  forth  the  specifications  of  the  trade  as  made  by  him  Upon  receipt  of  said 
confirmations  the  parties  thereto  shall  carefully  check  all  specifications  named  therein,  and  upon  finding 
any  dift’erences,  shall  immediately  notify  the  other  party  to  the  contract,  by  wire.  In  default  of  such  notice 
by  wire  the  contract  shall  be  filled  in  accordance  with  the  terms  of  the  confirmation  issued  by  the  broker, 
(c)  All  sales  by  telephone  shall  be  confirmed  on  date  of  sale  by  both  buyer  and  seller. 

(rf)  When  either  of  the  confirmations  contains  provisions  at  variance  with  the  conditions  expressed  in  the 
card  bid,  or  other  written  or  printed  bid,  the  provisions  of  the  said  card,  other  written,  or  printed  bid  shall 
govern,  except  when  both  parties  to  the  contract  shall  waive  the  irregularity  by  signing  the  confirmation, in 
which  event  the  confirmation  thus  signed  shall  be  understood  to  express  the  terms  of  the  contract. 


*’  Mpls.,  8:15. 


^Oma.,  Trading  Regulations,  No.  15.  Enumerates  procedure  at  length  and  stipulates  that  “members 
are  required  to  insert  the  above  contract  in  all  confirmations  of  purchase  or  sale  of  cash  grain.” 

St.  L.,  Rule  18. 

'  See  p.  259.  The  Omaharulerecites,  “In  case  marginal  deposit  call  to  the  market  is  not  deposited  and  oflfi* 
fial  notice  of  same  is  not  received  within  the  required  time,  as  hereinbefore  provided,  the  party  thus  call¬ 
ing  shall  have  the  privilege  to  cancel  all  contracts  covered  by  such  margin  call  at  the  general  market 
value,  or  to  reseller  rebuy  at  his  or  their  option,  under  prompt  telegraphic  advice,  charging  difference  or 
loss  to  the  defaulting  party,  said  amount  to  be  due  and  payable  at  once.”  (1918  Rules,  p.  75.) 

Mpls.,  Oma.,  and  St.  L.,  as  cited. 

8  Mpls.,  8:15;  Chi.,  22:17;  MU.,  11:11;  Phila.  (Grain  Rules),  0:7;  N.  Y.  (Grain  Rules),  38:5;  Buf.,  19:6;  also, 
Trade  Rules,  Grain  Dealers’  National  Association,  Rule  6  (b). 


EXCHANGE  RULES  AND  REGULATIONS. 


253 


the  seller  may  assess  and  add  to  contract  price  tlio  usual  prevailing  charge  for  carrying 
until  such  time  as  shipping -directions  are  received,  or  the  seller  shall  have  the  riglit 
to  sliip  th.e  goods  to  the  post-office  address  of  the  buyer  or  to  cancel  the  contract,  as 
seller  may  elect,  24  hours’  written  or^telegraphic  notice  having  been  given  by  seller 
( f  his  intention  or  election. 


Tlie  Milwaukee  rule  is  similar  hut  adaf-ited  to  lake  sliippiug  con- 
ditions.“ 

It  is  material  to  the  completion  of  a  to-arrive  contract  to  know 
wlietJier  the  shipment  period  begins  to  run  from  the  date  shipping 
instructions  are  ‘Murnished^’  by  the  buyer  in  the  tei^minal  market  or 
from  the  date  instructions  are  received  at  the  point  of  shipment. 
The  language  of  the  rules  varies  slightly  on  this  point.  Under  the 
Cliicago  and  Milwaukee  rules  the  period  begins  to  run  when  and  not 
until  the  seller  actually  receives  the  shipping  instructiojis.^^ 

Tlie  Minneapolis  rule  specifies  that  the  period  shall  be  reckoned 
from  the  day  after  full  written  or  telegraphic  shipping  instructioiis 
are  received  by  the  seller  in  Minneapolis.’’  This  ride  suggests  the 
expectation  that  most  of  the  to-arrive  buying  will  be  handled  through 
commission  men  in  the  terminal  market;  rather  tlian  by  direct  bids 
to  the  country.  ^ 

It  may  be  fairly  considered  the  rule  of  the  trade  that  the  time 
period  begins  to  run  with  the  day  following  that  upon  wliich  sliipping 
instructions  are  received  by  the  seller.'^ 

Shipments. — The  table  following  shows  the  shipment  terms  as  under¬ 
stood  on  the  various  exchanges.  Chicago,  Kansas  City,  and  St.  Louis 
leave  the  period  of  time  to  be  specified  (by  days)  in  the  contract, 
merely  providing  a  period  to  govern  where  no  time  is  si^ecified.  It  is 
generally  provided  or  understood  that  the  bill  of  lading  will  be  for¬ 
warded  to  the  buyer  immediately  after  shipment  and  will  constitute 
final  evidence  of  the  date  of  shipment.  Any  given  number  of  days 
means  calendar  days,  excluding  date  of  sale,  throughout  the  trade. 


>®  MpLs.,  8:15. 

Mil.,  11:11. 

12  Chi.  (22:17)  “from  the  date  of  the  receipt  of  full  shipping  instructions  at  point  of  shipment.” 

Mil.  (11:12)  “In  making  contracts  a  specific  nmnber  of  days  (meaning  calendar  days)  in  which  to  make 
shipment,  shall  be  stipulated,  and  shall  be  reckoned  from  the  day  after  shipping  instructions  are  received 
by  the  seller,” 

“  ‘Receipt  of  billing  instructions  by  seller  ’  shall  mean  receipt  of  same  at  seller’s  main  office  or  by  his  duly 
authorized  representative.”" 

isMpls.,  8:15. 

Bos.  (Grain  Rules),  1:1;  Phila.  (Grain  Rules),  6:5;  Grain  Dealers’  National  Association,  6  (b;. 

See  rule  5,  Trade  Rules,  Grain  Dealers’  National  Association.  Also  confiimed  by  exchange  rules. 


254 


TERMINAL  GRAIN  MARKETS  AND  EXCEIANGES. 


Table  73. — Time  jjeriods  for  to-arrive  shipments  as  defined  in  exchange  rules} 


“Imme¬ 

diate.” 

“Quick.” 

“Prompt.” 

Specification  to  apply  when  time  is  not 
specified. 

Chicago  (contract  to  specify 
time). 

Milwaukee . 

Days. 

Days. 

Days. 

“15  days  arrival.” 

“Prompt”  is  understood. 

3 

7 

14 

Minneapolis . 

3 

7 

14 

Do. 

Duluth  2 . 

10 

Seller  has  20  days. 

Kansas  City  (contract  to 
specify  time). 

Ornaha . 

“10  daj'S  shipment.” 

3 

5 

10 

St.  Louis  (contract  to 
specify  time). 

Peoria  (no  provision). 
Indianapolis . 

Do. 

3 

5 

10 

Cincinnati . 

3 

5 

10 

“  Prompt  shipment”  is  understood. 

Buffalo . 

3 

.5 

10 

“  Prompt  shipment  shall  apply.” 

Pltiladelphia . 

3 

10 

Do. 

New  York . 

3 

5 

10 

Do. 

Unst.nn  _ _ 

3 

7 

“Prompt”  is  understood. 

“  Prompt  shipment  shall  apply.” 

C.raiji  Dealers’  National  As¬ 
sociation. 

3 

5 

10 

1  Period  begins  the  day  alter  seller  receives  order. 

~  “On  the  opening  of  navigation”  means  10  days  thereafter. 


'X^VRLOAD.” — Payments  for  actual  grain  are  based  on  the  agreed 
weights  of  the  particular  car  purchased.  However,  when  settlement 
is  required  on  a  hypothetical  carload’’  (which  exists  only  m  storage) 
it  is  necessary  to  have  an  arbitrary  definition  of  the  quantity  of  grain 
which  the  term  implies.  (The  same  is  true  of  ‘‘boatload”  in  a  few 
cases.) 

Standard  carloads  are  also  necessary  in  accounting  for  “less  than 
carload  lots”  which  frequently  requires  a  commission  rate  different 
from  that  for  full  carloads. 

The  figures  adopted  in  the  various  markets  for  bushels  (or  pounds) 
per  “carload”  appear  below. 


Table  74, — Number  of  bushels  in  a  ^‘carload”  of  grain  for  17  specified  exchanges. 


Chicago . 

Milwaukee . 

Minneapolis . 

Duluth . 

Kansas  City . 

Omaha . 

St.  Louis . 

Peoria . 

Indianapolis . 

Cincinnati . 

Toledo  1 . 

Buffalo . 

Baltimore . 

Philadelphia . 

New  York . 

“boatloads” 


Buffalo.... 
New  York 


pounds.. 


pounds.. 


IN  BUSHELS. 


Wheat. 

Corn. 

Oats. 

Barley. 

Rye. 

1,100 

1,200 

1,800 

1,250 

1,200 

1,100 

1,100 

1,800 

1,250 

1,100 

1,000 

1,000 

1,500 

1,000 

1,000 

1,000 

1,2.50 

1,500 

1,200 

1,000 

1,000 

1,000 

1,500 

1,000 

1,000 

60,000 

60, 000 

48,000 

60,000 

60,000 

1,000 

1,000 

1,.500 

l,0i)0 

1,000 

1, 075 

1,100 

1,600 

1,2.50 

1,100 

1, 075 

1,100 

1,600 

1,250 

1,100 

1,075 

1,100 

1,600 

1,250 

1,100 

425-450 

475-500 

750-850 

500-550 

■475-500 

1,000 

1,000 

1,600 

1,000 

1,000 

1,100 

1,100 

1,600 

1,250 

1,100 

64,500 

61,600 

51,200 

60,000 

61, 600 

8,000 

8,500 

13,000 

10,000 

8, 500 

8,000 

8,500 

10,000 

10,000 

8, 500 

Flaxseed. 


GGO 


Ij-OOff 

l.OO'l 


1  Rule  adopted  Mar.  20,  1880. 


EXCHANGE  KtlLES  AND  REG ULAflOKS.  255 

Time  to  reject. — The  time  withui  which  a  buyer  may  reject 
grain  sold  by  sample  depends  largely  upon  the  terms  of  the  contract. 
Kojcction  can  not  be  made  in  any  case  after  a  final  inspectioii 
certificate  has  been  issued. 

In  some  markets  time  must  be  allowed  for  a  sample  by  the  official 
exchange  sampler,  which  shall  constitute  evidence  whereby  the 
purchaser  may  or  may  not  reject  and  call  for  reinspection.  For 
example — ■  - 

Whenever  grain  or  mill  feed  is  sold  by  sample,  the  purchaser  must  accept  or  reject 
such  grain  or  mill  feed  by  11  o’clock  a.  m.  of  the  business  day  next  succeeding  the 
day  of  purchase,  unless  it  shall  have  been  impossible  for  an  official  board  of  trade 
sampler  to  sample  such  grain  or  mill  feed  by  that  time.  If  it  be  impossible  to  sample 
such  grain  or  mill  feed  within  the  time  specified  it  shall  be  the  duty  of  the  purchaser 
to  notify  the  seller  by  11  a.  m.  of  the  business  day  next  succeeding  the  day  of  purchase, 
and  such  grain  or  mill  feed  shall  be  sampled  as  soon  as  possible  thereafter  by  the 
official  grain  sampler,  and  the  purchaser  must  accept  or  reject  such- grain  or  mill  feed 
immediately  after  the  report  of  the  official  sampler  is  made.^® 

For  grain  weighed  in  Omaha  or  Council  Bluffs  the  buyer  is  required 
'to  deliver  to  the  seller  the  certificate  of  weight  by  12  o’clock  noon 
of  the  next  business  day  following  the  weighing  of  the  car.  Grain 
sold  on  track  and  not  ordered  to  elevators,  mills,  or  warehouses 
must  be  rejected  within  24  hours  from  time  of  sale  or  accepted  on 
original  inspection  of  sample.”  ” 

In  addition  to  the  specifications  already  enumerated,  certain  other 
details  of  contracts  for  the  purchase  and  delivery  of  country  grain 
have  been  written  into  the  rules.  For  example,  on  contracts  dealing 
with  ^ 'first  half”  and  "second  half”  of  the  month,  some  of  the 
exchanges  preclude  any  subsequent  dispute  as  to  what  is  meant  by 
first  half  by  stipulating  midnight  of  the  15th  day  on  a  30-day  month 
and  midnight  of  the  16th  on  a  31 -day  month  as  the  termination  of  a 
shipment  period.^® 

Passing  of  title. — -The  passing  of  title  is  a  matter  of  varying 
construction  in  the  law  of  sales  and  is  frequently  stipulated  in  indi¬ 
vidual  contracts.  When  the  question  arose  with  reference  to  fire 
risk  in  Minneapolis  in  1916,  the  directorate  adopted  the  following 
resolution : 

WJiereas,  there  is  more  or  less  uncertainty  as  to  where  the  fire-insurance  risk  lies, 
and  as  to  the  exact  time  when  the  title  i)asses  to  grain  sold  on  the  exchange  floor  of 
this  association,  for  delivery  at  elevators,  mills,  and  industries,  or  on  track  in  the 
Minneapolis  switching  district:  Now  therefore  l^e  it 

‘8  Chi.,  22:14.  Compare  K.  C.,  rule  21,  sec.  6,  where  ‘Uho  purchaser  may  call  for  reinspcction  by 
1  o’clock  p.  m,  of  the  second  succeeding  business  day  from  time  of  regular  tender  and  in  case  of  chango 
of  grade  *  *  Sec  also  K.  C.,  rule  3,  sec.  12. 

See  Balto.  (by-laws),  12:1,  where  grain  can  not  be  rejected  later  than  10.30  a.  m.  of  the  day  after  purchase. 

Oma.,  0:9,  specifies  24  hours  for  grain  sold  on  track. 

Oma.,  191S  rules,  p.  54. 

Mpls.,  8:15;  Mil.,  11:12. 


256 


TEKMIXAL  GKAIN  MARKETS  AND  EXCHANGES. 


Resolved  by  the  hoard  of  directors  of  this  associat  ion,  Tliat  from  and  after  the  date  of 
the  p  issige  of  this  resolution  it  shall  be  understood  to  bo  the  intention  of  the  mem- 
bers  of  this  avssociation  with  respect  to  said  matters: 

1.  That  when  such  sales  of  grain  are  made  to  be  delivered  at  or  from  elevators, 
liidlls  or  iudustries,  or  on  track,  or  in  any  manner,  or  at  any  place  agreed  upon  between 
the  buyer  and  the  seller,  that  such  sales  shall  be  for  cash. 

2.  That  the  title  to  the  grain  shall  not  pass  to  the  buyer  until  the  payment  of  the 
])urchase  price  to  the  seller  or  his  assigns.  (Circular  No.  685.) 

Tlie  Buffalo  Corn  Exchange  has  written  into  the  general  rules  the 
following  definition,  which  seems  to  be  gaining  acceptance  in  the 
trade: 

The  title  to  lake  grain  shall  be  deemed  to  have  passed  upon  the  delivery  of  the 
original  bill  of  lading,  or  a  certificate  showing  cancellation  thereof,  or  negotiable, 
warehouse  receipt  or  nonnegotiable  warehouse  receipt;  but  the  buyer  shall  have 
tlie  right  to  demand  the  original  bill  of  lading  or  the  vessel  agent’s  certificate  showing 
the  same  to  be  canceled,  or  the  cancellation  thereon  of  any  grain  represented  by 
such  nonnegotiable  warehouse  receipt. 

The  title  to  rail  grain  shall  be  held  to  have  passed  to  the  buyer  upon  the  delivery 
to  him  of  the  warehouse  receipt  or  the  original  bill  of  lading,  properly  indorsed,  cov¬ 
ering  said  grain,  or  upon  reissue  by  the  railroad  company  of  a  bill  of  lading  covering 
said  grain. 

Delay  in  transfer  or  unloading. — If  the  buyer  of  grain  fails 
to  provide  instructions  for  unloading,  handling,  or  shipping  the  grain 
purchased,  so  that  weights  may  be  obtained  within  a  specified  time, 
the  seller  is  entitled  to  collect  the  larger  part  of  the  value  of  the  grain 
based  on  shipper’s  weights.  In  Chicago  on  all  property  for  delivery, 
transfer,  or  shipment,  not  transferred  or  unloaded  within  seven  busi¬ 
ness  days,  the  seller  may  collect  80  per  cent,  based  on  shipper’s 
wcights,‘®  and  in  Minneapolis  if  the  grain  is  not  moved  or  ordered 
toward  destination  and  unloaded  within  three  business  days  ‘‘the 
buyer  shall  pay  to  the  seller,  upon  demand,  a  cash  advance  on  said 
grain  or  seeds  equal  to  ninety  (90)  per  cent  of  its  value.” 

On  the  Kansas  City  Board  of  Trade  the  purchaser  of  track  grain 
or  grain  bought  to  arrive  must  give  disposition  orders  within  24 
•'  ‘  ~~  '  ’  '  ^  u  '  ^ 

'9  Biif.,  18:3,  4. 

.See  Pampa  Grain  Co.  v.  Otitakoma  City  Mill  &  FAcvator  Co.,  248  Fed.,  477,  decided  Mar.  13,  1918, 
where  the  court  held:  "There  may  be  a  sale  without  completed  or  perfected  delivery.  By  delivery  of 
the  bills  of  lading,  and  by  the  express  terms  of  the  confirmation  letter,  the  Oklahoma  Company  acquired 
complete  dominion  over  the  property,  with  the  right  to  change  its  destination  in  transit,  to  sell  at  this 
changed  destination,  or  to  sell  in  transit." 

See  also  Rules  of  the  Merchants’  Exchange  of  St.  Louis,  1919,  p.  43:  "The  seller  shall,  however,  have  the 
right  to  demand  from  the  buyer,  payment  of  95  per  cent  of  the  value  of  the  property  upon  the  delivery  of 
sa  id  property  to  the  outbound  railroad  and  surrender  of  the  proper  documents,  passing  title  to  said  property 
to  the  buyer." 

-’0  Chi.,  22:14;  K.  C.,  15:8. 

2  Mpls.,  R.  18,  secs.  4,  5,  6,  7,  and  circulars  374  and  702:  “Resale  shall  not  be  construed  as  moving  or 
or.lering  a  car,  in  the  above  sense." 

When  the  car  is  delivered  and,  without  being  unloaded,  "is  subsequentiy  reordered  to  some  other  des¬ 
tination,  the  buyer  shall  pay  the  seller  upon  demand  a  cash  advance  on  said  grain  or  seeds  equal  to  90  per 
cent  of  its  value.” 

The  rule  in  the  text  applies  also  to  sales  for  shipment  beyond  Minneapolis,  in  which  case  (circular  702) 
"the  seller  shall  have  the  right  to  demand  a  cash  advance  on  said  grain  or  seeds  equal  to  90  per  cent  of  its 
value,  which  advance  shall  be  due  and  payable  when  the  car  reaches  the  yard  of  the  outgoing  railroad, 
and  the  duplicate  disposition  order  or  other  necessary  railroad  order  is  delivered  by  the  seller  to  the  buyer.’ 


EXCHANGE  EULES  AND  REGULATIONS. 


257 


hours,  or,  failing  to  do  so,  seller  may  demand  payment  on  ship¬ 
per’s  or  railroad  weights,  upon  delivery  of  bill  of  lading,  properly  in¬ 
dorsed,  subject  to  readjustment  upon  Kansas  City  official  weights.”  ^2 

Omaha  follows  tlie  Chicago  requirement  that  ownership  remains 
with  the  seller  until  grain  is  paid  for  and  that  seller  may  draft  upon 
buyer  if  the  unloading  is  delayed  over  a  speeffied  time.  The  time 
limit  in  Omaha,  however,  is  hours  from  2  o’clock  p.  m.mf  the 

date  of  sale  of  the  grain,”  If  the  purchaser  fails  to  unload  within 
that  time  he  shall  pay  seventy-five (75)  per  cent  of  the  value  of  the 
grain,  on  demand,  for  the  grain  so  delayed,  based  on  shipper’s  weights 
or  based  on  the  capacity  of  the  car *  *  *  *  ”  23 

A  somewhat  different  rule  obtains  on  the  Merchants’  Exchange 
of  St.  Louis,  the  seller  being  entitled  to  interest  rather  than  part 
payment  after  failure  to  unload  within  the  required  time. 

Grain,  feed  stuffs  or  seeds,  sold  from  track  or  to  arrive,  to  be  switched  or  delivered  to 
an  elevator,  industry  or  team  track,  shall  be  unloaded  within  five  calendar  days  after 
actual  or  constructive  delivery  (and  for  purpose  of  this  rule  the  records  of  a  railroad 
company  of  the  time  of  tender  or  delivery  shall  be  prima  facie  evidence)  to  the  speci¬ 
fied  tracks  or  to  the  lead  or  switch  upon  which  the  industry  is  located. 

In  the  event  any  grain,  feed  stuffs,  or  seed  shall  not  have  been  unloaded  or  paid  for 
within  a  period  of  five  calendar  days,  including  the  date  of  delivery  or  tender,  as 
specified  in  this  rule,  the  buyer  shall  pay  to  the  seller,  and  the  seller  shall  collect  from 
the  buyer,  interest  at  the  minimum  rate  of  6  per  cent  per  annum,  or  the  current  legal 
rate,  if  higher,  for  each,  calendar  day  after  the  expiration  of  the  five  calendar  days’ 
free  unloading  period  until  the  commodity  is  paid  for,  provided  the  buyer  shall  have 
the  right  to  make  advances  or  tender  payment  in  full  at  any  time. 

Refusal  or  neglect  to  comply  with  these  provisions  shall  be  considered  unmercantile 

conduct  under  the  rules  of  the  exchange.^-* 

/ 

Tlie  rules  of  the  Indianapolis  Board  of  Trade  allow  the  buyer  24 
hours  to  give  a  disposition  order  and  10  days  to  furnish  to  the  seller 
an  official  weigher’s  certificate.^® 

On  tender  of  a  negotiable  bill  of  lading,  or  indorsed  railroad  order,  the  seller  may 
demand  95  per  cent  of  the  purchase  money  estimated  on  bill  of  lading  weight‘d,  or 
indorsed  railroad  order  with  certified  weight.  And  it  shall  be  deemed  uncommercial 
conduct  for  any  member  to  overinvoice  the  contents  of  a  car  or  cars  when  he  has 
knowledge  of  the  correct  weight. 

A  very  similar  rule  exists  in  Cincinnati.^® 

2^  K.  C.,  15:8. 

*3  0ma.,6:9. 

St.  L.,  4:15. 

Rules  of  the  Grain  Trade,  secs.  24  and  25. 

2«Cin.,  rule  6,  secs.  3,  4:  "The  buyer  shall  pay  to  the  seller  90  per  cent  *  *  *  on  railroad  weights, 
within  24  hours  after  such  tender. 

•Tn  all  transactions  the  buyer  shall  order  the  property  within  one  day  from  date  of  purchase,  unless 
otherwise  specified  at  time  of  sale.  When  grain  and  hay  exchange  weights  are  to  govern,  same  shall  be 
furnished  within  10  days  from  date  of  original  sale,  except  for  unavoidable  causes  for  which  the  biiyer  is 
not  responsible.  If  such  weights  are  not  furnished  witliin  10  days,  the  seller  may  demand  payment  on 
shippers’  weight.  ’  ’ 

1G8G93°— 20 - IT 


258 


TERMINi^  GRAIN  AIARKETS  AND  EXCHANGES. 


Ill  Philadelphia,  if  the  consignee  does  not  unload  on  time  he  is 
required  to  make  payment  on  invoice  weights. 

In  all  sales  of  grain  or  feed  on  track,  unless  otherwise  stipulated  at  time  of  sale,  the 
purchaser  shall  be  required  to  remove  the  contents  of  the  cars  within  four  working 
days  after  they  shall  have  been  placed  in  position  to  unload,  in  default  of  which  he  shall 
pay  for  same  at  invoice  -weight,  as  established  by  public  weigher’s  certificate,  or  by 
affidavit  of  private  weigher,  and  shall  also  be  responsible  for  any  demurrage  or  deten¬ 
tion  charges. 

Acceptance. — ^Acceptance  by  the  purchaser  of  a  car  of  grain 
bought  by  sample  takes  place  upon  the  unloading  thereof,  accord¬ 
ing  to  the  Duluth  rules,  provided — 

that  where,  in  the  process  of  unloading,  any  portion  of  a  car  is  found  to  be  plugged  or 
of  quality  inferior  to  that  of  sample  upon  which  the  grain  was  sold,  the  purchaser  shall 
accept  the  portion  of  the  car  unloaded  and  the  remainder  shall  be  left  in  the  car  sub¬ 
ject  to  the  order  of  the  seller,  who  shall  be  immediately  notified  by  the  elevator  com¬ 
pany  unloading  the  same.^® 

Also,  under  Minneapolis  rules,  if  ^‘the  car  is  reordered  without 
unloading,  or  without  first  calling  for  rcinspection,  such  reordering 
shall  be  considered  a  final  acceptance  of  the  car  by  the  purchaser.’’ 

The  time  for  payment. — One  of  the  causes  for  discipline  already 
discussed^®  is  that  of  willfully  faihng  to  pay  for  property  sold  for  cash 
by  another  member,  upon  delivery  of  the  same.^^  F ailure  of  a  member, 
party  to  a  contract,  to  receive  and  pay  for  the  property  will  be  dis¬ 
cussed  in  considering  defaults.  There  are,  in  addition,  certain  rules 
designed  to  enforce  payment  for  goods  received  and  accepted. 

As  a  general  rule,  on  sales  of  cash  grain  to  go  to  elevators  or  mills 
in  the  market,  payment  is  due  immediately  after  the  grain  is  weighed 
and  unloaded  (“as  soon  as  unloaded  and  weighed”). ' 

The  “time  for  jiayment”  is  clearly  set  forth  in  the  Omaha  rule: 

On  all  sales  of  cash  grain  to  go  to  elevators,  mills  or  warehouses  in  this  market,  made 
on  the  floor  of  the  exchange,  on  the  “call”  board,  or  by  private  sale,  in  accordance 
with  the  rules  and  regulations  of  the  excliange,  the  buyer  shall  order  the  grain  to  the 
elevator,  the  ownership  of  such  grain  to  remain  in  the  seller  until  the  grain  is  paid 
for.  On  such  sales  payment  shall  be  made  by  the  purchaser  before  2  o’clock  p.  m., 
of  the  day  following  the  day  on  which  the  grain  is  unloaded  at  the  elevator;  except 
that  in  case  the  grain,  for  any  reason  whatsoever,  is  not  unloaded  at  elevator  within 
144  hours  from  2  o’clock  p.  m.  of  the  date  of  sale  of  the  grain,  the  purchaser  shall  pay 
75  per  cent  of  the  A'alue  of  the  grain,  on  demand,  for  the  grain  so  delayed,  based  on 
shipper’s  weights,  or  based  on  the  capacity  of  the  car;  subject,  however,  to  final 
adjustment,  based  on  official  weights  of  the  exchange,  or  as  may  be  otherwise  agreed 

Phila.,  Grain  rules,  8:5. 

28  Dul.,  14:11. 

29  Mpls.,  18:6. 

io  r.  211. 

E.  g.,  see  St.  Louis,  4:9. 

22  ]'eo,,  13:16.  Sec  also  Balto.  (Bj'-Laws)  12:1,  where  bills  are  due  and  payable  “immediately  after 
delivery  unless  otherwise  agreed  upon  at  time  of  sale.’-' 

Also,  see  Mpls.,  Circular  No.  CS5,  «  *  *  *  such  sales  shall  be  for  cash.” 


EXCHANGE  RULES  AND  REGULATIONS.  259 

between  buyer  and  seller.  No  grain  shall  be  paid  for  until  unloaded,  or  at  the  expia¬ 
tion  of  144  hours  from  2  o’elock  p.  m.,  of  the  date  of  the  sale  of  the  grain.^^ 

The  Chicago  rules  are  most  explicit  on  this  point  of  payment  for 
cash  grain,  requiring  that  ‘^all  bills  rendered  for  grain  *  *  * 

sold  by  grade,  or  by  sample,  or  by  grade  and  sample,  either  after 
arrival  or  to  arrive,  or  in  any  manner  as  may  be  agreed  upon  between 
buyer  and  seller  if  delivered  at  the  office  of  the  buyer  by  2  p.  m.  shall 
be  paid  by  2.45  p.  m.  the  same  day,  except  that  on  Saturdays  all 
bills  delivered  by  11.20  a.  m.  shall  be  paid  by  11.50  a.  m.  the  same 
day,’'34  with  due  provisos  as  to  the  documents  which  shall  be  attached 
to  the  invoice. 

Kansas  City  has  an  equally  stringent  rule  applymg  to  ‘^all  bills  for 
carlot  loads  of  grain,”  with  a  slightly  more  liberal  time  allowance. 

There  is  a  rule  in  Milwaukee  that  when  grain  is  sold  on-track  in 
the  market,  ‘^payment  must  be  made  therefor  on  date  of  presenta¬ 
tion  of  the  invoice,  provided  that  invoice  is  delivered  to  the  buyer 
before  11  a.  m.,  accompanied  by  necessary  certificate  of  weight.”^® 

Section  14.  Defaults  on  contracts. 

In  GENERAL. — ^Another  outstanding  object  in  the  organization  of 
grain  exchange  associations  has  been  to  insure  the  fulfillment  of 
business  obligations.  For  example,  the  very  first  provision  in  the 
rule  book  of  the  Omaha  Grain  Exchange  is  that  every  person  ad¬ 
mitted  to  the  privileges  of  this  exchange  shall  promptly  and  faith¬ 
fully  comply  with  and  fulfill  all  business  obligations  into  which  he 
may  enter,  either  with  other  members  of  this  exchange,  or  with 
other  parties,  and  shall  equitably  and  satisfactorily  adjust  and  settle 
the  same.”  This  is  the  primary  obligation  of  a  member. 

On  all  highly  organized  exchanges  stringent  rules  have  been  adopted 
to  insure  the  observance  of  every  business  contract  entered  into  bv  a 
member  of  the  exchange;  and,  as  pointed  out  in  previous  sections, 
willful  default  on  a  contract  subjects  a  member  to  suspension,  ex¬ 
pulsion,  or  other  disciplinary  action  by  the  governing  board. 

Every  contract  so  made  is  not  only  subject  to  the  existing  law 
but  also  to  the  exchange  rules  as  a  part  of  the  conditions 
thereof,®^  and  the  rules  may  extend  to  contracts  not  enforceable  in 

Oma.,  6:9. 

Chi.,  22:16. 

fe  K.  C.,  15:9. 

‘6  Mil.,  11:10. 

«  Correspondence  of  secretary  of  Chicago  Board  of  Trade,  June  3,  1916,  states  that  the  courts  have  held 
repeatedly  and,  so  far  as  he  knows,  never  to  the  contrary,  ‘‘that  all  contracts  made  on  the  Cliicago  market 
under  these  rules  have  as  a  part  the  conditions  of  the  contract  and  the  said  rules.”  And  the  Kansas  City 
rules  provide:  “All  coutraefs  of  a  member  of  the  board  of  trade,  or  a  fii’m  having  a  member  of  the  board 
of  trade  as  a  general  partner,  or  a  corporation  having  a  membership  representation  with  any  other  member 
of  the  board  of  trade  as  a  general  partner,  or  any  other  corporation  having  membership  representation 
for  the  purchase  and  sale  of  grain  or  provisions,  or  futures,  or  transactions  incident  to  the-grain  or  provi¬ 
sion  business  proper,  are  contracts  subject  to  the  rules  of  this  board  of  trade.”  (Art.  21,  sec.  13.) 

St.  Louis,  Rule  8,  see.  1:  “  This  contract  is  subject  in  all  respects  to  the  rules  and  regulations  of  the  Mer¬ 
chants’  Exchange  of  St.  Louis. ’j 


260 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


the  law.  To  understand,  then,  the  rights  and  remedies  set  up  for 
the  protection  of  members  and  their  customers  in  the  grain  trade  it 
is  necessary  to  make  a  brief  survey  of  the  rules  covering  defaults. 

Such  defaults  may  occur  (1)  through  willful  noncompliance  or 
gross  negligence,  or  (2)  through  inability  to  meet  the  conditions  of 
the  contract  for  causes  beyond  the  delinquent’s  control.  The  ques¬ 
tion  of  intent  is  of  controlling  importance  in  disciplinary  action;  but 
equally  important  to  the  interests  of  the  trade  are  the  rules  of  dam¬ 
ages  which  apply  to  any  default. 

Willful  violation  of  a  business  contract. — As  a  general  rule 
willful  breach  of  any  business  contract  by  an  exchange  member 
renders  him  subject  to  suspension  or  expulsion  at  the  discretion  of 
the^  board  of  directors. None  of  the  exchanges  limit  such  default 
to  contracts  with  another  member.  The  Chicago  rule  refers  to  “a 
willful  violation  of  any  business  contract  or  obligation,”  and  the 
Minneapolis  board  will  entertain  complaints  “for  the  breach  of  any 
contract  or  agreement.”  In  Duluth  we  find  the  rule  limited  to  con¬ 
tracts  “which  he  has  entered  into  in  connection  with,  or  by  virtue 
of,  his  membership  in  this  association;”  which  contracts  include  of 
course  those  with  nonmembers. 

'Ordinarily  the  mere  willful  default  in  itself  does  not  subject  the 
member  to  discipline  until  it  is  also  shown  that  the  delinquent  neg¬ 
lected  or  refused  to  make  a  satisfactory  adjustment  or  settlement  of 
the  obligation,  as  provided  for  by  the  rules  governing  defaults.=^®  The 
effort  to  adjust  or  settle  must  be  made  within  a  reasonable  time, 
since  prompt  compliance  with  contracts  is  the  general  customary 
requirement  of  such  associations.  In  construing  these  rules,  willing¬ 
ness  to  submit  a  disputed  difference  to  arbitration  is  considered  by 
the  Omaha  Grain  Exchange  “as  evidence  on  the  part  of  such  member 
of  his  readiness  to  equitably  adjust  and  settle  his  said  disputed 
obligations.” 

Where  evidence  of  fraud,  dishonesty,  or  other  dishonorable  conduct 
appears  in  the  controversy,  discipline  may  ensue  of  course  for  the 
act  itself  quite  apart  from  any  subsequent  settlement  of  differences.'*^ 

Defaui^t  through  inability  to  meet  the  obligation. — 
Where  default  results  from  causes  beyond  the  delinquent’s  immediate 
control,  as  in  case  of  car  shortage,  or  inability  to  procure  the  grain, 
the  rules  generally  provide  a  method  of  settlement  or  adjustment 

88 Seep.  211. 

8»E.  g.,  Mil.,  4:12,  “*  *  *  The  member  in  fault  shall,  by  such  finding,  stand  suspended  from  all 
privileges  of  membership  imtil  the  matter  complained  of  shall  have  been  satisfactorily  settled  in  the  judg¬ 
ment  of  the  board  of  directors.”  Mpls.,  8:2;  Mil.,  4:12;  Chi.,  4:9;  Dul.,  4:9;  Oma.,  1:9;  Sy  L.,  4:9;  Peo., 
•::8;  Buf.,  4:1;  N  Y.  (by-laws),  sec.  32;  Balto.  (by-laws),  7:7;  Phila.  (by-laws),  24:2. 

<8  Oma.,  6:3.  ,  , 

On  failure  to  deliver  warehouse  receipts  after  issuing  notice  of  readiness  to  deliver  a  “party  shall  be 
deemed  guilty  of  gross  fraud,  and  shall  be  suspended  or  expelled  from  membership  in  this  association.” 
(Chi.,  21:2.) 


EXCHANGE  RULES  AND  REGULATIONS. 


261 


whereby  the  obligation  may  l)e  satisfied.  Discipline  need  not  bo 
resorted  to  unless  the  defaulter  is  financially  insolvent  (or  for  reasons 
of  dishonorable  conduct).  Ti’ading  while  in  an  insolvent  condition 
will  generally  involve  fraud  and  is  punishable  for  reasons  other  than 
the  default  itself. 

The  rules  for  settlement  and  adjustment  apply  mainly  to  contracts 
for  future  delivery  and  contracts  for  future  shipment.  The  rights 
of  buyers  and  sellers  under  these  two  classes  of  business  will  therefore 
be  briefly  summarized. 

Failure  to  deliver  on  future  contracts. — Failure  to  deliver 
tlie  property  on  a  future  contract  is  frequently  the  result  of  operations 
wdiich  have  inflated  market  prices.  It  is  necessary,  therefore,  to 
determine  the  true  commercial  value  at  date  of  maturity  so  that  a 
settling  price  can  be  adopted  which  will  operate  to  prevent  corners 
and  yet  not  encourage  irresponsible  short  selling.  This  can  be 
arrived  at  (1)  by  allowing  the  injured  party  (the  long  side)  to  buy  in 
the  property  stipulated  in  the  contract  for  account  of  seller  or  (2) 
by  taking  the  average  market  price  on  day  of  maturity,  or  (3)  a 
settling  price  may  be  determined  by  a  special  committee  appointed 
for  the  purpose.  -  ' 

In  Chicago  and  Duluth  the  third  method  is  jjrovided  for  ever}^ 
such  default. 

The  president  shall  appoint  a  committee  of  three  from  the  membership  at  large, 
to  be  approved  by  the  board  of  directors,  which  committee  shall  determine  as  nearly 
as  possible  the  true  commercial  value  of  the  commodity  in  question  on  the  day  of  ma¬ 
turity  of  the  contract,  and  the  price  so  established  shall  be  the  basis  upon  which 
settlement  is  made. 

A  similar  committee,  which  amounts  to  a  special  committee  of 
arbitration,  is  provided  for  in  Minneapolis  when  there  is  a  disagree¬ 
ment  on  the  fulfillment  of  the  contract. 

Either  party  to  such  disagreement  may  call  upon  the  president  of  the  chamber 
for  the  appointment  of  a  committee  to  determine  such  matter  of  dispute;  whereupon 
the  president  shall  select  five  (5)  discreet  members  of  the  association,  in  good  standing, 

(See  p.  208.)  "When  any  member  of  this  association,  knowing  himself,  or  the  firm  in  which  he  is  a 
pnrtnor,  or  the  corporation  of  which  he  is  an  executive  officer,  to  be  in  an  insolvent  condition,  shall  make  any 
contract  on  his  own  account,  or  on  account  of  such  firm  or  corporation,  under  the  rules  of  this  association, 
whereby  pecuniary  loss  shall  result  to  any  other  member,  or  to  any  firm  or  corporation  entitled  to  trans.act 
business  on  this  exchange,  he  shall  be  suspended  or  expelled  at  the  discretion  of  the  board  of  dirfectors;  or, 
when  any  member  of  this  association,  knowing  himself,  or  the  firm  in  which  he  is  a  partner,  or  the  corpora¬ 
tion  of  which  he  is  an  executive  officer,  to  be  in  an  insolvent  condition,  shall  accept  on  his  own  account,  or 
on  account  of  any  such  firm  or  corporation,  any  money  or  security  or  securities  as  margins  from  any  cus¬ 
tomer  on  any  trade  or  trades  made  under  the  rules  of  this  board,  whereby  pecuniary  loss  shall  result  to 
the  person,firm,  or  corporation  depositing  such  margins,  such  member  shall  be  suspended  or  expelled  at  the 
discretion  of  the  board  of  directors.”  (Chi.,  4:31.)  And  compare  with  the  following  rule  in  Milwaukee: 
"  In  case  of  insolvency  of  either  party  to  the  contract  it  shall  be  considered  a  default,  and  the  contr.ict 
may  be  closed  by  purchase  or  sale  on  the  open  market  of  a  like  quantity  of  property  equal  in  quality  to  that 
called  for  in  the  contract,  without  reference  to  the  contract  period,  24  hours’  notice  of  such  intention  having 
been  given.”  (Rule  11,  sec.  12.) 

«  Chi.,  23:1.  The  Chicago  rule  is  admittedly  devised  to  penahze  short  selling.  Idem:  Duh,  rule  15;  also 
Balto.  (by-laws),  13:18;  Peo.,  13:11. 


262  TERMIK-AL  GRAIN  MARKETS  AND  EXCHANGES. 

to  be  approved  by  the  board  of  directors,  who  are  not  in  any  manner  interested  in  the 
matter  in  controversy,  who  shall,  without  unnecessary  delay,  organize  by  electing 
one  of  their  number  chairman,  andlu'oceed  to  hear  and  determine  the  question  as  to 
the  equitable  measure  of  damages,  if  any,  to  be  paid  by  the  party  in  default.  Said 
committee  shall  before  entering  upon  their  duties  be  sworn  to  fairly  and  impartially 
hear  and  determine  the  questions  presented  to  them.  They  shall  receive  such  state¬ 
ments  or  evidence,  under  oath,  as  either  of  the  parties  may  present;  and,  m  order 
that  then  investigation  shall  be  thorough  and  impartial,  notice  of  the  appointment 
of  the  time  and  place  of  the  hearing  shall  be  announced  on  ’Change,  and  an  in\'itation 
given  to  any  member  of  the  association  to  appear  before  them  with  evidence  of  any 
facts  having  a  bearing  on  the  subject  matter  they  are  appointed  to  consider. 

The  committee  shall  be  authorized  to  determine  the  relevancy  of  any  testimony 
presented  to  them;  and  if  they  deem  it  necessary,  may  call  for  any  available  evidence 
that  may  not  be  voluntarily  tendered.  The  said  committee,  in  determining  the 
measure  of  damages  to  be  paid  by  the  defaulter,  shall  be  authorized  to  consider 
whether  or  not  the  value  of  the  property  in  dispute  has  been  enhanced  by  combina¬ 
tion  or  by  any  individual  for  the  purpose  of  extorting  unreasonable  damages,  and 
shall  also  consider  the  effect  on  values  produced  by  sales  in  excess  of  the  marketable 
Gupply,  and  in  view  of  the  facts  presented  and  having  reference  to  the  duty  of  the 
seller  to  specifically  fulfill  his  contract,  shall  determine  the  just  and  true  value  of 
the  property  defaulted  on  at  the  time  of  the  default,  and  by  the  \  alue  so  established 
shall  determine  the  measure  of  damages  to  be  assessed,  both  of  which  shall  be  stated 
in  their  findings,  which  shall  be  made  by  a  majority  vote  of  the  committee,  and  in 
writing,  signed  by  the  chafiman  of  the  committee.  The  decision  of  said  committee 
as  to  the  value  of  the  property  in  question  on  the  day  to  which  thefi  decision  applies 
shall  be  deemed  its  true  value  at  that  date  and  shall  be  accepted  and  recognized  ai 
establishing  said  value  as  to  the  equitable  basis  for  all  settlements  and  adjustments 
of  similar  defaults  by  members  of  the  association  on  that  day,  and  values  so  estab¬ 
lished  shall  be  respected  as  final  by  the  board  of  directors  and  committees  of  arbitra¬ 
tion  and  appeals  of  the  association.  The  committee  appointed  under  the  provisions 
of  this  section  shall  be  entitled  to  twenty-five  ($25)  dollars  for  their  services,  to  be 
equally  divided  among  them;  said  fees  shall  be  paid  in  advance  by  the  party  upon 
whose  request  the  committee  is  called,  and  shall  be  finally  i)aid  as  the  committee 
shall  determine  and  state  in  their  findings.'*^ 

The  Minneapolis  rule  also  provides  the  other  methods  of  settle¬ 
ment  for  the  buyer;  that  is,  (1)  by  buying  in  the  property  for  account 
of  the  seller,  or  (2)  by  payment  (on  the  seller’s  part)  of  loss  based  on 
the  average  market  price  at  date  of  maturity  with  due  regard  for  any 
manipulation  of  market  prices.  And  substantially  these  same 
alternatives  exist  as  recourses  for  the  buyer  in  Kansas  City,  Omaha, 
St.  Louis,  Milwaukee,  and  Toledo.^"  Any  loss  incurred  by  the  purchaser 
is  due  and  payable  at  once  by  the  party  in  default.  On  the  four 
exchanges  just  named  if  private  settlement  fails  the  dispute  must  be 
submitted  to  arbitration  in  the  regular  way;  and  it  is  provided  in 
Kansas  City  and  Omaha  (in  identical  rules)  that  the  disputes  over 

«  Mpls.,  rule  10. 

45  K.  C..  14:1;  Oma.,  5:1;  St.  L.,  (S:5).  The  St.  Louis  rule  provides  a  T)  per  cent  penalty  with  a  minimum  of 
6  cents  per  bushel  on  wheat,  4  cents  on  corn  and  3  cents  on  oats,  for  such  defaulted  delivery. 

Mil.,  10:1;  it  is  also  provided  in  Kansas  City,  Omaha,  and  St.  Louis  that  the  buyer  may  cancel  or  forfeit 
the  contract.  Note  that  in  New  York  the  Grain  Committee  is  directed  to  hold  a  public  call  to  buy  in  grain 
to  satisfy  the  buyer  on  such  a  default  (rules  of  grain  trade,  32:1);  Tol.,  21:1. 


EXCHANGE  RULES  AND  REGULATIONS. 


203 


all  defaults  on  future  deliveries  for  one  month  shall  be  handled  as  one 
arbitration  with  the  clearing  house  a  party  thereto.'^® 

After  a  controversy  extending  from  the  earliest  years  of  active 
future  trading  a  rule  was  adopted  in  Chicago  in  191 setting  arbitrary 
limits  (both  up  and  down)  to  the  liquidated  damages  which  may  be 
collected  on  a  defaulted  contract: 


As  liquidated  damage  the  seller  shall  pay  to  the  purchaser  not  less  than  five  per 
cent,  nor  more  than  ten  per  cent  of  the  value  of  the  commodity  as  -established  by  the 
committee;  the  percentage,  within  said  limits,  to  be  such  as  in  the  judgment  of  the 
committee,  may  be  just  and  equitable. 

Settlement  shall  be  made  without  delay,  and  the  damage,  as  determined  under  the 
provisions  of  this  section,  shall  be  due  and  payable  immediately  upon  the  finding  of 
the  committee. 

This  section  shall  not  be  construed  as  applying  to  any  parties  having  the  property 
both  bought  and  sold,  in  all  of  which  cases  settlement  shall  be  made  on  the  basis  of 
prices  established  by  the  contracts  in  such  instances.^® 

Failure  to  receive  and  pay  on  future  contracts.— Failure  to 
receive  and  pay  for  delivery  of  warehouse  receipts  by  the  final  holder 
of  a  delivery  notice  constitutes  a  breach  of  contract  which  may  be 
settled  by  pa^unent  of  differences  between  the  contract  and  the  mar¬ 
ket  price,  plus  chaises  and  penalty.  In  case  of  such  a  default  the 
seUer  in  order  to  establish  a  claim  must  resell  the  property  on  the 
market  within  24  hours  and  notify  the  defaulting  purchaser  of  such 
sale."*® 

In  Chicago,  Minneapolis,  Duluth,  and  Milwaukee,  all  expense  for 
storage,  interest,  insurance  and  other  risk  as  well  as  I-cent  commission 
arc  payable  by  the  defaulting  buyer  to  the  party  required  to  make 
resale.'^®  The  penalty  (for  failure  to  receive  and  pay)  in  St.  Louis 
isfar  more  severe,  namely, an  additional  sum  *  *  *  equal  to  five 

(5)  cents  per  bushel  on  wheat,  four  (4)  cents  per  bushel  on  corn  and 
three  (3)  cents  per  bushel  on  oats.^'  The  Kansas  City,  Omaha,  and 
Kevv'  York  rules  do  not  provide  a  penalty  but  merely  state  that  ^^any 
loss  resulting  to  the  seller  shall  be  paid  by  the  party  in  default.’^ 


«K.  C.,  14:4;  Oma.,  5:4. 

<7  See  Ch.  Ill,  p.  113. 

<8  Chi.  23, 1. 

«  Chi.,  23:2;  Mpls.,  11:9;  Dul..  13:9;  Mil.,  11:6;  St.  L.,  8:5;  K.  C.,  14:2;  Oma.,  5:2;  N.  Y.,  (rules  of  the  grain 
trade)  32:2;  Tol.,  21:2. 

f-o  Chi.,  21:2  and  23:2;  Mpls.,  11:9;  Dul.,  13:19;  Mil.,  11:6. 


81  St.  L.,S:5. 

62  K.  C.,  14:2;  Oma.,  5:2;  N.  Y.  (Rules  of  Grain  Trade),  32:2.  Defaults  by  either  party  to  a  contract  for 
future  delivery  are  covered  in  the  Mlowing  Peoria  rule  wliich  may  be  considered  a  fair  summary  of  general 
exchange  practice  (although  the  Peoria  futures  market  is  inactive):  ‘Un  case  any  property  contracted 
for  future  delivery  is  not  delivered  or  received  on  the  day  of  maturity  of  such  contract,  the  contracting 
party  not  in  default  may,  at  his  option,  consider  the  contract  forfeited,  or  may  purchase  or  sell  the  proi-'crty 
on  the  market  for  account  of  the  buyer  or  seller,  as  the  case  may  be,  during  Lbe  next  business  day,  notifying 
him  at  once  in  writing  of  such  purchase  or  sale,  or  may  compel  a  settlement  by  the  party  making  the 
default  at  the  average  market  price  on  the  day  of  maturity  of  contract;  the  loss,  if  any  shall  be  due  and  pay¬ 
able  at  once  by  the  party  making  the  default.”  (R.  13,  sec.  12.) 


‘204 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


On  the  whole,  it  is  fairly  settled  on  tlie  exchanges  that  defaults  on 
contracts  for  warehouse  grain  may  he  settled  by  payment  of  market 
differences  if  agreed  to  by  the  parties. 

It  will  be  noted  that  the  rules  for  future  trading  proceed  on  the 
theory  that  failure  to  receive  and  pay  for  grain  on  an  original  contract 
dating  presumably  two  or  three  months  back  is  not  a  fraudulent 
breach  of  contract  but  may  occur  through  the  unforeseen  contin¬ 
gencies  of  trade;  and  therefore  that  it  is  fair  to  allow  the  buyer  to 
settle  by  payment  of  differences  and  a  stated  penalty,  rather  than 
to  be  compelled  to  make  full  payment  on  the  actual  grain.  This 
rule  should  be  contrasted  with  that  for  failure  to  accept  and  pay  for 
car-lot  purchases  on  a  to-arrive  contract,  which  is  discussed  below. 
In  the  case  of  default  by  a  purcliaser  of  grain  for  future  delivery  it  is 
assumed  that  there  will  be  a  market  for  the  actual  grain  in  store  and 
that  no  great  inconvenience  will  result  from  allowing  the  defaulting 
party  to  settle  by  payment  of  differences  plus  penalty. 

Failure  to  deliver  on  cash  contracts. — Sellers  of  deferred 
shipments  are  also  allowed  to  default  and  settle  under  certain  condi¬ 
tions  without  becoming  liable  to  discipline  for  breach  of  contract. 
The  alternatives  open  to  the  buyer  are  similar  to  those  for  defaults 
on  future  deliveries.  He  may  elect  to  extend  or  cancel  the  contract 
or  to  rebuy  on  the  open  market  for  account  of  seller,  or,  under  some 
rules,  require  settlement  at  the  market  price  at  the  time  of  demand. 
In  any  event,  providing  the  buyer  notifies  the  seller  within  a  stipu¬ 
lated  time  of  the  course  which  he  elects  for  settlement,  the  party  in 
default  must  pay  him  a  sum  equal  to  the  prov^en  loss  sustained.  This 
loss  may  be  determined  by  buying  the  grain  in  on  the  open  market 
or  by  a  comparison  of  the  contract  with  the  market  price. It  is  a 
general  rule  that  the  contract  shall  continue  in  force  until  some  such 
demand  is  made  by  the  buyer. 

Failure  to  receive  and  pay  on  cash  contracts. — Some  of  the 
exchanges  still  publish  rules  indicating  that  on  any  defaulted  con- 
*tractinScIiange  trading  the  aggrieved  party  is  entitled  to  any  dam¬ 
ages  that  can  be  shown  to  have  been  sustained  and  that,  in  order  to 
protect  his  interest,  he  may  purchase  or  sell  a  like  amount  of  property, 
as  the  case  may  be.®^  Settlements  on  this  basis  have  been  described 
for  contracts  where  one  party  defaults  through  inability  to  vdeliver 

63  Chi.— 22:13;  Mpls.— 11:8;  Mil.— 11:11;  Dul.— 14:9;  K.  C.— 15:14;  Oma.— 6:1;  St.  L.— 8:G;  Peo.— 13:9; 
Buf.— R.  12;  Cin.— 6:8:  Balto.— (by-laws)  13:17;  N.  Y.— (Rules  of  Grain  Trade)  38:6;  Phila.— (Grain  Rules) 
6:8;  Boston  (Trade  Rules),  Rule  7,  and  General  Rules  of  the  Trade,  sec.  4. 

61  Cf.,  the  Peoria  rule  quoted  on  p.  263,  and  note  the  following  rule  of  the  Milwaukee  Chamber  of  Com¬ 
merce:  “In  case  any  property  contracted  for  immediate,  regular,  or  futme  delivery  shall  not  have  been 
delivered  or  received  at  the  maturity  of  such  contract,  the  party  aggrieved  shall  be  entitled  to  any  damages 
that  can  be  shown  to  have  been  actually  sustained,  and  shall  be  entitled  to  protect  his  interest  by  pur¬ 
chase  or  sale  of  a  like  quantity  of  property,  in  open  market,  on  or  before  the  next  regular  session  of  the 
chamber:  Provided,  That  nothing  herein  contained  shall  be  construed  as  authorizing  extortionate  claims 
bases  on  values  manipulated  for  the  piu-pose  of  seeming  such  claims.^’  (Rule  10,  sec.  1.) 


EXCHANGE  RULES  AND  REGULATIONS. 


265 


or  (ill  the  ease  of  futures)  inability  to  accept  delivery.  The  question 


is  now  raised:  On  a  contract  for  car-lot  shipment,  assuming  that  the 
grain  arrives  on  time,  and  disregarding  disputes  over  grades  and 
weights,  can  tlie  buyer  default  and  settle  by  paying  to  the  seller  the 
damages  sustained  out  of  a  difference  between  the  contract  price  and 
the  price  obtained  ?  And,  if  such  a  settlement  takes  place,  is  the 
defaulting  party  further  subject  to  discipline  for  violation  of  a  busi¬ 
ness  contract  ? 

A  rule  permitting  such  defaults  in  specific  terms  is  provided  by  the 
Philadelphia  Commercial  Excliange: 

When  any  property  contracted  for  delivery  is  not  received  and  paid  for  when 
properly  tendered,  it  shall  be  the  duty  of  the  seller  to  sell  it  on  the  regular  market  at 
any  time  during  the  next  24  hours,  Sundays  and  holidays  excepted,  at  his  discretion, 
after  such  default  shall  have  been  made,  he  notifying  the  buyer  at  least  one  hour 
before  such  sale;  or  the  seller  shall  have  the  privilege  of  referring  the  case  to  the 
grain  committee,  which  shall  establish  the  amount  of  his  damage,  which  shall  be  paid 
by  the  party  in  default.®® 

But  this  rule  does  not  exist  in  the  larger  grain  markets  where  failure 
to  receive  and  pay  after  final  grades  and  weights  are  received  amounts 
to  insolvency  and  uncommercial  conduct  rendering  the  member  sub¬ 
ject  to  severe  discipline.  (See  Ch.  V,  sec.  5.) 

The  Chicago  rule  indicates  the  prevailing  requirements  of  the 
terminal  markets: 

All  bills  rendered  for  grain,  seeds,  mill-stuffs,  straw  and  hay,  sold  by  grade,  or  by 
sample,  or  by  grade  and  sample,  either  after  arrival  or  to  arrive,  unloaded  on  regular 
or  private  tracks,  or  in  private  elevators  or  warehouses,  or  in  any  manner  as  may  be 
agreed  upon  between  buyer  and  seller,  if  delivered  at  the  office  of  the  buyer  by  2  p.  m., 
shall  be  paid  by  2.45  p.  m.  the  same  day,  except  that  on  Saturdays  all  bids  delivered 
by  11.20  a.  m.  shall  be  paid  by  11.50  a.  m.  the  same  day;  provided  that  the  regular 


team  track  w'eight  tickets,  or  official  board  of  trade  weight  tickets,  or  other  disinter¬ 


ested  certificates  of  weight,  shall  be  attached  to  the  invoice. 

Any  member,  firm  or  corporation  violating  any  of  the  provisions  of  this  section  shall 
be  deemed  guilty  of  dishonorable  conduct,  as  defined  by  Section  IX  of  Rule  IV,  and 


upon  conviction  thereof  *  *  *  shall  be  .subject  to  the  penalty  *  *  *  etc. 
(That  is) — “he  shall  be  suspended  from  all  the  privileges  of  this  association  until 


such  contract  or  obligation  is  satisfactorily  adjusted  and  settled  *  *  * 

It  is  presumed  that  a  buyer  of  grain  on  track  is  able  to  receive  and 
pay  for  it  if  he  buys  in  good  faith.  Therefore,  when  the  seller  has 
met  the  terms  of  the  contract  and  filed  the  proper  papers,  the  buyer 


must  order  the  grain  delivered  and  pay  for  it.  He  can  not  default 
and  settle  by  payment  of  market  differences. 

Section  16.  Terminal  market  “terms.” 


Inspection. — ^Unless  otherwise  agreed  to,  grain  in  carlots  is  sold 


subject  to  the  inspection  and  weight  certificates  recognized  in  the  • 
terminal  market  through  which  it  passes;  and  buyers  and  sellers, 


»»  Rules  of  the  Grain  Trade,  IX,  2.  Idem,  Peo.— 13:9. 


M  Rule  22:  Secs.  14  and  15. 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


whether  receivers  or  shippers,  are  entitled  to  certificates  of  inspection 
as  a  basis  for  each  contract.^^ 

Terminal  market  ‘Herms’'  as  applied  in  a  contract  for  sale  is 
understood  by  the  grain  trade  to  mean  ^Hhe  official  inspection  and 
weights  of  some  Board  of  Trade,  State,  or  disinterested  public  inspec- 
tion  and  weighing  departoent.” 

\Vliere  State  grading  and  inspection  prevails — as  in  the  majority 
of  western  markets — the  exchange  has  of  necessity  adopted  the  cer¬ 
tificates  issued  by  such  official  agency  as  part  of  the  “terms’’  of  that 
particular  market,^'’  all  iieing  subject  to  the  Federal  grain  standards 
act  of  August  11,  1916. 

In  case  the  exchange  provides  its  own  inspection  service — as  in 
Milwaukee,  Omaha,  Peoria,  Indianapolis,'  Cincinnati,  Buffalo,  Balti- 
more,  Philadelphia,  and  New  York — a  special  set  of  rules  has  been 
adopted  for  the  organization  of  such  inspection  department  and  to 
define  the  duties  of  the  chief  inspector  and  liis  subordinates.®®  These 
rules  and  regulations  do  not  establish  any  substantial  rights  for 
buyers  and  sellers  which  need  be  discussed  at  this  place. 

Under  the  Federal  grain  standards  act  of  1916,  regulations  have 
been  adopted  largely  nullifying  the  effect  of  exchange  rules  and 
regulations  as  applied  to  wheat,  corn,  and  oats  in  interstate  com¬ 
merce.  Any  person  who  properly  presents  himself  is  entitled  to 
have  inspection  and  grading  performed  by  licensed  inspectors, 
under  the  above  act,  and  he  can  not  “be  deprived  of  his  right  there 
by  any  rule,  regulation,  by-law,  or  custom  of  any  market,  board  of 
trade,  chamber  of  commerce,  exchange,  inspection  department,  or 
similar  organization,  or  by  any  contract,  agreement,  or  understanding 
whatsoever.”®^ 

^Sampling. — Where  State  inspection  prevails  the  principal  ex¬ 
changes  have  provided  a  department  of  grain  sampling,  and  appointed 
a  cliief  grain  sampler  or  official  sampler  ®^  to  act  as  a  check  on  the 
State  department  and  represent  the  interests  of  the  association  on 
inspection  matters.  , 

In  Chicago  the  grain  committee  is  to  nominate  the  samplers 
(“helpers”)  and  the  board  of  trade* furnish  funds  for  their  payment. 

57  K  G.,  Rules,  p.  102. 

03  See,  Trade  Rules,  Grain  Dealers’  National  Association,  rule  2,  (c).  “Terras”  also  includes  the  rules 
of  the  marf;ct. 

Sec  also  opinion  of  court  in  Chicago  Board  of  Tradev.  UnitedStates  (246  U.  S.  236):  “  Grains  there  dealt 
in  are  graded  according  to  kind  and  qualityandaresoldusually  ‘Chicago  weight.inspection and  delivery.’” 

Chi.,  22:3;  Mpls.,  11:1;  Dul.,  14:1;  K.  C.,  15:10.  The  St.  Louis  Merchants’  Exchange  has  no  rule  for- 
mally  adopting  the  Missouri  or  lihuois  inspection  service;  the  rules  merely  designate  the  (Federal)  grades 
which  shall  apply  as  “contract”  grades. 

CO  Mil.,  R.  19;.  Oma.,  1918  Rules,  p.  77;  Ind.,  1918  Report,  p.  82;  Cin.,  R.  4;  Buf.,  17:  Balto.,  (By-Laws) 
Art.  10;  Phila.,  (Grain  Rules)  R.  2;  N.  Y.,  (Rules  of  Grain  Trade)  R.  3. 

61  Regulation  8,  sec.  6;  rules  and  regulations  of  the  Secretary  of  Agriculture  under  the  United  States  grain 
standards  act  of  August  11, 1916. 

62  Chi.,  Regulations  adopted  by  Board  of  Directors  (under  authority  of  the  rules)  1918  Book  of  Rules, 
p.  121.  Mpls.,  Rule  22.  Dul.,  Rule  IS:  “The  board  of  directors  shall  have  power  to  establish,  control, 
and  conduct  a  department  for  sampling  grain  and  seeds  in  cars,  cargoes,  and  otherwise,  and  to  make  regular 
tiens  for  its  government  and  operation.’’  (Sec.  4.)  IC.  C.,  3:11  and  12.  St.  L.,  8:6. 


EXCHANGE  RULES  AND  REGULATIONS.  267 

HQL&:cver^_tliey  ai’c  to  be  appointed  by  and  subject  to  control  and 
discharge  by  the  State  grain  department. 

The  sampling  departments  established  on  other  exchanges  are 
quite  independent  of  the  State  agency.  According  to  the  Kansas 
City  rules: 

(6)  This  department  shall  have  jurisdiction  in  the  matter  of  sampling  at  all  places 
on  tracks  or  at  elevators,  mills,  warehouses,  etc.,  within  the  switching  limits  of  Kansas 
City.  It  shall  be  the  duty  of  the  board  of  trade  official  sampler,  or  his  assistants,  upon 
written  request,  to  obtain  a  true  sample  of  any  commodity  and  deliver  the  same  to  the 
person  requesting  such  sample  by  12  o’clock  noon  of  the  next  succeeding  business  day. 
In  the  event  of  his  inability  to  get  such  sample,  the  sampler  shall  make  and  file  with 
the  secretary  of  the  board  of  trade  a  report  of  such  inability  and  its  cause.  The  com¬ 
pensation  for  such  sampling  shall  be  fixed  by  the  sampling  committee  subject  to  the 
approval  of  the  board  of  dmectors  and  shall  be  paid  by  the  person  requesting  it.*^^ 

Even  under  State  inspection  grain  may  be  sold  subject  to  the  ^ 
approval  of  the  official  sampler.’’  Under  these  terms  an  appeal  may 
be  taken  from  the  decision  of  the  official  sampler  to  the  grain  com¬ 
mittee  (Chicago)  or  to  the  grain  appeal  committee  (Kansas  City). 
The  decisions  of  these  committees  shall  be  final  and  binding  on  the 
parties  interested. In  Minneapolis,  where  disputes  arise  ^‘as  to  the 
quality  of  grain,  tendered  on  sales  to-arrive,  where  sales  have  been 
made  by  sample,  the  parties  in  dispute  may  refer  same  to  an  official 
grain  sampler  of  the  chamber  of  commerce  for  decision.  Appeal 
from  the  official  grain  sampler  lies  to  the  board  of  arbitration”  in  the 
regular  way,  as  provided  by  the  rules. 

Weighing.- — The  weighing  of  grain  is  performed  by  State  com¬ 
missions  to  the  same  extent  as  inspection  and  grading,  except  that 
in  Illinois  jurisdiction  has  been  given  to  the  Chicago  and  Peoria 
Boards  of  Trade  by  special  arrangement.  The  duties  of  the  chief 
weighmasters  and  their  assistants,  as  those  for  scale  inspectors,  are 
indicated  elsewhere.  (See  p.  319.)  It  is  sufficient  to  state  here  that 
buyers  and  sellers  are  entitled  to  official  State  or  exchange  weights 
before  final  adjustment  of  a  contract  based  on  terminal  market 
terms.  This  right  was  defined  in  a  ruling  of  the  Minneapolis  board  of 
directors  on  October  22,  1908: 

Resolved,  That  all  sales  of  grain  made  upon  the  floor  of  the  exchange  are  subject  to 
State  weights,  unless  it  is  definitely  agreed  upon  at  the  time  to  the  contrary,  and  is 
stipulated  in  the  confirmation  of  the  trade;  that  failure  to  furnish  State  weights  when 
the  same  were  required  would  bo  deemed  uncommercial  conduct,  and  in  such  case  the 
seller  should  have  the  right  to  demand  payment  for  shipper’s  weights, 

The  weights  of  the  recognized  official  agency  in  the  terminal  are 
binding  between  buyers  and  sellers,  whether  members  or  nonmembers, 
unless  otherwise  specified  in  the  contract,®^  and,  whether  performed 

^  Sections  “ninth”  and  “tenth.” 

Rule  3,  see.  11  (6). 

65  Chi.,  22:18;  K.  C.,  3:12. 

66  General  Rules,  p.  65. 

6r  Clii.,  Constitution,  Sec.  X,  Rule  22,  Sec.  XIII  and  Special  Regulations,  p.  131;  Mil.,  9:6;  N.  Y.  (Grain 
Rubs),  3S:7;  Ruf.,  17:8. 


268 


TEllMINAL  GEAIN  MAEKETS  AND  EXCHANGES. 


by  public  or  exchange  agency,  the  inspection  aiul  weighing  of  car-lot 
grain  shipped  into  or  out  of-terminal  markets  are  regarded  as  indis¬ 
pensable  to  the  general  marketing  system  and  matters  of  general 
public  concern.®®  Therefore,  it  is  scarcely  necessary  for  any  trader, 
who  properly  presents  himself,  to  invoke  any  special  rule  or  agree¬ 
ment  in  order  to  secure  a  disinterested  certificate  of  weights. 

Weights  at  seaboaed  markets. — Since  the  traders  in  eastern 
seaboard  markets  frequently  buy  on  terms  of  the  terminal  market 
at  point  of  origin,  subject  to  claims  for  shortages,  the  obligation  to 
furnish  weights  under  these  circumstances  rests  primarily  upon  the 
seller.  Destination  outturn  weights  will  govern  in  determining 
shortages  in  any  case  and  will  be  the  sole  basis  for  payment  when  no 
official  weight  certificates  have  been  furnished  by  the  seller.®®  The 
New  York  and  Boston  rules  given  below  set  forth  the  prevailing 
practice  : 

On  all  sales  of  grain  and  mill  feeds  in  car  lots  for  future  delivery,  unless  otherwise 
specified,  the  shipper  shall  furnish  for  each  car  a  certificate  of  weight  issued  by  a 
•weighmaster  who  is  an  official  appointee  of  a  recognized  commercial  body  or  of  the 
Slate  in  which  the  grain  or  feed  was  weighed.  Xhis  certificate  shall  be  the  basis  of 
settlement  between  buyer  and  seller."" 

Certificates  of  weights  issued  by  a  public  elevator  or  official  board  of  tiade  weigh¬ 
master  shall  be  final.  Shipments  without  either  of  these  certificates,  but  accom¬ 
panied  by  sworn  certificate  of  weight,  or  duly  authorized  weighmaster’s  certificate, 
shall  be  guaranteed  within  1  per  cent.  All  shipments  unaccompanied  by  proper 
certificates  of  weights  shall  be  settled  on  outturn  weights,  unless  the  seller  furnish 
such  certificates  before  arrival  of  car  at  destination. 

All  claims  for  shortage  must  be  made  within  10  days  after  arrival  at  point  of  desti¬ 
nation,  accompanied  by  a  duly  sworn  certificate  of  outturn  weight,  paid  freight  bill, 
and  canceled  bill  of  lading,  or  copy  of  same.^* 

Section  16.  Terminal  charges. 

As  already  indicated,  there  are  certain  inevitable  terminal  services 
(in  addition  to  commissions,  handling  charges,  interest,  etc.)  which 
must  be  paid  for  on  every  shipment  of  grain.  The  exchanges  which 
enforce  the  ‘^uniform  commission  rule’^  (see  sections  7-11)  recognize 
this  and  have  endeavored  to  require  all  purchasers  of  country  grain 
to  assess  these  charges  on  a  uniform  basis. 

Cincinniti  Rules  Governing  Public  Weighing,  Rule  II,  Section  17:  ‘‘These  rules  governing  weigh¬ 
ing  operations  of  the  Grain  and  Hay  Exchange  Weighing  Bureau  arc  for  the  purpose  of  securing  uni- 
fo:  mity  of  practices  in  weighing  operation  in  this  market  for  the  benefit  of  the  whole  trade  interested,  and' 
for  a  proper  standing  of  the  market.”  And  cf.  Buffalo  Corn  Exchange  Rules,  Rule  17,  Sec.  8:  “All  grain 
sold  by  or  to  members  Cf  the  Corn  Exchange  must  be  weighed  by  its  authorized  weighmaster,  unless 
previously  weighed  at  a  public  elevator,  or  by  a  board  of  trade  weighmaster.”  See  also,  Reg.  13,  p.  73, 
Omaha  Grain  Exchange  Rules,  1918.  “It  shall  be  the  duty  of  every  member  of  the  exchange  who  owns, 
operates,  or  controls  an  elevator  in  Omaha,  South  Omaha,  or  Council  Bluffs  to  have  every  car  of  grain 
shipped  out  of  such  elevator  inspected  and  weighed  by  the  exchange  in  the  regular  way,  and  each  such 
m  mber  shall  pay  to  the  exchange  the  regular  fees  for  weighing  and  inspection.” 

Buf.— 17:10;  Balto.— (By-Laws)  12:2;  Phila.— (Grain  rules)  8:5;  N.  Y.— (Grain  rules)  38:7:  Bos.  — (Trade 
rules)  5  and  6. 

7®  N.  Y.— (Grain  rules)  38:7. 

Bos.— (Trade  rules  for  grain)  5, 6. 


exchange  rules  and  regulations. 


269 


The  more  frequent  of  these  cliarges  cover  the  services  of  (1) 
inspection,  (2)  weighing,  (3)  sampling,  (4)  elevation  and  storage, 
(5)  mixing  and  conditioning,  and  (6)  switching.  The  insurance 
charges  on  grain  in  store  are  not  tabulated  here,  since  they  are  largely 
a  matter  of  private  contract  and  vary  greatly  according  as  the 
location  and  construction  of  the  elevator  affects  the  risk. 

It  will  be  noted  that  these  rates  are  regulated  in  some  markets 
by  the  State,  in  others  by  the  exchange,  and  elsewhere  by  elevators, 
railroads,  or  individual  agreement.  It  follows  that  the  charges  lack 
uniformity  as  between  certain  markets,  even  for  the  same  service. 

The  specific  services  for  which  these  six  classes  of  charges  are 
assessed are  apparent  from  the  tables,  and  are  referred  to  contin¬ 
uously  throughout  the  report.  For  the  inspection  aiid  weighing 
services  reference  should  be  made  to  Chapter  VI.  “Sampling,’’  as 
used  in  Table  77-,  refers  to  an  additional  sampling  service,  usually  per¬ 
formed  as  a  check  on  the  official  inspection.  Elevation  and  storage 
usually  means  the  elevation  of  bulk  grain  without  preserving  identity 
within  the  grade,  and  discharging  it  to  a  receiving  carrier  within  a 
stated  period.  Additional  storage  accrues  when  grain  is  held  beyond 
the  specified  “free  time.”  The  various  mixing  and  conditioning 
services  are  sufficiently  described  in  the  table  below.  Switching  is 
included  among  terminal  charges,  since  it  is  usually  assessed  against 
the  shipper  as  a  separate  item  and  not  included  in  the  freight  charge 
(except  where  absorbed  by  the  carrier).  Smtehing  charges  are 
subject  to  many  variations,  even  in  a  single  market,  and  for  the  most 
part  are  predicated  on  specific  competitive  conditions.  In  a  few 
instances,  where  all  industries  are  connected  by  a  local  belt  line 
railroad,  flat  charges  have  been  set  up  for  the  district.  No  attempt 
is  made  here  to  give  an  exhaustive  statement  of  switching  charges. 
The  statements  do  present,  however,  the  rates  appearing  in  the 
switching  tariffs  of  the  principal  grain-carrying  railroads  at  the 
markets  listed,  and  indicate  the  policies  of  these  roads  with  reference 
to  the  absorption  of  switching.  It  will  be  noted  that  the  carriers 
will  usually  absorb  switching  in  connection  with  a  line  haul  for 
which  they  have  earned  a  certain  minimum  revenue.  However,  there 
are  frecpient  exceptions  to  any  general  principles  which  might  be  laid 
down. 

'2  Under  certain  conditions  both  elevation  and  SAvitehing  may  be  absorbed  by  the  railroad  carrier  as  a 
part  of  transportation. 

The  Supreme  Court  of  the  United  States,  in  1911,  in  reviewing  the  cases  of  Interstate  Commerce  Com¬ 
mission  V.  DilYenbaugh,  Interstate  Commerce  Commission  u.  F.  H.  Peavey  &  Company,  and  Union  Paci^c 
Railroad  Company  v.  Same  (222  U.  S.,  p.  42),  held,  ‘'The  interstate  commerce  act  does  not  attempt  to 
equalise  fortune,  opportunities,  or  abilities;  it  contemplates  payment  of  reasonable  compensation  by  carriers 
for  serA’ices  rendered  and  instrumentalities  furnished  by  owners  of  property  transported,  the  only  power 
of  the  Commission  being  to  determine  the  maximum  of  such  compensation.  Contracts  made  by  various 
railroads  for  elevation  expenses  of  grain  at  points  of  transshipment  at  rates  not  exceeding  those  fixed  by 
the  Commission  as  reasonable,  held  not  to  be  illegal  discriminations  or  rebates  when  paid  to  owners  of 
elevators  on  their  own  grain,  although  such  owners  performed  services  other  than  those  paid  for  at  the  same 
time  to  their  own  advantage.’' 


Table  75. — Inspection  charges  at  specified  markets  Dec.  1,  1919. 


270 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


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Table  76.' — Weighing  charges  at  specified  markets  Dec.  1,  1919. 


Table  77 — Sampling  charges  at  specified  marhets,  Bee.  1 ,  1919. 


272 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


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EXCHANGE  RULES  AND  REGULATIONS. 


273 


Tablk  1^.— Elevating  and  storage  charges  at  specified  markets  Dec.  1,  1910. 

[In  bushels  unless  otherwise  specified.] 


•  Market. 

Elevating  and 
initial  storage. 

Free 

time. 

Additional 
storage  (rate 
per  day). 

Unloading  and 
reloading. 

Chicago . 

Crntit. 

1 

Days. 

10 

Vents. 

1 

Milwaukee  7 . 

1 

10 

1 

Minneapolis . 

15 

@  -Sts 

Duluth . 

Li 

15 

10 

3 $3.00 

35.00-  6 10.00 

Kansas  City . 

Omaha . 

7 100-  8  .50 

3 

St.  Louis . 

1-1 

10 

Peoria . 

©, 

1 

15 

5 

5  i  ^  0 

^  @  i 

®  :\-  (§)  ^ 

71  3.00 

Cincinnati . 

Toledo . 

11 

1 

10 

15  1.00-  76  2.00 

Indianapolis . 

1 

Buffalo . 

17  1 

5 

fis)  1-  551 

Baltimore . 

L©  1 

1_7 

20 

20 

10 

20 

i 

27  1.00 

25  1.00 

261.50-272.00-283.00 

Philadelphia . 

Now  York . 

X 

Boston. . . . . 

@  50  1_  3^  f  1 

32  30 

H 

Li 

San  Francisco . 

Seattle . 

8  40-  33  100 

5-30 

New  Orleans 3<.... 

1-  (g)  a 

36  5-  37  1  0 

381-®  a  @ 

•«  2.00-  «  6.00 

Portland . 

•  ■•2  100 

5 

«20 

Rates  fixed  b}-- 


State  Grain  Inspection 
Department. 
Elevators. 

State  law  (maximum). 
Do. 

Do. 

Grain  Exchange. 

State  law  (maximum). 
Elevators. 

Grain  and  Hay  Ex¬ 
change. 

Produce  Exchange 
Elevators. 

State  law  (maximum). 
Railroads. 

Elevators. 

Produce  Exchange. 
Railroads. 

Do. 

Port  of  Seattle  Corpo¬ 
ration. 

New  Orleans  Board  of 
Trade. 

Commission  of  public 
docks. 


'  1919,  the  rate  will  be  H  cents  per  bushel  for  unloading,  elevating,  and  reloading;  and  for 

additionalstorage  cent  in  concrete  and  cent  in  wooden  elevators. 

2  Storage  charges  Nov.  15  to  May  15  shall  not  exceed  4  cents  per  bushel. 

3  Bulkhead  cars  per  car;  coopering  cars  $2  per  car. 

*  Includes  insurance  and  unloading. 

‘  Bulkhead  cars  per  car. 

*  Unloading  only  from  coalcars,  percar. 

'•  Inbound  grain. 

*  Outbound  grain. 

»  Corn  and  oats. 

1®  15  days  additionalstorage  until  maximum,  4  cents  on  oats  and  5  cents  on  other  grain,  is  reached 

to  M&y  1 }« 

“  Bulkhead  ears  per  car. 

*2  First  10  days. 

13 10  days  of  part  thereof  after  first  (additional)  K>  days. 

1^  Elevating  damaged  grain  1  cent  extra. 

1®  Loading  ^yheat,  corn,  rye,  flaxseed,  per  car;  oats  and  barley  1,-500  bushels,  and  30  cents  for  each  addi¬ 
tional  100  bushels. 

1®  Bulkhead  cars,  also  screenings,  per  car. 

17  A  ll  accrued  charges  on  grain  remaining  in  store  on  Apr.  1  in  each  year  must  be  paid  to  that  date  on 

®  the  15th  day  of  April,  under  penalty  of  h  cent  per  bushel  additionalstorage  charge. 

18  Lake  gram  each  seven  days  thereafter  or  part  thereof. 

18  Rail  grain. 

8®  Rail  grain  includes  delivery  to  vessels  or  cars;  delivery  in  bags  J  cent. 

21  Trimming  per  car. 

82  Delivery  to  tramp  boats  in  addition  to  elevation  charge. 

23  Domestic  grain. 

21  Export  grain. 

23  Reloading  or  trimming  per  car. 

26  Canal  boats,  trimming  per  1,000  bushels. 

27  Ocean  vessels  and  schooners,  trimming  per  1,000  bushels. 

28  Ocean  vessels,  trimming  per  1 ,000  bushels. 

29  Bostnn  &  Maine  export  rate.  Includes  insurance;  also  delivery  to  vessels  or  steamers  at  Common¬ 

wealth  Piers;  also  delivery  m  cars  at  Boston  A  Maine  Railroad  wharves;  each  10  days  thereafter  to  cover 
storage  and  insurance.  ■ 

3®  Domestic  oats,  barley,  and  buckwheat. 

31  Domestic  other  than  oats,  barley,  and  buckwheat. 

32  Flat  storage  per  month,  30  cents.  Rate  per  season  on  wheat,  $1.25;  on  barley,  corn,  and  rye,  .$1..50; 

33  Wharfage  per  ton;  includes  unloading,  trucking  in,  elevating,  or  hauling  from  ship. 

31  On  grain  for  export  charges  includes  elevation  “from  cars  or  river  barges  in  bulk  and  thence  into  vessels 
atelevator’s  wharf  in  bulk  or  into  cars  in  bulk  for  delivery  to  other  export  elevators.^’  On  grain  imported 
charges  include  elevator  “from  cars  in  bulk  or  from  hokl  of  ve.ssel  in  bulk  and  thence  into  cars”  or  “from 
cam  in  bulk  or  from  hold  of  vessel  in  bulk  and  thence  into  vessel  or  into  river  barge  at  elevator’s  wharf 
in  bulk.”  (Public  grain  elevator  tariff  No.  -3.) 

33  Oats  onw- 

36  For  local  domestic  grain. 

37  Export  grain. 

38  On  local  or  domestic  grain  1  cent  per  hundredweight  for  10  calendar  days  or  fraction  thereof;  for  each 
succeeding  10  calendar  days  or  fraction  thereof  J  cent  per  hundredweight. 

39  On  export  grain  cent  per  ton  each  additional  calendar  day. 

^®  Per  car  for  loading  into  cars. 

Per  car  for  receiving  into  elevators. 

!!  wharfage,  unloading  cars,  and  piling  when  received  in  sacks. 

*3  Each  30  days  or  fraction  thereof. 

16SG03°— 20 - 18 


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EXCHAXGE  TvULES  AND  REGULATIONS. 


275 


Switching  charges  on  grain  (compiled  from  railroad  tariffs  in 
force  Dec.  1,  1919). — The  statements  below  indicate  the  switching 
charges  required  by  one  or  more  grain  carrying  roads  in  each  terminal 
and  the  charges  which  will  be  absorbed  by  such  carriers. 

CHICAGO. 

Charges. — The  switching  charge  from  terminals  (inspection  tracks  of  the  inbound 
carrier)  to  industries  on  other  roads  is  almost  uniformly  $3  per  car,  which  is  absorbed 
by  the  inbound  carrier.  The  present  basis  for  the  switching  charge  from  industry  to 
industry  is  the  combination  of  the  local  switching  charges  of  various  switching  roads 
participating  in  the  movement.  It  ranges,  therefore,  from  $2  per  car  (where  one 
line  is  interested)  to  $10  or  more  per  car  where  other  lines  are  interested. 

Chicago,  Rock  Island  &  Pacific  Railroad  switching  charges  from  $3  to  $4  per  car. 

Absorplmis. — Inbound  switching  is  absorbed  by  inbound  carrier  and  outbound 
grain  absorbed  by  outbound  carrier. 


MILWAUKEE. 

Charges. — From  one  industry  to  another  on  the  same  railroad  1,3  cents  per  100 
pounds. 

From  industry  on  one  road  to  industry  on  another  road  0.02  cent  per  100  pounds. 
Internal  switching  $2  per  car  for  each  movement.  From  industry  to  industry, 
$2  per  car  on  tracks  of  Chicago  &  North  Western  Railroad. 

Absorptions. — The  Chicago  &  North  Western  Railroad  will  absorb  switching  charges 
of  connecting  lines  at  Milwaukee  as  per  their  published  tariffs. 


Minneapolis.— 


Between  connecting  lines  of  railroads  and  industries  located  on— 

1 

Rates  apply 
on  switch 
movement  in 
connection 
with  road- 
haul  move¬ 
ment. 

Rates  apply 
on  movements 
within  the 
Minneapolis 
switching 
district.'- 

Chicago,  Milwaukee  &  St.  Paul . 

$1.50 
1.50 
1.50 
1.50 
1.50 
1.50 
$1. 00-1. 50 
2.00-3,00 
1.50 
1.50 
1.50 

1. 00-1. 50 
1.50 

$2,00-$G.50 

1.50- 5.00 
2.00-  6.50 
2.00-  6.50 
2.00-  5.00 
2.00-  6.50 

1. 50-  5. 00 

2.50-  5.00 
2.00-  6.50 
2.00-  5.00 

(b 

1.50-  6.50 
2.00-  6.5') 

Chicago' Great  Western  Railway...., . 

Minneapolis  &  St.  Louis  Railway  2 . 

Railway  Transfer  Co . 

Minneapolis  Eastern  Railway . . . 

Soo  Line . 

Northern  Pacific  Railway . . . 

East.  St.  Louis  Railway . 

Great  N orthem  Railw  ay . . 

Minneapolis  Western  Railway . 

Chicago,  Rock  Island  &  Pacific  Railwav . 

Chicago,  St.  Paul,  Minneapolis  &  Omaha  Railwav . 

Chicago,  Burlington  &  Quincy  Railway  * . 

*  Minimum  Inter-terminal  charge,  $o. 

-Between  Minneapolis,  Hopkins,  St.  Lpuis  Park,  1  cent  per  pound,  minimum  charge  $6  per  car,  2  cents 
per  100  pounds,  minimum  weight  34,000  pounds. 

3  Two  and  one-half  cent  per  100  pounds;  minimum,  30,000  pounds.  - 

<  Track  connection  with  all  lines  via  Great  Northern  Railway;  Chicago,  Burlington  &  Quincy  uses  team 
tracks  of  Great  Northern  Railway  but  does  not  have  free  access  to  Great  Northern  Ry.  industry  tracks 
'  ( Great  N orthem  switching  rates  apply). 

Note.— Intermediate  switching  charge;  Carriers  not  having  direct  track  connections  the  switching 
charge  of  the  intermediate  line  is  in  addition  to  the  delivering  line  switching  charge. 

Absorptions. — On  carload  shipments  having  origin  or  destination  in  the  State  of 
Minnesota  (including  the  city  of  Minneapolis)  consigned  to  or  originating  at  industries 
located  on  the  tracks  of  the  Minneapolis  Eastern  Railway  or  consigned  to  industries 
located  on  connecting  lines  where  intermediate  switching  is  performed  \ia  the  Min¬ 
neapolis  Eastern  Railway  this  railroad  will  absorb  the  switching  charges  of  the 
Minneapolis  Eastern  Railway.  Will  apply  only  on  Minnesota  intrastate  traffic. 


276 


TEKMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


Switching  charges  at  Minneapolis  will  not  be  absorbed  on  grain  or  seeds,  carloads, 
received  via  the  Chicago  Great  Western  Railroad  except  in  the  following  cases:, 

(a)  On  grain  or  seeds,  carloads,  except  grain  to  be  milled  in  transit,  from  Council 
Bluffs,  Iowa,  Omaha  and  South  Omaha,  Nebr.,  Kansas  City  and  St.  Joseph,  Mo., 
Atchison,  Kansas  City,  and  Leav  enworth,  Kans.,  when  originating  beyond,  unloaded 
at  elevators  or  mills  on  the  Chicago,  Burlington  &  Quincy  Railroad,  Chicago,  Mil¬ 
waukee  &  St.  Paul  Railway,  Chicago,  Rock  Island  &  Pacific  Railway,  Chicago,  St. 
Paul,  Minneapolis  &  Omaha  Railway,  Great  Northern  Railway,  or  Minneapolis  & 
St.  Louis  Railroad,  switching  will  be  absorbed. 

(b)  On  grain,  carload,  except  grain  to  be  milled  in  transit,  from  Council  Bluffs, 
Iowa,  Omaha  and  South  Omaha,  Nebr.,  Kansas  City  and  St.  Joseph,  Mo.,  Atchison, 
Kansas  City,  and  Leavenworth,  Kans.,  when  originating  beyond,  unloaded  at  ele¬ 
vators  or  mills  on  the  Minneapolis  Eastern  Railway  or  Minneapolis,  St.  Paul  &  Sault 
Ste.  Marie  Railway  the  charges  for  intermediate  switching  only  will  be  absorbed. 

(c)  On  grain  and  seeds,  carload,  from  Chicago,  Ill.,  unloaded  at  elevators  or  mills 
on  Chicago,  Burlington  &  Quincy  Railroad,  Chicago,  Milwaukee  &  St.  Paul  Railway, 
Chicago,  Rock  Island  &  Pacific  Railway,  Chicago,  St.  Paul,  Minneapolis  &  Omaha 
Railway,  Great  Northern  Railway,  Minneai:)olis  A  St.  Louis  Railroad,  or  Minneapolis, 
St.  Paul  &  Sault  Ste.  Marie  Railway,  switching  will  be  absorbed. 

(d)  On  wheat,  carload,  from  Council  Bluffs,  Iowa,  Omaha  and  South  Omaha,  Nebr., 
Kansas  City  and  St.  Jossph,  Mo.,  Atchison,  Kansas  City,  and  Leavenworth,  Kans., 
when  originating  beyond,  to  be  milled  in  transit  at  Minneapolis,  Minn.,  that  is  deliv¬ 
ered  to  mills  or  elevators  on  tracks  of  the  Chicago,  St.  Paul,  Minneapolis  &  Omaha 
Railway,  Minneapolis  Eastern  Railway,  or  Minneapolis,  St.  Paul  &  Sault  Ste.  Marie 
Railway,  the  intermediate  switching  charges  will  be  absorbed. 

(e)  On  wheat,  carload,  from  Council  Bluffs,  Iowa,  Omaha  and  South  Omaha, 
Nebr.,  Kansas  City  and  St.  Joseph,  Mo.,  Atchison,  Kansas  City,  and  Leavenworth, 
Kans.,  when  originating  beyond  to  be  milled  in  transit  at  Minneapolis,  Minn.,  that 
is  delivered  to  mills  or  elevators  on  the  Great  Northern  Railway  or  the  Railway  Trans¬ 
fer  Co.,  switching  will  be  absorbed. 

Switching  charges  in  connection  v/ith  line  haul  transportation,  applying  from 
elevators  on  Great  Northern  Railroad  tracks  to  team  tracks  of  Great  Northern  Rail¬ 
road,  also  switching  charges  in  connection  with  line  haul  transportation  between 
industries  on  Minneapolis  Western  Railroad,  will  be  absorbed. 

Cooperage  $1.50  per  car. 

DULUTH. 

Charges. — Great  Northern  Railroad  switching  charges.  Grain  from  elevators  ‘‘E,” 
“H, ”  “Capitol,”  and  “Peavey”  to  connecting  lines,  in  connection  with  line  haul, 
$3  per  car.  Intraplant,  intraterminal  or  interterminal  elevators  “E,  ”  “H,  ”  “Cap¬ 
itol,  ”  and  “Peavey,  ”  $4  per  car. 

Absorption. — Chicago,  St.  Paul,  Minneapolis  &  Omaha  Railway  will  absorb  $1.50 
of  switching  charge  as  per  tariff  on  file  with  the  Interstate  Commerce  Commission. 

Cooperage. — $2  per  car. 

OMAHA. 

Charges. — From  Union  Pacific  Railroad  tracks  connecting  with  Chicago,  Burling¬ 
ton  &  Quincy  Railroad;  Chicago,  St.  Paul,  Minneapolis  &  Omaha  Railroad;  Chicago 
&  North  Western  Railroad,  and  Missouri  Pacific  Railroad  in  Omaha  to  Union  Pacific 
tracks  connecting  with  Chicago  Great  Western  Railroad  tracks  in  Omaha,  $2  per  car, 
l^quipment  for  Chicago  &  North  Western  Railroad  at  Omaha  between  Cliicago  & 
North  Western  Railroad  and  Chicago,  Burlington  Quincy  Railroad  $2  per  car. 
Carload  switching  rates  between  industries  on  Union  Pacific  Railroad  located  in 
the  Omaha  yard.  ^ 

First  district,  $2  per  car. 


EXCHANGE  RULES  AND  REGULATIONS. 


27-7 


Second  district,  $2,50  per  car;  between  second  and  first  districts,. $3  per  car. 

Third  district,  $2.50  per  car;  between  second  and  third  districts,  $3  per  car,  and  be¬ 
tween  first  and  third  districts,  $3  per  car. 

Fourth  district,  $2  per  car;  between  first  and  fourth  districts,  $3  per  car;  between 
second  and  fourth  districts,  $3.50  per  car;  between  third  and  fourth  districts,  $4 
per  car. 

Fifth  district,  $2.50  per  car;  between  first,  second  and  fifth  districts,  $3  per  car; 
between  third  and  fifth  districts,  $3.50  per  car;  and  between  fourth  and  fifth  districts, 
$4  per  car. 

Intraterniinal  or  interterminal  between  Union  Pacific  Railroad  tracks  in  Omaha 
and  Omaha  Flour  Mills  Co.  and  Peters  Milling  Co.,  same  service  in  connection  with 
line  haul,  $4  per  car. 

Absorptions. — Outbound.  On  grain  (not  moving  under  transit  privileges)  the 
Union  Pacific  Railroad  will  absorb  the  switching  between  Council  Bluffs  and  Omaha 
or  South  Omaha  when  moving  over  its  rails  destined  to  stations  Denver  to  Speer  and 
Cheyenne,  Wyo. 

KANSAS  CITY. 

C/wr(/€5.— Reconsignment,  $2.  Switching,  $3  to  $5.  Chicago,  Burlington  &  Quincy 
effective  September,  1919.  From  Chicago,  Burlington  <fe  Quincy  Railroad  track 
connections  with  Chicago,  Rock  Island  &  Pacific  Railroad  and  Wabash  Railroad  in 
North  Kansas  City  to  industries  in  North  Kansas  City  on  Chicago,  Burlington  & 
Quincy  Railroad,  elevator  A,  $3;  elevator  B,  $4. 

Absorptions. — Union  Pacific  Railroad  will  absorb  connecting  lines  switching  charo-ps 
as  per  current  tariffs  on  file  with  Interstate  Commerce  Commission. 

ST.  LOUIS. 

Charges. — Central  elevator  B  and  track  connection  with  St.  Louis  Transfer  Rail¬ 
way,  }/i  cent  per  100  pounds— minimum  40,000  pounds.  Grain  carloads  (originating 
at  Missouri  points,  upon  which  the  line  performing  the  road-haul  does  not  absorb 
swritching  charges  of  Missouri  Pacific  Railroad)  from  St.  Louis-San  Francisco  Railway 
connection  with  Missouri  Pacific  Railroad  to  central  elevator  B,  3^  cent  per  100  pounds, 
minimum  $1.50  per  car;  to  Plant  Milling  Co.,  Saxony  Mills,  cent  per  100  pounds, 
$2  minimum  per  car. 

Grain  carloads  (originating  at  points  in  Missouri  and  upon  which  the  line  performing 
the  road-haul  does  not  absorb  switching  charges  of  Missouri  Pacific  Railroad  west 
and  Missouri  Pacific  Railroad  south)  from  Missouri  Pacific  Railroad  west  connection 
with  Missouri  Pacific  Railroad  south  to  Plant  Milling  Co.,  Saxony  Mills,  }i  cent  per 
100  pounds,  minimum  $1  per  car. 

Grain  all  kinds.  From  Wabash  Railway  track  connection  with  Missouri  Pacific 
Railroad  west,  St.  Louis-San  Francisco  Railway  and  Terminal  Railroad  Association 
to  Exchange  Elevator  at  Theresa  Avenue  $1.50  per  car  (applies  only  on  noncompeti¬ 
tive  traffic)  and  1  cent  per  100  pounds,  minimum  50,000  pjounds  (applies  only  on  com¬ 
petitive  traffic). 

Grain  all  kinds  from  East  St.  I^ouis  Connecting  Railway,  St.  Louis  Meichants 
Bridge  Terminal  Railway,  Southern  Railway  (V.  &  C.  Belt),  Terminal  Railway  Asso 
ciation  of  St.  Louis  to  elevators  and  industries  specified,  34  cent  per  100  i)ounds, 
minimum  40,000  pounds. 

Grain  all  kinds,  from  track  connection  of  Mobile  &  Ohio  Railroad  with  Missouri 
Pacific  Railroad  south  at  Vulcan,  Ill.,  to  elevators  and  warehouses  specified,  3^  cent 
per  100  pounds,  minimum  $3  per  car. 

.  Barley,  corn,  oats,  xya  and  wheat  originating  west  of  Mississippi  River,  from  track 
Connections  with  Terminal  Railroad  Association,  St.  Louis  Mei-chants  Bridge  Termi¬ 
nal  Railway,  and  East  St.  Louis  Connecting  Railway,  to  all  switch  elevators  speci¬ 
fied,  34  cent  per  100  pounds,  minimum  40,000  pounds. 


278 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


Grain  from  elevators  located  on  Chicago,  Burlington  &  Quincy  Railroad  tracks  in 
St.  Louis  south  of  Aurora  Avenue  to  St.  I^ouis  Merchants  Bridge  Terminal  Railroad, 
St.  Louis  Transfer  Railroad,  Wabash  Railroad,  and  Missouri,  Kansas  &  Texas  Rail¬ 
road,  $1.50  per  car  subject  to  minimum  charge  of  $5  for  through  movement. 

Absorptions. — Shipments  of  grain  consigned  to  St.  liouis  or  East  Louis  locaJly  on 
C'hicago,  Burlington  &  Quincy  Railroad  team  or  industry  tracks.  No  smtehing 
charge  will  be  made. 

The  Wabash  Railroad  will  absorb  switching  charges  at  St.  Louis  from  elevators  in 
connection  mth  Alton  &  vSouthern  Railway,  Chicago  &  Alton  Railway,  Louisville 
&  NasliA’ille  Railroad,  Toledo,  St.  Ijouis  &  Western  Railroad. 

PEOniA. 

Charges.-— Charges  inbound  and  outbound  $3.50,  except  from  Burlington  and  Central 
City  elevators,  when  the  rate  is  $2,  which  is  usually  absorbed. 

Absorptions. — The  $2  charge  from  Burlington  and  Central  City  elevators  is  nearly 
always  absorbed  ])y  the  carriers. 

Peoria  and  Pekin  Union  Railway  and  Peoria  Railway  Terminal  Co.  will  absorb 
switching  charges  of  connecting  lines  only  when  the  freight  charges  amount  to  $15 
per  car  or  more. 

CINCINNATI. 

Charges. — Switching  charges  between  elevators  on  Cincinnati,  New^  Orleans  A 
Texas  Pacific  Railroad  and  Baltimore  &  Ohio  Railroad  (Indiana  &  Toledo  Division), 
Cleveland,  Cincinnati,  Chicago  &  St.  Louis  Railroad,  Cincinnati  Northern  Railroad, 
Chesapeake  &  Ohio  Railroad,  Cincinnati,  Louisville  &  Nashville  Railroad,  IjOuls- 
ville  (k  Nashville  Railroad.  Norfolk  &  Western  Railw^av,  and  PittsbiN’gh.  Cincinnati, 
Chicago  and  St.  Louis  Railroad,  $2  and  $2.50  per  car.  Some  elevators  $3,  $3.50,  $3.75 
and  $5;  team  tracks  $5. 

Absorptions. — On  Baltimore  &  Ohio  Railroad  when  gross  freight  re\'enue  is  $11 
and  the  switching  charge  is  $3,  $1  per  car  will  be  absorbed  and  wUen  gross  revenue  is 
$13  and  switching  charge  is  $3  the  entire  switching  charge  will  be  absorbed. 

On  Cleveland,  Cincinnati,  Chicago  &  St.  Louis  Railroad  w^hen  freight  is  $14  and 
switching  charge  $5,  $4  will  be  absorbed. 

On  Erie  Railroad  w'hen  freight  is  $17,  minimum  $15,  switching  charge  $5,  $2  will 
be  absorbed. 

TOLEDO. 

Charges. — For  switching  loaded  cars  between  team  tracks,  industries,  private  tracks, 
or  sidings,  minimum  $6.50  per  car.  To  industries,  private  tracks  or  sidings  $5  per  car. 
To  team  tracks  $6.50  per  car. 

Rates  to  industries,  private  tracks  or  sidings  on  Michigan  Central  Railroad  from: 

Per  car. 


Cleveland,  Cincinnati,  Chicago  &  St.  Louis  Railroad .  $3.  00 

Ann  Arbor  Railroad .  3.  00 

Baltimore  &  Ohio  Railroad .  3.  00 

Detroit  &  Toledo  Short  Line  Railroad . . .  5.  00 

Hocking  Valley  Railroad . 1 .  3.  00 

New  York  Central  Railroad .  3.  Oti 

Pere  Marquette  Railroad . .  3.00 

Pennsylvania  Railroad .  3.00 

Toledo  &  Ohio  Central  Railroad .  3.00 

Toledo,  St.  Louis  &  Western  Railroad .  3.00 

Wheeling  &  Lake  Erie  Railroad, .  3.  00 

Wabash  Railroad .  3.00 


To  or  from  team  tracks  on  above  railroad  (except  Detroit  &  Toledo  Short  Line  Rail¬ 
road)  $5  per  car. 

Where  team  track  switching  will  not  he  performed. 


EXCHANCJE  RULER  AND  REGULATIONS. 


279 


From  Michigan  Central  Railroad  to:  local/ 

0.  S.  junction,  |2.50  per  car  road  haul .  $5,  00 

W.  W.  junction,  $2.50  per  car  road  haul .  5. 00 

N.  T.  yards,  $2.50  per  car  road  haul .  5.  00 


Absorptions— Ahsorptioji  by  Michigan  Central  Railroad  in  and  out  s\\itching  not 
to  exceed  $G  per  car. 

IXDIANAl’OLIvS. 

Charges— Qai's  switched  by  Illinois  Central  Railroad  between  tracks,  switches, 
warehouses,  or  other  industries  on  Illinois  Central  Railroad,  minimum  charge  $5  per 
car. 

Absorptions. — On  grain  car  loads,  on  sidetracks  on  connecting  railroad,  also  switch¬ 
ing  or  trackage  of  intermediate  or  bolt  lines,  will  be  absorbed. 


BUFFALO. 

Chciigcs.  Per  car. 

Switching  to  elevators  on  Buffalo  Creek  Railroad  tracks .  $2.  GO 

Switching  to  elevators  on  New  York  Central  Railroad  tracks .  $3.  50-  5. 00 

Switching  to  elevators  on  Pennsylvania  Railroad  tracks .  2. 10-  2.  80 

Switching  to  elevators  on  Erie  Railroad  tracks .  5. 00 


The  Buffalo  Union  Terminal  Railroad  is  reached  through  the  Erie  Railroad  or  the 
New  York  Central  Railroad. 

Erie  Railroad  Tariff. 


Private  siding  located  in— 

Connections  with  railroads  located  in— 

Territory  B:  Pcrc*ar, 
subject  to  notes  below. 

Territory  G:  Per  car, 
subject  to  notes  below. 

Applies  on 
all  carload 
freight 
switched 
in  con¬ 
nection 
with  a 
road  haul. 

Applies  on 
all  carload 
freight 
which  has 
not  paid  a 
road  haul. 

Applies  on 
all  carload 
freight 
switched 
in  con¬ 
nection 
with  a 
road  haul. 

Applies  on 
all  carload 
freight 
which  has 
not  paid  a 
road  haul. 

Territory  A .  . 

$3. 50 
3.50 
3.50 
3.50 
4.00 
4.00 
5.00 

$5.00 

5.00 

5.00 

5.00 

5.00 

5.00 

G.50 

$5.00 

5.00 

5.00 

5.00 

4.00 

4.00 

3.50 

$6.50 
6.50 
6. 50 
6. 50 
.5.00 
5.00 
5.00 

Territory  B . 

Territory  C . . 

Territory  D . 

Territory  E . 

Territory  F . 

Territory  G . 

Absorptions. — The  Erie  Railroad  switching  chaige  of  $5  per  car  or  the  New'  York 
Central  Railroad  switching  charge  of  $3.50  per  car,  will  be  absorbed. 

The  Buffalo  Creek  Railroad  intermediate  charge  of  $2.60  per  car  will  bo  absorbed. 


BALTIMOIIF. 

Charges. — Elevators  $1  to  $G.50. 

Switching  charge  from  the  terminal  to  industry  on  Baltimore  &  Ohio  Railroad 
when  from  elevator  witliin  the  confinesof  one  yard  $5;  from  one  yaid  district  to  another 
yard  district  $G.50  per  car.  Water  connections  labor  charge  of  50  cents  per  2,000  pounds 
additional. 

Switching  from  industry  to  industry  on  traffic  that  has  not  paid  road  haul  revenue 
in  same  car  within  the  confines  of  one  yard  $5  per  <ar,  and  from  one  yard  limit  to 
another  yard  limit  $G.50  per  car. 

There  is  no  absolution  of  switching  at  Baltimore  by  the  Pennsylvania  Railroad  or 
Western  Maiyiand  Railroad. 


280 


TEKMIXAL  6RA1:N^  MARKETS  AKD  EXCHANGES. 


Grain  in  carloads  fiom  Cliase’s  Wharf  and  Fell  Street  to  Herring  Run,  Lausdowne, 
Monumental  and  Rosedale,  3.2  cents  and  4  cents  per  100  pounds. 

Absorptions. — The  Canton  Railroad  charges  not  to  exceed  20  cents  per  2,000 
pounds  are  absorbed. 

Grain  waybilled  to  Camden  Station,  Baltimore,  Md.,  and  reordered  in  same  car  to 
Mount  Clare  elevator,  Baltimore,  Md.,  will  be  switched  free. 

Grain  waybilled  to  Mount  Clare  may  be  reconsigned  free  of  chaige  in  same  car  within 
24  hours  to  Mount  Clare  elevator,  Camden  Station  deliveries  on  Pratt,  President,  and ' 
Aliceanna  Streets,  Baltimore,  Md.,  Locust  Point  elevators,  or  to  Locust  Point  piers,  ^ 
for  delivery  to  vessels. 

When  Baltimore  A  Ohio  Railroad  elevator,  Mount  Clare,  Baltimore,  Md.,  is  con¬ 
gested,  grain  intended  for  that  delivery,  or  for  which  it  is  necessary  to  transfer  from 
that  elevator,  wall,  to  avoid  placing  an  embargo,  be  switched  free  from  Mount  Clare 
Junction  or  Camden  Station  yards,  to  Baltimore  &  Ohio  Railroad  elevators,  Locast 
Point,  Md.  Wdien  room  in  Baltimore  &  Ohio  Railroad  elevator,  Mount  Clare,  Md.,  is 
available  the  return  switching  movement  will  l)e  made  free. 

BOSTON. 

Chatpes. — (Boston  &  Maine  Export  Freight). 

Switching  between  Boston  &  Maine  wharves  and  connection  with  Grand  Junction 
Branch  of  Boston  &  Albany  Railroad  for  traflic  only  wiiich  is  delivered  'to  or  received 
from  vessels  at  Boston  &  Maine  Railroad  piers,  Wiien  such  traffic  is  from  or  to  non¬ 
competitive  points,  and  when  road  receives  a  line  haul  24  cents  per  100  pounds  when 
road  does  not  receive  a  line  haul  3  cents  per  100  ]  Gunds. 

Wiien  such  traffic  is  from  or  to  points  via  lines  other  than  via  Boston  A  Maine  Rail¬ 
road  and  such  points  are  competitive  and  when  road  receives  a  line  haul  4^  cents  per 
100  pounds;  when  road  does  not  receive  a  line  haul,  5^  cents  per  100  pounds.  i. 

Switching  between  the  Boston  &  Maine  wharves  and  Union  Freight  Railroad  when 
road  receives  a  line  haul,  3  cents  per  100  pounds;  when  road  does  not  receive  a  line 
haul,  4  cents  per  100  pounds. 

The  Boston  &  Albany  charges  2^  cents  per  100  pounds  for  switching  to  or  from  its 
connections  within  Boston  &  Maine  in  East  Somerville  from  or  to  its  East  Boston  piers. 
The  New  Haven  charges  2  cents  per  100  pounds  for  moving  cars  from  or  to  its  piers  or 
Commonwealth  Pier  No.  5  and  connection  with  the  Union  Freight  Railroad  charges  2  , 
cents  on  freight  between  the  Boston  &  Maine  and  the  New'  Haven,  minimum  20,000 

jiounds  per  car  as  above.  ^ 

Absorptions.— On  export  carload  freight  the  road  which  is  assessed  a  switching  charge  , 
usually  absorbs  it  into  its  Boston  rate  if  the  shipment  originates  at  points  roughly  be-  ■ 
yond  New  England.  This  does  not  apply  to  grain  in  bulk  from  American  points  and 
grain  and  grain  products  from  Canadian  points.  The  Cunard  Steamship  Co,,  which  ' 

■  docks  at  the  Boston  &  Albany  piers,  in  order  to  secure  traffic  originating  at  New  Eng-  , 
land  points  on  other  lines,  absorbs  the  switching  charge  in  its  freight  rate.  ! 

On  import  carload  freight,  as  a  general  rule,  the  switching  charge  assessed  on 
freight  arriving  at  the  piers  of  the  road  and  shipped  over  the  rails  of  another  is  not  ab¬ 
sorbed  in  the  rate. 

NEW  ORLEAN.S.  .  .  ^ 

Charges.— The  New  Orleans  Public  Belt  Railroad  switching  charge  is  $5  per  car,  re¬ 
gardless  of  w'eight  or  distance  on  competitive  traffic  in  and  out  of  New  Orleans,  except 
on  certain  low-grade  tiaffic  which  takes  a  $3.50  rate;  and  $2  on  noncompetitive  traffic 
in  out  of  New  Orleans.  The  $2  charge  also  is  assessed  for  local  switching. 

Intraplant  switching  $2.50  per  car;  intraterminal  switching  $2.50  per  car;  and  $2 
per  car  applies  only  in  connection  w  ith  line  or  road  haul. 

Absorptions.— The  $5-charge  is  absorbed  by  the  railroad  when  theyT-eceive  a  line 
haul  revenue. 


EXCHANGE  RULES  AND  REGULATIONS. 


281 


RAN  FRANCISCO. 

Charges.— WiQre  grain  is  moved  from  one  warehouse  to  another  within  the  switching 
limits  and  no  main  line  liaiil  ie  involved,  tlie  cliarge  is  30  cents  per  ton,  with  a  minimum 
of  $0.50  per  car. 

Absorptions.  Grain  ]>roHght  to  storage  ])oints  by  railroads  is  switched  to  warehouses 
free  of  charge,  the  service  being  ])art  of  the  main  line  haul. 

SEATTLE. 

Terminal  tracks  are  divided  into  zones.  If  car  is  switched  from  zone  1  to 
zone  2  or  3  the  rate  is  $10  per  car.  If  switched  from  zone  1  to  zone  4  the  rate  is  $12,50 
])er  car.  If  switched  from  zone  2  to  zone  4  or  5  the  rate  is  $15  per  car.  From  industry 
to  industry  or  terminal  located  in  same  zone  rate  is  $7.50  per  car.  Intraterminal 
sAvitching  (usually)  $3.50  per  car. 

Switching  charges  on  import  and  export  ti'affic  through  Seattle  is  al> 
sorbed  liy  the  railroad  Avhich  secures  the  line  haul. 

PORTLAND,  OREO. 

Charges. — Transfer  track  ’with  Oregon-Washington  Railroad  &  Navigation  Co.  at 
.East  Portland  and  Portland  (Park  Street),  Oregon  $5  per  car,  switching  charge. 

Absorptions . — Southern  Pacific  Railroad  'wall  absorb  switching  charge  of  $5  per  car 
when  originating  at  or  destined  to  the  following  competitive  points  served  by  water 
carriers,  viz:  Albany,  Corvallis,  Dayton,  Independence,  McMinville,  Newbiirg,  and 
Oregon  City,  Oreg. 

No  aKsorption  except  when  revenue  amounts  to  $15  per  car  or  more. 

i 

Towing,  Lighterage,  and  Switching  Charges. 

[Compiled  from  railroad  larriffs  in  force  Dec.  1,  1919.] 

NEW  YORK. 

Charges— To^wing: 

Iriom  Whitehall  to  Fulton  Street,  North  River;  East  River,  Brooklyn;  Atlantic 


Dock;  and  Yorjc  Street,  Jersey  City .  $4.00 

From  Whitehall  Street  to  points  between  Fulton  and  Vesey  Streets .  5. 00 

From  Whitehall  to  Erie  Basin;  South  Sixth  Street,  Williamsburg;  Fifth  Street, 

East  River;  and  Pier  45,  North  River;  and  Seventh  Street,  Hoboken .  6. 00 

From  Whitehall  to  Thirty-fourth  Street,  North  River . . .  .9. 00 

From  Whitehall  to  Thirty-ninth  Street,  Gowanus;  Mouth  of  Newtown  Creek  and 

Thirty-fourth  Street,  Ea.st  River .  9  00 

From  Whitehall  to  Ravenswood  and  Sixty-third  Street,  East  River .  10. 00 

From  Whitehall  to  West  Shore  Railroad;  Weehawken;  and  Sixty-fifth  Street, 

North  River .  10.00 

From  Whitehall  to  One  hundred  and  thirty-fifth  Street,  Harlem  River .  11.00 

From  Whitehall  to  Staten  Island,  North  and  South  Shore  as  far  as  Staten  Island 

Flour  Mill .  12  00 

Shifting  from  Atlantic  Dock .  2. 00 

Shifting  from  Erie  Basin .  3  qq 


On  addition  to  the  above  prices,  except  in  the  first-named  limit  on  the  East  River, 
shifting  from  one  river  to  the  other,  one  tow  and  one-half  tow.) 

Loaded  boats  from  canal  district  to  Shady  Side  or  Edgewater . $12.00 

'Lighterage.—  Lighterage  2\  cents  per  bushel  on  1,000  bushels  or  less. 

Lighterage  2  cents  per  bushel  upward  of  1,000  and  not  exceeding  2,000  bushels. 
Lighterage  1^  cents  per  bushel  upward  of  2,000  and  not  exceeding  5,000  bushels. 
Lighterage  1  cent  per  bushel  upward  of  5,000  bushels. 


282 


TERMINAL  GRAIN  AIARKETS  AND  EXCHANGES. 


Absorptions. — Free  lighterage  limits — For  ^'essels; 

North  River,  New  Jersey  side,  from  National  Stores  to  AVest  Shore  Railroad,  Wce- 
hawken,  N.  J.;  New  York  side,  from  Battery  to  Seventy-second  Street. 

East  River— New  York  side,  Battery  to  Sixty-third  Street;  Brooklyn  side,  from 
steamer  piers  to  Webster  Avenue,  Ravenswood,  J.ong  Island;  South  Brooklyn,  from 
steamer  piers  to  Fifty-first  Street. 

Railroads — The  railroad  lighterage  limits  extend  from  Bergen  Point  to  Fort  Lee  on 
the  Jersey  side,  and  to  One  hundred  and  thirty-fifth  Street  on  the  New  York  side; 
to  Jerome  Avenue  Bridge  on  the  Harlem  River;  to  Pot  Cove  on  the  East  River;  and 
to  Sixty-ninth  Street,  Brooklyn. 

The  free  floatage  privilege  is  applied  where  six  times  the  carload  minimum  is  floated, 
although  the  property  may  be  loaded  in  less  than  six  cars. 

PHILADELPHIA. 

Charges. — (See  absorptions.) 

Absorptions. — Almost  the  entire  export  and  import  traftic  of  the  port  of  Philadelphia 
originating  at  or  destined  to  interior  points  is  exchanged  between  the  railroad  lines 
and  the  steamship  lines  without  any  expense  to  the  owners  of  the  goods  other  than 
the  transportation  charges. 

Section  17.  Rules  for  trading  in  futures. 

General  summary. — Tlic  rules  applicable  strictly  to  contracts  for 
future  delivery  relate  for  tlie  most  part  to  details  of  procedure,  and 
raise  no  problems  not  thoroughly  treated  in  other  chapters  of  the 
report.’^^  They  arc  confined  for  the  most  part  to  the  following  classes 
of  subject  matter:  .  . 

{a)  The  “contract  grades’^  established  for  future  delivery. 

(6)  The  requirement  of  margins  as  security. 

(c)  Operation  of,  or  agreement  with,  a  clearing  house. 

{d)  Requirements  for  “regular  delivery.’’  ^ 

(e)  Liquidation  of  damages  on  default.  ^ 

(f)  Prohibited  methods  of  trading. 

These  rules  form  but  a  skeleton  for  the  business  engaged  in  and 
by  no  means  indicate  the  technical  intricacies  of  the  futures  market. 

Rules  applicable  to  future  trading  have  already  been  discussed  in 
sections  9,  12,  and  14.  The  rules  laid  down  in  addition  to  these  do 
not  present  substantial  rights  or  severe  prohibitions  such  as  to  warrant 
more  than  a  summary  discussion  at  this  point. 

The  “contract  grades.” — The  grades  of  grain  which  .shall  be 
valid  tender  on  future  contracts  arc  selected  necessarily  from  those 
varieties  under  the  Federal  grain  standards  act  which  are  dealt  in  on 
the  particular  exchange.  For  example,  the  Chicago  Board  of  Trade 
lists  certain  No.  1  and  No.  2  varieties  of  wheat,  corn,  and  oats  which 
are  deliverable  at  contract  price  in  1,000  or  5,000  bushel  lots.  There 
are  also  listed  other  varieties  which  may  be  delivered  at  a  premium 
over,  or  discount  under,  the  contract  price.  Occasional  rules  have 
been  adopted  to  insure  the  condition  of  these  grades,  such  as  the 
prohibition  against  treating  contract  wheat  by  any  process  except 


EXCHANGE  nULES  AND  REGULATIONS. 


283 


drying.'^®  For  the  most  part,  however,  dependence  is  placed  on  the 
statutory  requirements  for  grading.  Reference  may  be  had  to  Vol¬ 
ume  for  a  comparison  of  contract  grades  there  listed  for  the 
various  futures  markets. 

Requirements  of  margins. — The  exchanges  where  future  trad¬ 
ing  is  active  provide  for  the  protection  of  buyers  and  sellers  on  time 
contracts  by  permitting  either  party  to  require  the  deposit  of  ade¬ 
quate  margins  as  cash  security.^*  The  Minneapolis  rule  is  typical : 

On  time  contracts  purchasers  shall  have  the  right  to  require  of  sellers  as  security 
10  per  cent  based  on  the  contract  price,  and  further  security,  from  time  to  time,  to 
the  extent  of  any  advance  above  said  contract  price  for  the  article  named  and  the 
delivery  specified  in  the  contract. 

Sellers  shall  have  the  right  to  require,  as  security  from  buyers,  10  per  cent  based 
on  the  contract  price,  and  further  security  from  time  to  time  to  the  extent  of  any 
decline  below  said  contract  price  for  the  article  named  and  the  delivery  specified  in 
the  contract.  Should  the  contract  price  be  above  the  legitimate  shipping  or  intrinsic 
value  of  the  property  sold,  sellers  may  require  additional  security  to  the  extent 
of  any  difference  that  may  exist  between  such  legitimate  shipping  or  intrinsic  value 
and  the  price  of  sale. 

On  the  New  York  Produce  Exchange  where  future  trading  in  grain 
has  become  negligible  the  deposit  of  margins  is  contingent  upon 
a  by  either  party,  the  caller  depositing  an  equal  amount  at 

the  time  of  making  the  call.  This  procedure  applies  to  contracts 
^^on  the  spot,  to  arrive,  or  for  future  delivery.’’^® 

Margins  are  usually  required  to  be  deposited  with  a  bank  approved 
by  the  directorate,  or  with  an  officer  of  the  association  such  as  tlie 
treasurer  (Chicago).  In  Minneapolis  the  banking  house  must  be  a 
member  of  the  Clearing  House  Association.^®  In  Duluth  deposits 
are  made  in  ^‘some  well-established  bank  or  banking  house  in  the 
city  of  Duluth,  which  may  be  designated  by  the  seller.’'®^ 

The  ‘Legitimate  value.’’ — In  adjusting  margins  to  the  market, 
in  assessing  damages,  and  in  settling  disagreements  as  to  value,  it  is 
necessary  for  parties  and  arbitration  bodies  to  have  a  rule  defining 
such  “legitimate  value,”  or  “true  market  value”  as  compared  with 
contract  prices  of  grain.  All  of  the  futures  markets  stipulate  a  cash 

•S  Chi.,  22:  3. 

”  Chap.  IV,  sec.  9. 

73  Mpls.  9:1,  2;  Chi'.  20:1;  Mil.  9;  Dul.  1G;1, 2;  K.  C.  12:1;  St.  L.  7:1;  Tol.  18:1;  Teo.  13:1, 2,  3  (inactive) 
Ind.  sec.  2  (inactive). 

73  “  On  all  sales  or  purchases  of  grain,  on  the  spot, to  arrive  or  for  future  delivery,  cither  party  to  the  con- 
tract  shall  have  the  right  to  call  an  original  margin  of  not  exceeding  10  cents  per  bushel  on  wheat,  rye,  and 
barley,  and  5  cents  per  bushel  on  corn  and  oats,  upon  a  deposit  by  the  caller  of  an  equal  amount  to  that 
called,  provided  sueh  call  be  made  before  12  m.  of  the  business  day  next  succeeding  the  day  of  such  sals 
or  purchase;  and,  on  all  contracts  for  future  delivery  a  further  margin  may  be  called  from  time  to  time  to 
the  extent  of  any  variation  in  the  market  value  from  the  contract  price. 

•‘Where  no  original  margin  has  been  deposited  calls  may  be  made  from  time  to  time  to  the  extent  of 
1  cent  per  bushel  above  or  below  the  current  quotation  at  the  time  the  call  is  made.”  (Rules  of  the  Grain 
Trade,  Rule  XXX.) 

Rule  9,  sec.  4. 

Rule  15,  sec.  4 


284 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


basis  for  estiinatiiig  this  legitimate  valuej  for  the  most  part  in  iden¬ 
tical  language: 

• 

In  determining  the  value  of  property  under  this  rule,  its  value  in  other  markets, 
or  for  manufacturing  or  consumptive  purposes  in  this  market,  together  with  such 
other  facts  as  may  justly  enter  in  the  determination  of  its  value,  shall  be  considered 
irrespective  of  any  fictitious  price  it  may  at  the  time  be  selling  for  in  this  market. 
Such  value,  for  the  purposes  of  this  rule,  in  case  of  disagreement,  shall  be  determined 
by  the  board  of  directors,  and  communicated  to  the  parties  in  interest  through  the 
president  or  secretary.®^ 


Disagreements  as  to  such  ^degitimate  shipping  or  intrinsic  value” 
may  be  determined  by  ruling  of  the  lioard  of  directors®^  or  by  refer¬ 
ence  to  the  board  of  arbitrationj^^  or  to  a  special  committee  (as  in 
Kansas  City). 

Offsets  and  substitutions. — The  settlement  of  contracts  by 
ofl’sets  or  the  substitution  of  other  principals  is  characteristic  of 
future  trading  in  grain  (see  Vol.  V,  Ch.  V)  and  recognized  by  rule 
on  the  exchanges.  In  the  markets  where  trading  in  futures  is  active, 
clearing  houses  have  been  established  for  clearing  and  settling  the 
i  trades  of  members  in  this  way.®'^ 

While  the  practices  of  making  offsets  and  substitutions  is  impliedly 
recognized  in  the  I'ules  of  various  exchanges,  only  in  Chicago  and 
vSt.  Louis  is  it  set  up  as  a  right  of  traders  executing  contracts.**  Both 
rules  are  identical  in  requiring  that  any  differences  between  the 
current  market  value  of  the  property  and  the  several  contract 
prices  ” shall  be  due  and  payable  immediately.”  The  Chicago  rule 
provides  a  basis  for  adjustment  of  such  balances  (which  is  omitted 
from  the  St.  Louis  provision);  ‘^such  memorandum  shall  be  in 
writing,  and  shall  state  on  its  face  the  date  of  the  transaction,  the 
quantity  and  kind  of  property  covered  b)^  the  same,  the  month  of 
delivery,  the  price,  and  the  name  of  the  party  to  whom  sold  or  of 
whom  bought,  and  shall  be  signed  by  the  party  or  firm  making  the 
same.” 


Contracts  for  deferred  acceptance— puts  and  calls. — 
Contracts  for  deferred  acceptance,  known  specifically  as  ”bids”  and 
'Liffors”  (and  similar  to  contracts  known  as  ^^puts”  and  calls,”  or 
‘‘privileges”)  are  recognized  by  rule  in  Chicago  and  Kansas  City 
only.®’  Both  exchanges  provide  that  a  commission  of  “  not  less  than 
5  per  cent  of  the  consideration  paid  or  received”  be  charged  nonmem¬ 
bers  for  securing  such  a  privilege  trade.  Members  securing  offers 
for  their  personal  accounts  shall  bo  charged  not  less  than  per  cent, 
and  brokers  employed  by  a  clearing  member  not  less  than  3  per  cent. 


*2  Chi.  20:7;  Mil.  9:8f  Mpls.  9:3;  Dul.  16:3;  K.  C.  12:7;  St.  L.  7:1;  Tol.  18:6.  .\lso  stated  in  Peo.  13:5. 
Chi.  and  St.  Iv. 

Mpls.,  Mil.,  and  Dul, 

See  Vol.  V,  Ch.  V,  for  description  and  comparisons. 

Chi.  22:6;  St.  L.  8:12. 

«  Chi.,  22:20;  K.  C.,  1.5:20,  21. 


285 


EXCHANGE  RULES  AND  REGULATIONS. 

The  Chicago  rules  prescribing  the  contract  forms  for  this  sort  of 
trading  is  as  follows: 

Sec.  20.  All  offers  made  subject  to  deferred  acceptance  provided  for  under  this 
rule  shall  be  in  one  of  the'folloAving  forms: 

f 

Chicago,  111., - day  of - - — 19 — , 

I  will  give - ^  per  bushel  for  — -  bushels  of  contract  grade  of - for  delivery 

during - 19 — ,  same  to  be  delivered  in  store  in  regular  warehouses  under  the 

rules  of  the  Board  of  Trade  of  the  City  of  Chicago. 

This  offer  is  subject  to  acceptance  by  you  until  the  closing  hour  for  regular  trading 
on  — - 19 — . 

(Signature.)  - - - - . 


Chicago,  III.,  • — —  day  of - 19 — . 

I  will  sell  —  bushels  of  contract  grade  of - —  at - per  bushel  for  delivery 

(juring— - 39 — ^  same  to  be  delivered  in  store  in  regular  warehouses  under  the 

rules  of  the  Board  of  Trade  of  the  City  of  Chicago. 

This  offer  is  subject  to  acceptance  by  you  until  the  closing  hour  for  regular  trading 
on - 19 — .  ^ 

:  (Signature.)  - - . 


Chicago,  III., - day  of - 19 — . 

I  have  your  offer  to  buy - bushels  of  contract  grade  of - at  —  per  bushel 

for  delivery  during - —  19 — ,  same  to  be  delivered  in  stoie  in  regular  warehouses 

under  the  rules  of  the  Board  of  Trade  of  the  City  of  Chicago,  and  subject  to  my  accep¬ 
tance  until  the  closing  hour  for  regular  trading  on  — —  19 — . 


Chicago,  III., - day  of — - 19 — . 

*  • 

I  have  your  offer  to  sell - bushels  of  contract  grade  of - - —  at - })er  bushel 

for  delivery  during - —  19 — ,  same  to  be  delivered  in  store  in  regular  warehouses 

under  the  rules  of  the  Board  of  Trade  of  the  City  of  Chicago,  and  subject  to  my  accep¬ 
tance  until  the  closing  hour  for  regular  trading  on - 19 — . 


Regular  delivery. — Time  contracts  are  limited  to  denominations 
of  1,000  and  5,000  bushels  of  grain.  The  requirements  for  a  valid 
tender  of  such  property  are  fairly  uniform  where  the  seller’s  option 
is  the  prevailing  form  of  contract. 

In  all  the  active  futures  markets  except  Kansas  City  the  rules 
provide  for  delivery,  by  service  of  notice  of  delivery  on  the  buyer. 
Such  notice  must  state  the  place  of  business  of  the  issuer,  the  precise 
receipts  which  the  seller  proposes  to  deliver,  the  contract  price  and 
(in  Chicago)  the  net  cash  price  at  time  of  delivery.®*  In  New  York 
and  Baltimore  rules  this  method  of  settlement  and  delivery  is  referred 
to  as  a  ‘Hransferable  order.” 

wChi.,  21:2;  Mil.,  11:6;  Mpls.,  11:9;  I)ul.,  14:14;  St.  L.,  8:1;  N.  Y.,  rule  10  of  the  grain  rules,  see.  .5.  Cf, 
Balto.,  art.  14.  Failure  to  serve  such  a  notice  constitutes  default  on  delivery  (see  p.  261). 


f 


286 


TERMINAL  GRAIIT  MARKETS  AXD  EXCHANGES. 


The  exchanges  set  a  definite  time  and  place  for  the  notice  of  de¬ 
livery  and  designate  such  deliiTir.v  hv  notice  as  a  valid  and  sufficient 
tender  on  futures  contracts.^® 

In  Chicago,  where  the  volume  of  futures  business  is  largest,  two 
delivery  periods  are  provided.  Between  9.30  and  11  a.  m.  deliv¬ 
eries  may  be  made  by  notice  at  the  office  of  the  buyer  and  between 
1.30  and  2  p.  m.  may  be  made  in  the  exchange  hall  or  ^fin  such  other 
place  as  may  be  designated  by  the  board  of  directors, with  certain 
special  provisions  for  the  first  and  last  days  of  the  month.®® 

In  Minneapolis  notice  of  delivery  may  bo  made  on  the  exchange 
floor  between  9.10  a.  m,  and  1.20  p.  m.®^  If,  however,  the  buyer  or 
his  representative  is  absent  from  the  floor,  or  in  case  delivery  is  made 
through  the  Clearing  Association,  the  time  limit  is  extended  to  2.30, 
p.  in.-^- 

The  Chicago  (and  St.  Louis)  rules  provide  that  parties  must  be 
present  at  the  time  and  place  of  deliveiy.  ^LVny  property  which 
can  not  be  delivered  owing  to  the  absence  of  the  buyer  from  the 
exchange  hall,  or  such  other  place  as  the  directors  may  have  desig¬ 
nated  for  the  purpose  of  delivery,  may  be  sold  out  by  the  party 
havmg  same  sold  to  such  absentee,  as  hereinbefore  provided  in  cases 
of  default;  all  expenses  and  risk  of  carrying  the  property,  commis¬ 
sions,  etc.,  shall  be  paid  by  the  absentee,  the  same  as  in  the  case  of 
default;  provided,  however,  such  property  shall  not  be  sold  until  the 
absentee  has  had  notice  in  writing,  either  delivered  to  him  in  person, 
to  his  business  representative,  at  his  place  of  business,  or  left  at  the 
secretary’s  office  in  case  he  has  no  regular  place  of  business,  that  the 
property  was  ready  for  delivery  under  this  rule  on  Ifis  contract.” 

Such  notices  of  delivery  may  be  transferred  from  purchaser  to  pur¬ 
chaser  by  proper  indorsement,  up  to  the  limit  set  on  the  specified  day 
of  delivery. 

The  Merchants  Exchange  of  St.  Louis  has  written  into  the  rules 
the  form  of  delivery  notice  and  the  indorsement  required: 

®>  “ *  *  it:  parties  haAing  property  due  them  on  time  sales  shall  be  present,  or  shall  be  represented 
by  an  authorized  employee  in  the  exchange  hall  or  such  other  place  as  may  be  designated  by  the  board  of 
directors,  between  the  hours  of  1.30  and  2  o’clock  p.  m.  of  each  business  day  and  on  days  when  the  board 
adjourns  at  12  o’clock  m.,  between  the  hours  of  12.30  and  1  o'clock  p.  m.  and  on  the  first  business  day  of 
each  month  between  the  hours  of  8.30  and  9.15  o'clock  a.  m.;  and  admission  to  the  exchange  hall  or  such 
ether  place  as  may  be  designated  by  the  board  of  directors  shall  be  denied  all  parties  after  1.30, 12.30  o'clhck 
p.  in.  cr  8.30  o'clock  a.  m.,  as  the  case  may  be.  *  *  *” 

*  A7id,  provided  further,  That  on  the  last  business  day  of  any  month,  when  deliveries  of  articles 
mentioned  in  this  section  are  made  after  11  o'clock  a.  m.,  the  secretary  of  the  board,  or  any  person  acting 
under  his  direction,  shall  have  the  poiver  to  extend  the  time  for  such  deliveries  from  2  o'clock  p.  m.  (if  on  a 
Saturday,  from  1  o’clcck  p.  m.),  as  often  and  to  such  time  during  that  day  as  in  his  judgment  it  may  bo 
necessary  to  enable  all  who  arc  prepared  to  do  so  to  tender  or  receive  delivery  notices  *  *  *>’ 

12.05  p.  m.  on  Saturdays. 

11. 39  a.  m.  on  Saturdays  or  12.30  p.  m.  when  Saturday  falls  on  the  last  day  of  the  month.  Substan¬ 
tially  the  same  rules  in  Duluth  (Rule  14)  and  Milwaukee  (Rule  11)  with  differences  in  the  hour. 

Chi.,  21:2;  St.  L..  8:1. 

^  Sections  cited,  preceding  footnote. 


EXCHANGE  RULES  AND  REGULATIONS. 


287 


NOTICE  or  DELIVERY. 


St.  Louis,  Mo. 


Messrs. - - 

We  hereby  give  notice  that  we  shall  this  day  deliver  to  you  or  to  the  last  indorser 

hereon  five  thousand  bushels  at - cents  per  bushel  on  account  of  our  contract 

sale  to  you  dated - at - -  cents  per  bushel. 

Signed - Originator, 

- Indorser. 


lliere  is  nothing  to  prevent  delivery  by  notice,  as  outlined  above, 
under  the  Kansas  City  rules.  In  practice  in  that  market,  deliveries 
are  largely  made  through  the  Grain  Clearing  Co.,  and  delivery  by 
notice  is  not  provided  in  the  rules.  As  in  the  other  markets,  time 
limits  are  set  for  delivery  by  the  seller  and  for  delivery  by  the  Clear¬ 
ing  Co.®^ 

Payment  upon  delivery. — All  the  rules  mentioned  provide  that 
payment  at  the  market  price  shall  be  due  immediately  from  the  final 
holder  of  the  delivery  notice  at  the  expiration  of  the  time  limit.  The 
“market  price  ’’  of  grain  deliverable  on  such  time  contracts  is  required 
to  be  posted  by  the  secretary  twice  daily  in  Chicago.  In  Minne¬ 
apolis,  Duluth,  and  Milwaukee  the  closing  price  of  the  preceding 
business  day  is  taken  as  a  basis  for  settlement  and  posted  daily  on 
the  exchange  bulletin.*’^ 

Failure  to  pay  for  the  grain  upon  receipt  of  the  above  notice  con¬ 
stitutes  a  default,  which  may  be  settled  by  liquidation  of  damages. 
This  is  discussed  in  another  section  (p.  263). 

Only  “actual  trades.’’ — In  defending  speculative  trading  and 
in  campaigning  against  bucketshops  the  exchanges  proceed  on  the 
theory  that  an  actual  trade  or  exchange  of  a  commodity  is  intended 
in  every  sale  executed  on  the  exchange.  On  this  theory  the  rules  or 
regulations  generally  prohibit  transactions  wdiere  actual  delivery  is 
not  intended  and  brand  the  practice  as  “uncommercial”  (or  “unmer- 
cantile”)  conduct. 

In'  addition  to  the  provisions  against  bucket  shopping  (stated 
below),  twm  exchanges  publish  rulings  on  this  requirement  of  “actual 
trades.”  The  Mhvaukee  directorate  resolved  (Aug.  23,  1910): 


That  any  member  of  the  association  who  enters  into  a  transaction  which  is  not  a 
“  bona  fide  purchase  and  sale  of  property  ”  shall  be  deemed  by  the  board  of  directors 
guilty  of  unmercantile  conduct,  as  provided  by  section  27,  rule  4. 

And  that  it  would  not  be  considered  a  “  bona  fide  purchase  and  sale  of  property” 
for  members  to  become  parties  to  so-called  “accommodation”  trades,  or  any 
subterfuge  having  merelj'’  the  appearance  but  not  the  intent  of  an  actual  purchase 
or  sale. 


Likewise,  when  the  Omaha  Grain  Exchange  was  organized  in  1903 
they  wTote  the  following  provision  into  their  rules: 

Only  actual  trades  shall  be  allowed  to  bo  made  on  the  exchange,  and  no  arrangement 
for  the  purchase  or  sale  of  commodities  shall  be  entered  into  except  where  it  is  intended 


K.  C.,  15:3. 


Not  provided  for  in  St.  Louis. 


288 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


vH' 


there  shall  be  an  actual  receipt  or  delivery  of  the  property  bought  or  sold;  and  any 
member  enteiing  into  any  arrangement  in  which  it  is  understood  that  there  shall  be 
no  actual  receipt  or  delivery,  but  that  only  the  difference  shall  be  settled  between 


the  parties,  or  otherwise  violating  the  provisions  of  this  section,  shall,  upon  conviction, 
be  suspended  or  expelled  by  the  board  of  directors.*® 


Prohibitions  against  bucketshops.- — All  of  the  exchanges  inter¬ 
ested  in  future  trading  have  promoted  or  assisted  campaigns  for  the 
suppression  of  bucketshops  (see  p.  121).  The  rules  reflect  this  agita¬ 
tion  in  the  strict  prohibitions  against  dealing  in  differences  C'  bucket 
shopping  The  following  rule  is  substantially  identical  on  seven 
exchanges: 

Any  member  of  the  association  who  shall  be  interested  or  associated  in  business 
with,  or  who  shall  act  as  the  representative  of,  or  who  shall  knowingly  execute  any 
order  or  orders  for  the  account  of  any  organization,  firm,  or  individual  engaged  in  the 
business  of  dealing  in  differences  on  the  fluctuations  in  the  market  price  of  any  com¬ 
modity  or  corporate  stock,  without  a  bona  fide  purchase  and  sale  of  the  article  for  an 
actual  delivery;  or  who  shall  be  a  member  of,  or  shall,  in  his  own  behalf,  or  as  agent, 
directly  or  indirectly  make,  execute,  or  give  any  orders  for  a  trade  or  transaction  in 
or  upon  any  bucket  shop  or  any  so-called  exchange,  wherein  is  conducted  or  permitted 
the  business  afore-said,  or  who  shall  knowingly  accept,  cither  directly  or  indirectly, 
from  any  member  of  any  so-called  exchange,  wherein  is  conducted  or  permitted  the 
business  aforesaid,  any  orders  for  trades  or  transactions  to  be  executed  in  the  exchange 
hall  of  this  association,  shall  be  deemed  guilty  of  unmercantile  conduct,  which 
renders  him  unworthy  to  be  a  member  of  the  association;  and  upon  complaint  to  and 
conviction  thereof  by  the  board  of  directors,  he  shall  be  expelled  from  membership 
in  the  association. 

The  Minneapolis  and  Duluth  rules  eliminate  an  obvious  possibility 
of  bucketshop  practices  by  forbidding  members  to  act  as  brokers  or 
commission  merchants  in  buying  or  selling  for  future  delivery  for  any 
agent  or  employee  of  a  local  telegraph  company. 

In  GENERAL. — Under  the  broad  discretion  given  the  directors  to 
construe  the  rules  relative  to  uncoipmercial  conduct  on  aU  large  grain 
exchanges,  various  regulations  are  adopted  and  action  is  taken  from 
time  to  time  affecting  the  technical  methods  of  future  trading.  For 
example,  members  have  been  suspended  and  expelled  in  Chicago  for 
‘'cross  trading”  while  no  definition  and  prohibition  of  this  practice 
has  been  written  into  the  rules.®® 

Likewise  in  Minneapolis  and  Milwaukee  there  exist  orders  of  the 
directorate  construing  it  to  be  a  violation  of  the  rules  for  members  to 
make  what  are  termed  “cross  trades”  in  buying  grain  or  seeds  for 
future  delivery.^®®  These  matters  are  more  thoroughly  discussed  in 
the  volumes  on  future  trading.  It  is  important  here  to  note  that  the 
practices  in  future  trading  which  are  prohibited  on  the  exchange  can 

Oma.,  1:.5. 


w  Quotation  from  Chi.,  4:8.  See  also  Mil.,  4:27;  Mpls.,  4:7;  Diil.,  4:7; 
98  Mpls.,  4:7;  Dul.,  4:7 


K.  C.,  8:15;  Oma.,  1:6;  St.  L., 


99  See  minuter  of  the  board  of  directors,  June  S,  1915,  and  for  explanation  of  “cross  trading,” 
Vol.  V. 

Mpls.,  July  17,  1905;  Mil.,  Feb.  9,  1915. 


9:2. 

see 


EXCHANGE  RULES  AND  REGULATIONS. 


289 


by  no  means  be  fully  ascertained  by  reference  to  the  general  rules. 
Suflicient  power  is  lodged  with  the  board  of  directors  to  discipline 
any  member  for  an  infraction  of  well  established  customs  and  usages 
under  the  general  commercial  ethics  which  obtain  in  the  particular 
market. 

Section  18.  Control  of  quotations  and  market  reports. 

Makki:t  QUOTATIONS. — All  essential  purpose  of  all  exchanges 
is  to  afford  members  and  their  customers  continuous  informa¬ 
tion  of  market  prices  and  market  conditions.  To  this  end  the 
majority  of  grain  exchanges  have  authorized  their  directors  to 
adopt  methods  of  contipllmg  the  record  and  distribution  of 
quotations.^  These  requirements  do  not  always  appear  in  the 
rules  or  regulations.  Frequently  the  requirements  for  reporting 
])rices  of  sales  on  exchange  are  issued  by  a  quotations  committee 
or  appear  in  unpublished  orders  and  so  can  not  be  discussed  by 
reference  to  any  general  rules.  For  example,  the  fact  that  trans¬ 
actions  in  futures  in  Chicago  are  reported  immediately  to  employees 
of  an  authorized  telegraph  company  docs  not  appear  in  any  section  of 
the  book  of  rules.  For  these  reasons  no  attempt  is  made  in  this 
section  to  enumerate  the  practices  of  all  the  exchanges,  but  rather  to 
discuss  certain  rules  which  typify  these  practices.-^  It  will  be  under¬ 
stood  that  regardless  of  rules  in  the  transactions  on  a  commission 
basis,  it  is  of  interest  to  the  seller  to  report  the  price  (especially  if  it 
departs  from  prior  quotations)  so  that  his  customer  may  have  no 
ground  for  complaint. 

Reporting  cash  sales. — On  several  exchanges  tlie  reporting  of 
cash  sales  is  not  compulsory  on  membei's,  e.  g.,  Chicago  and  Duluth. 
(See  p.  324).^  Yet  on  five  exchanges  (Minneapohs,  Kansas  City, 
Omaha,  Indianapolis,  and  Cincinnati)  the  rules  are  very  definite  on 
this  point. 

Private  and  unreported  sales  on  exchange  were  forbidden  in 
Minneapolis  in  1911,  when  the  board  of  directors  resolved: 

That  the  mem})ers  be  required  to  report  all  spot  sales  of  cash  grain  seed  from  coun¬ 
try  points  without  exception  to  the  Cash  Grain  Reporter  as  soon  as  practicable  after 
the  same  are  made,  but  in  any  event  not  later  than  the  close  of  the  market  on  that 
date.  In  order  that  the  reports  shall  indicate  clearly  the  character  of  the  grain  or 
seed,  members  are  required  to  state  the  color  in  sales  of  corn;  also  in  reporting  sales 
carrying  an  excessive  dockage  to  note  the  words,  “Heavy  dockage;”  also,  in  reporting 

1  The  authority  given  the  directors  in  Kansas  City  is:  “  To  control  absolutely  any  and  all  quotations 
of  transactions  made  lietween  members  under  the  rules  of  this  association,  and  they  shall  have  power  to 
make  all  regulations  and  contracts  necessary  to  govern  the  collection,  transmission,  distribution,  and  use 
of  all  such  quotations.”  And  see  page  323  of  this  volume. 

2  See  p.  323  for  detailed  discussion  of  practices  and  requirements  in  the  quotation  services. 

«  The  neglect  to  require  reporting  of  cash  sales  by  rule  on  the  Chicago  Board  of  Trade  may  be  attributed 
to  the  fact  that  Howard,  Bartels  &  Co.  have  reported  cash  sales  for  so  long  a  period  as  to  be  regarded  as  an 
established  institution,  yet  there  is  no  reason  why  the  interests  of  cash  customers  sliould  not  be  protected  as 
well  irs  those  of  futures  customers. 

108693'^— 20 - 19 


290 


TEKiVIINAL  GRAIX  .MAirivI-:TS  AXD  EXCHAXCiKS. 


sales  to  go  out  “0.  W,  B.,”  'vviiicli  on  tins  account  command  a  }n-emium,  to  note  the 
letters  ‘‘0.  W.  B.;”  also  in  reporting  sales  wliicli,  on  account  of  its  choice  quality 
commands  a  premium,  to  note  the  word  “Choice,”  and  in  general  to  make  such  other 
notations  in  reporting  sales  as  will  indicate  clearly  the  cliaracter  of  the  grain  or  seed, 
or  the  conditions  surrounding  the  sale.  And  “that  the  failure  to  so  report  sales  as 
above  mentioned  shall  be  considered  uncommercial  conduct,  subjecting  the  member 
to  the  penalties  provided  by  the  rules  of  the  cbam])er  of  commerce.’ 

The  Omaha  Grain  Exchange  also  provides  that  sales  of  cash  grain 
by  sample  car  lot  ‘^be  immediately  reported.’^  The  rule  goes  on  to 
describe  the  procedure — 

*  *  *  the  seller  Idling'  out  slips  pro^•ided  by  the  exchange,  showing  number  of 
cars,  kind  of  grain,  grade,  price,  and  name  of  seller  and  buyer.  These  slips  to  be 
handed  to  the  board  marker,  who  will  immediately  post  the  information  on  the  black¬ 
board,  together  with  the  time  the  slip  is  handed  him.  Failure  to  so  report  shall  sub¬ 
ject  the  seller  violating  this  rule  to  a  fine  of  $5  for  each  offense.  These  reports  of 
sales  shall  be  jrreserved  by  the  exchange,  where  all  members  thereof  and  reporters 
of  the  market  may  have  access  to  them  at  any  time.^ 


The  Kansas  City  Board  of  Trade  requires  that  a  sale  of  incoming 
country  grain  must  be  reported  within  15  minutes  after  the  sale  is 
made,  subject  to  a  fine  for  violation." 

The  Indianapolis  Board  of  Trade  requires  ‘Trll  sales  of  track  grain’’ 
to  be  reported  to  the  secretary;"^  and  the  Cincinnati  Grain  &  Hay 
Exchange  recpiircs  the  seller  to  report  “all  sales  of  cash  grain”  to 
the  entry  clerk. ^ 

Idle  Cincinnati  exchange  has  adopted  17  special  rules  governing  the 
report  of  sales  to  the  secretary,  stating  specifically  what  must  be 
reported  regarding  the  quality  and  condition  of  grain  and  the  cir¬ 
cumstances  surrounding  the  transaction.  A  procedure  is  also  pro¬ 
vided  whereby  the  accuracy  of  entries  in  the  exchange  sales  book 
juay  be  challenged  by  members  on  the  day  of  entry.  Such  a  chal¬ 
lenge  may  result  in  a  preliminaiA'  investigation  by  the  executive 
secretary  and  (on  his  recommendation)  a  formal  investigation  by  the 
appropriate  inspection  committee;  and  “if  it  be  found  that  the  entiy 
misrepresents  the  conditions  attending  the  transaction  the  said 
committee  shall  report  to  the  l)oard  of  directors.”  The  sole  penalty 
provided  in  the  rules  is  an  announcenient  by  the  board  “that  the 
offending  party  has  been  found  guilty  of  serious  irregularity  in  re¬ 
porting  an  entry  for  the  sales  book.’’^ 

Future  prices. — ^In  the  interest  of  customers  and  of  the  trade  gen¬ 
erally  transactions  in  futures  are  reported  on  the  exchanges  where 
,  sucli  business  is  active.  Yet  this  matter,  as  in  the  case  of  many 
others  relating  to  future  tniding,  is  not  provided  for  by  general  rules. 


^  ('ircular  No.  296:  “O.  W.  B.”  refers  to  a  Minneapolis  transit  privilege. 
"  Orna.  —(  1918  rules),  p.  G2. 

«  K.  C.— 21:10. 

'  itules  of  the  grain  trade,  sec.  33. 
s  1918  Rules,  p.  53. 

“  Idem. 


EXClfANCU^.  RULES  AND  REGULATIONS. 


291 


Control  of  price  dissemination. — Tiic  effort  to  control  the  pub¬ 
lication  and  distribution  of  price  inforination  which  has  been  col¬ 
lected  by  the  exchanges  has  been  conffned  largety  to  the  futures 
market.  Restrictions  on  the  use  of  cpiotations  by  telegraph  com¬ 
panies  are  discussed  elsewhere  (see  p.  126).  The  right  of  exchanges 
to  prohibit  members  from  furnishing  quotations  to  biicketshops  is 
imquestioned  and  such  rules  appear  in  the  records  of  four  exchanges. 

Members  in  Minneapolis  may  not  ^Turnish  such  market  quotations 
in  any  manner,  either  directly  or  indirectly,  to  parties  doing  a  com¬ 
mission  or  brokerage  business’’  outside  of  the  exchange.'® 

The  Milwaukee  board  requires  that — 

N^o  such  quotations  shall  be  transmitted  outside  the  exchange  room  except  upon  duo 
application  to  and  approval  of  the  board  of  directors  or  appropriate  committee,  nor 
shall  the  office  of  any  member  or  any  hrin  or  corporation  entitled  to  trade  or  do  busi¬ 
ness  on  the  floor  of  the  chamber  of  commerce  be  connected  by  telephone  or  telegraph 
with  any  other  office,  except  in  accordance  with  the  regulations  established  by  the 
Imard  of  directors  in  pursuance  of  the  objects  of  this  rule.'^ 

The  above  rules  were  adopted  particularly  with  a  view  to  the 
suppression  of  biicketshops.  A  far  more  sweeping  rule — and  one 
which  takes  the  dissemination  of  quotations  entirely  out  of  the  hands 
of  members  on  the  floor — has  been  adopted  in  Chicago: 

No  member  of  this  association  shall,  by  messenger,  signals,  telephone,  telegraph, 
or  any  other  means  whatsoever,  convey  or  transmit  continuously  the  market  quota¬ 
tions  from  the  exchange  floor  to  any  person,  firm,  or  corporation  located  off  said 
exchange  floor,  and  any  member  violating  this  regulation  shall  bo  deemed  guilty  of 
dishonorable  conduct  and  subject  to  the  penalty  provided  therefor  in  the  rules  and 
by-laws  of  this  association.'- 

It  must  not  be  inferred  from  the  above  rules  that  the  Chicago  Board 
of  Trade,  for  example,  may  arbitrarily  withhold  its  quotations  from 
the  public.  This  was  decided  in  the  New  York  and  Chicago  Grain 
and  Stock  Exchange  case  in  1889: 

*  *  *  The  question  is,  can  the  board  so  conduct  its  affairs  for  a  long  term  of 
years  as  to  create  a  standard  market  for  agricultural  products,  and,  acting  in  concert 
or  combination  with  the  telegraph  companies,  build  up  a  great  system  for  the  instan¬ 
taneous  and  continuous  indication  of  that  market  and  its  fluctuations,  until  the  public 
and  all  persons  dealing  in  such  products  conform  their  business  to  this  system,  and 
until  by  the  usage  and  custom  of  merchants,  thus  advanced  by  the  methods  adopted 
by  the  board  and  telegraph  companies,  such  instantaneous  quotations  become  neces¬ 
sary  to  the  successful  and  safe  transaction  of  business,  and  until  such  system  has 
become  impressed  and  affected  with  a  public  interest,  and  then  be  allowed  to  dis¬ 
criminate  between  persons  and  parties,  and,  where  all  alike  are  willing  to  conform  to 
reasonable  rules  and  requirements,  and  pay  for  the  information  desired,  say  that  one 
shall  and  another  shall  not  have  sueh  information? 


io  Mpls.,  4:7;  Dul.,  4:7. 

>i  Mil.,  4:28. 

Regulation  VI,  1918  Rules,  p.  13G. 

19  N.  E.  859-860.  Approved  by  the  United  Stales  Supreme  Court  in  the  Christie  case  (198  U.  S.,  252.). 


292 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


■  If  the  board  has  such  right,  and  these  corporations  are  lawfully  permitted  so  to  do, 
then  they  have  the  power  to  create  monopolies,  and  dictate  who  shall  deal  in  the 
agricultural  products  of  the  country,  and  at  will  impoverish  or  enrich  merchants, 
shippers,  and  producers. 

After-market  prices. — The  control  of  after-market  prices  is  con¬ 
fined  to  the  regulation  of  to-arrive  bids  to  the  country— afternoon 
Jiids/'  as  they  are  called.  This  control  involves  not  only  the  use  of) 
quotations  but  a  regulation  of  the  actual  bids  which  may  be  made.? 
Tlie  historical  and  economic  aspects  of  these  rules  are  discussed  in) 
the  chapter  on  Receiving  Grain  (Vol.  III). 

The  rules  for  four  of  the  markets  stand  to-day  as  follows: 

(1)  The  closing  quotation  of  the  “to-arrive  market”  .(where  such 
exists)  is  a  basis  for  subsequent  bids.^^ 

(2)  In  Chicago,  Milwaukee,  Omaha,  and  St.  Louis  members  may 
depart  from  such  closing  quotation  and  make  a  higher  bid  provided 
they  file  with  the  secretary  of  the  exchange  before  the  opening  hour 
evidence  to  show  that  a  new  market  level  has  been  fairly  established.^^ 

The  Kansas  City  Board  of  Trade  allows  any  bid  to  be  sent  out 
“upon  proper  record  being  made  of  the  same,”^®  and  so  long  as  the 
“regular  charges”  are  allowed  in  conformity  with  the  “Commission 
rule.”  Further  details  are  left  to  the  to-arrive  committee. 

The  Omaha  Grain  Exchange  rule  provides  that — - 

fuitlier  competitive  bids  may  be  received  and  posted,  provided  such  bid  be  first  sub¬ 
mitted  in  writing  and  signed  by  seven  active  members  of  this  exchange;  each  member 
signing  must  represent  a  different  firm  and  the  last  member  signing  must  be  a  member 
of  the  to-arrive  committee. 

llie  St.  Louis  Merchants'  Exchange  likewise  has  established  strict 
requirements  of  publicity  of  after-market  bids  in  the  following  manner: 

Such  authority  by  a  secondary  buyer  shall  be  evidenced  by  a  bona  fide  bid  in  hand 
from  a  buyer  at  this  market,  who  has  declared  his  intention  of  bidding  seven  active 
cash  handlers  of  the  kind  of  grain  bid  for,  in  this  market,  for  the  purpose  of  establish¬ 
ing  a  new  basis  for  an  overnight  bid  to  the  country,  or  by  a  clear  showing  that  a  member 
or  members  making  such  bids  to  persons  outside  of  St.  Louis  have,  prior  thereto,  made 
to  members  here,  not  less  than  seven  bona  fide  bids  for  sufficient  quantities,  to  estab- 
blish  fairly  a  new  market  level,  and  further,  such  member  or  members  must  show 
the  bid  so  made  represents  the  price  thus  bid  to  the  members  here  less  the  regular 
handling  charge.’® 

Outside  of  the  above  five  markets  no  restrictions  whatever  are 
placed  on  after-market  bids  except  that  they  must  allow  the  charges 

Chi.  (1918  rules),  p.  138;  Mil.  regulation  of  Nov.  13,  1917  (1918  report,  p.  121);  Oma.  (1918  rules)  p.  71- 
St.  L.  (1917  rules),  p.  77. 

Sections  cited  above.  It  has  been  ruled  by  the  to-arrive  grain  committee  in  Chicago  that  such  bids 
must  be  made  to  at  least  five  people  or  firms  who  are  active  in  the  handling  of  the  particular  grains  for 
which  such  bids  are  made.  (Aug.  18,  1914.) 

J*  K.  C.,  21:17.  Same  rule  in  Chicago,  but  supplemented  and  construed  by  published  regulations  as  in 
footnote  14. 

Rule  cited. 

Rules,  p.  79. 


EXCHANGE  EULES  AND  EEGULATIONS. 


293 


required  under  the  ^ ^uniform  commission  rule/’  where  such  exists.’* 
The  Minneapolis,  Duluth,  and  Peoria  exchanges,  for  example,  allow 
commission  men  or  terminal  market  buyers  to  send  out  any  bona  fide 
bids  to  the  country  after  the  close  of  the  market.^^ 

v' 

Control  of  market  letters. — Market  circulars  sent  out  by  mem¬ 
bers  to  the  trade  are  generally  under  the  supervision  of  the  Tparket 
report  .committee  or  a  similar  agency.  It  is  thought  necessary  to 
place  in  the  discretion  of  an  administrative  body  the  regulation  of 
the  market  news  services  provided  by  cash  and  future  commission 
houses  for  their  customers.  Consequently,  there  are  few  general 
rules  restricting  specifically  markenelters  and  circulars,  but  the 
practice  appears  in  sundry  regulations  and  committee  rulings. 

A'  resolution  adopted  by  the  board  of  directors  in  Minneapolis, 
however,  has  the  same  effect  as  a  general  rule  and  furnishes  evidence 
of  the  effort  of  the  major  exchanges  to  insure  the  accuracy  of  market 
reports  and  to  eliminate  publicity  material  calculated  to  invite  pure 
speculation. 

Resolved,  That  members  sending  out  circular  and  other  letters,  giving  information 
regiirding  values  of  cash  grain  in  this  market,  be  required  to  so  word  these  letters  as 
to  avoid  misapprehension  on  the  part  of  the  receiver  of  the  letters  regarding  values 
in  this  market  ;_that  the  reporting  of  sales  of  cash  wheat  of  a  certain  test  weight,  in 
such  a  manner  as  to  leave  the  impression  that  all  wheat  of  that  test  weight  is  of  equal 
value,  is  misleading  and  uncommercial  conduct;  that  the  reporting  of  specific  sales 
of  cash  grain  should  not  be  made  in  any  manner  as  to  create  a  false  impression  re¬ 
garding  values  generally;  that  circular  and  market  letters  sent  out  should  be  carefully 
worded,  so  as  to  convey  to  the  receiver  of  the  letter  an  accurate  impression  regarding 
terminal  grain  values.  Be  it  further 

Resolved,  That  members  be  requested  to  call  the  attention  of  the  secretary’s  office 
to  any  circular  or  other  letters  sent  out  b}^  members  which  appear  to  be  in  violation 
of  this  resolution.  Be  it  further 

Resolved,  That  on  and  after  December  20,  1916,  members  be  required  to  forward  a 
copy  of  all  circular  and  market  letters  forwarded  by  them  to  country  shippers  to  the 
secretary’s  office,  these  copies  being  for  examination  by  the  committee  of  investiga¬ 
tion  and  board  of  directors,  in  connection  with  the  enforcement  of  the  above  resolu¬ 
tion.'^^ 

Control  of  wire-house  activities. — The  department  of  market 
records  and  reports,  under  the  market  record  committee,  is  an  im¬ 
portant  bureau  in  Chicago  owing  to  the  several  large  private  tvire 
houses  which  transmit  future  quotations  to  their  branches  through¬ 
out  the  United  States.  Under  authority  of  a  general  rule  the 
board  of  directors  have  adopted  strict  regulations  requiring  such 
wire  houses  to  have  the  approval  of  the  board  both  as  to  the  place 


’s  See  p.  235. 

Note  that  the  uniform  commission  rule  must  be  followe'I  in  Minneapolis  and  Duluth. 

21  Circular  No.  700,  Dec.  14, 1916. 

22  Rule  4,  sec.  23. 

23  1918  rules,  p.  130. 


294 


TERMIivTAL  GEAIN  MARKETS  AKD  EXCHANGES. 


to  which  a  private  wire  may  be  extended  and  as  to  the  nature  of  the 

information  which  mav  be  furnished. 

.  */ 

As  applied  to  private  wire  houses  the  most  drastic  section  of  these 
regidations,  lies  in  the  authority  vested  in  the  market  report  com¬ 
mittee  to  examine  books  and  records  of  brancii  offices  or^  more 
literal^,  ^Ao  examine  into  the  conduct  of  all  private  offices  or  places 
of  business  Tecciving  the  continuous  market  quotations  of  the  board 
of  trade  *  * 

This  regulation  was  especially  difficult  to  enforce  at  first;  and  the 
directorate  was  called  upon  for  disciplinary  action  in  several  cases. 
As  an  instance;  on  July  13,  1916,  an  order  was  issued  to  a  nonresi¬ 
dent  member  of  Memphis;  Tenn.,  to  produce  all  books  and  papers 
of  his  firm  so  that  a  representative  of  the  department  of  market 
records  and  reports,  under  the  regulations  adopted  for  that  depart¬ 
ment,  might  examine  the  business  of  his  firm.  The  member  from 
Memphis,  on  the  advice  of  counsel,  persistently  refused  to  produce 
his  books  and  papers  or  disclose  the  same  to  the  board’s  investigator. 
He  stated  that  it  would  .place  his  firm  at  a  great  disadvantage  before 
the  courts  of  Tennessee.  Tlie  matter  was  finally  tried  before  the 
directors  and  he  was  suspended  from  all  privileges  of  membership 
until  he  should  see  fit  to  comply  with  the  order  of  the  market  record' 
committee.  The  suspended  member  instituted  a  suit  for  $200,000 
damages  against  the  Board  of  Trade,  but  subsecjuently  withdrew  the 
suit,  acceded  to  the  rules  of  the  exchange,  and  was  reinstated  in 
Januarv,  1918. 


Chapter  VI. 

INSPECTION  AND  WEIGHING.^ 

Section  1.  In  the  early  markets. 

The  most  important  facilities  which  the  early  exchanges  ofTcrod 
the  grain  grower  and  shipper,  outside  of  an  immediate  market  for  the 
grain,  were  the  .grading  and  weighing  agencies  established  at  the  ter¬ 
minal.  Reliable  weights  and  measures  had  been  a  matter  of  concern 
to  traders  in  bulk  commodities  since  time  immemorial.  If  the  farmer 
who  broke  the  prairie  soil  was  to  be  offered  continuous  markets  for 
his  product  at  near-by  terminals,  there  must  be  established  facilities 
for  weighing  winch  would  command  his  confidence.  Likewise,  if 
grain  prices  were  to  be  based  on  quality  as  well  as  quantity — if  thei’o 
was  to  be  any  incentive  for  producing  the  best  grain— it  was  indis¬ 
pensable  that  standard  grades  bo  established  by  definite  rule  and 
administered  through  a  reliable  and  representative  agency. 

Prior  to  1850  there  were  nq  inspection  systems,  and  no  standai'ds 
of  grade,  and  grain  was  bought  in  the  eastern  markets  by  measured 
bushels  (that  is,  not  determined  by  weights)  The  crude  method  of 
testing  quantity  by  the  half-bushel  method  was  abandoned  by  the 
Buffalo,  Chicago,  and  other  western  markets  in  the  early  50’s,  and  the 
6()-pound  bushel  was  adopted  for  vdieat.  The  eastern  markets  still 
clung  to  the  old  measuring  method  for  several  years,  and  evoked  a  pro¬ 
test  from  the  midway  market  of  Buffalo  in  1854.  The  merchants  of 
the  Buffalo  Board  of  Trade,  by  formal  resolution,  strongly  disapproved 
of  ‘The  antiquated  custom  of  measuring  grain  as  practiced  in  the  city 
of  New  York.”  They  stated  that,  “it  is  the  custom  in  this  city,  and 
also  with  dealers  at  all  western  ports,  to  buy,  sell,  and  ship  all  kinds 
of  grain  by  weight,  *  whereas,  it  is  the  custom  in  the  city  of 

New  York  to  sell  and  deliver  grain  by  measuring  in  sealed  half¬ 
bushel  measures.”  They  considered  this  latter  practice  “as  an  incor¬ 
rect  and  illegal  method  of  ascertaining  the  number  of  bushels,  and 
the  practice  ought  to  be  abolished  and  a  uniform  system  of  selling 
and  delivering  by  weight  adopted.”^ 

This  resolution  was  concurred  in  by  the  Chicago  Board  of  Trade 
and  they  voted  to  “rorpiest  the  Boards  of  Trade  of  Milwaukee, 
Detroit,  Toledo,  Cleveland,  and  all  other  shipping  ports  to  cooperate 
with  us  in  the  effort  to  accomplish  this  desirable  object.”^ 

1  See  Tables  75  and  76,  Ch.  V. 

-  Taylor,  History  of  the  Board  of  Trade  of  Chicago,  Vol.  1,  pp.  147-137. 

3  Taylor,  Vol.  l,p.  180. 

Udem,  p.  190. 


295 


296 


TERMI^’AL  GRAIN  MARKETS  AND  EXCHANGES. 


Inspection  systems  were  devised  and  instituted  at  al>t)Ut  the  same 
time.  The  early  grades  were  experimental,  and  the  inspector  was 
“instructed  to  use  his  discretion  in  inspecting  the  different  grades 
of  wheat,  and  not  confine  himself  strietty  to  the  standard  of  weight 
where  it  is  a  manifest  injury  to  do  so.’*^ 

After  the  Civil  War,  with  the  development  of  the  storage  business, 
^  and  of  trading  in  grain  for  future  delivery,  facilities  for  grading  and 
;  inspecting  grain,  as  well  as  official  weighing  departments  were  devel¬ 
oped  on  all  the  principal  exchanges.  On  the  part  of  the  farmers 
there  was  a  considerable  apprehension  and  distrust  of  the  exchange 
systems,  associated  as  they  wore  with  the  newly  developed  railroad 
and  elevator  interests.  Evidence  of  this  appears  in  the  report  of 
the  St.  Louis  Merchants’  Exchange  in  1870: 

Cur  system  of  inspection  carefully  guards  against  any  of  the  deceptions  or  tricks 
practiced  in  other  markets,  and  being  controlled  by  the  Merchants’  Exchange  in  the 
interest  of  the  merchants,  can  not  be  used  to  the  advantage  of  the  elevators.® 

Section  2.  State  inspection  and  weighing. 

The  recurrent  distrust  of  hoard  of  trade  inspection  and  weighing 
resulted  in  the  assumption  of  these  functions  by  the  State  authorities 
in  certain  States.  The  first  State  agency  was  established  in  Illinois 
with  the  passage  of  the  railroad  and  warehouse  act^  oLlS?!.^  The 
Board  of  Trade  of  Chicago  had  been  engaged  in  a  long  fight  to  hold 
the  terminal  warehousemen  to  a  stricter  accountability  for  grain  in 
storage,  and*  had  been  influential  in  the  enactment  of  constitutional 
and  statutory  provisions  for  the  regulation  of  such  warehouses.  But 
the  legislature — “at  the  instance  of  farmers  and  country  dealers”'^ — 
took  a  further  step  and  established  “compulsory  inspection”  under 
the  authority  of  the  Illinois  Railroad  and  Warehouse  Commission. 
And,  in  spite  of  protests  from  the  Board  of  Trade,*  State  inspection 
in  Chicago  prevailed  from  that  time  on.®  This  move  was  followed 
by  other  States  in  the  grain  areas.  A  Minnesota  statute  of  1885 

t  Idem,  p.  14. 

*  Report,  1870,  p.  61. 

’•  So  .stated  in  ICth  Annual  Report  (1874),  p.  22. 

«  F or  example,  the  following  in  the  report  published  January  1,  1874,  p.  22:  The  investigations  of  a  year  or  ’ 
more  ago  disclosed  the  perpetration,  imder  State  regime,  of  irregularities  and  frauds  unparalleled  in  the 
history  of  the  grain  trade  of  the  country,  and  the  investigations  made  more  recently  show  continued  viola¬ 
tions  of  the  law.  It  would  seem  that  a  few  moments  of  reflection  would  suffice  to  convince  any  ordinary 
mind  that  the  inspection  of  grain  in  Chicago  is  a  matter  of  such  vast  importance,  affecting,  as  it  does,  the 
value  of  many  millions  of  dollars’  worth  of  property  which  changes  ownership  many  times  annually,  and 
that  the  adoption  and  supervision  of  the  execution  of  rules  governing  grain  inspection  and  the  registration' 
of  warehouse  receipts  require  such  practical  experience  with  the  business,  and  such  perfect  familiarity 
with  the  wants  of  the  trade,  together  with  such  constant  care  and  so  much  of  thought  and  time,  as  to  render 
it  absolutely  impossible  for  a  board  of  three  coimnissioners,  having  headquarters  IGO  miles  distant  from  this 
business,  to  satisfactorily  control  its  conduct,  and  at  the  same  time  succeed  in  enforcing  laws  regarding  the 
management  of  railroads.  It  is  not,  therefore,  surprising  that  the  present  law  and  its  administration  have 
proved  unsatisfactory.  In  this  connection  it  may  not  be  improper  to  say  that  it  is  the  unanimous  opinion 
of  youi’  board  of  directors  that  compulsory  inspection  as  conducted  by  this  State  is  not  only  wrong  in  prin¬ 
ciple  and  theory,  but  is  in  practice  detrimental  to  the  interests  of  the  agricultm  ists  of  the  Northwest  and 
damaging  to  the  trade  and  commerce  of  Chicago, 

8  The  act  was  limited  (in  its  specific  requirements)  to  cities  of  over  100,000  inhabitanis. 


INSPECTION  AND  WEIGHING. 


297 


gave  the  railroad  and  warehouse  commission  of  the  State  power  to 
supervise,  weigh,  and  register  grain.  State  inspection  and  weighing  was 
established  in  Kansas  (1907),  Missouri  (1889),^^  Wisconsin  (1905), 
Washington  (1911),  Oregon  (1917),  and  North  Dakota,  Montana,  and 
Idaho  (1919).  The  Chicago  Board  of  Trade  protested  vigorously 
against  State  inspection,  when  first  established,  and  State  juris- 
tliction  was  obtained  in  Kansas  City  and  St.  Louis  only  after 
prolonged  litigation. 

By  long-standing  agreement  the  function  of  w^eighing  in  Illinois 
has  never  been  undertaken  by  the  vState  commission  but  has  been 
delegated  to  exchange  agencies  in  Chicago  and  East  St.  Louis.“  In 
the  other  States  enumerated,  State  weighing  is  coordinate  with 
State  inspection.  It  is  noteworthy  that  in  Kentucky,  where  com¬ 
paratively  little  grain  is  grown,  the  State  legislature  in  1880  vested 
the  weighing  and  inspection  of  grain  in  the  Louisville  Board  of  Trade, 
where  the  authority  has  ever  since  remained. 

Inspection,  grading,  and  weighing  are  stiU  exchange  facilities  in 
Milwaukee,  Omaha,  Peoria,  Decatur,  Indianapolis,  Cincinnati,  Louis¬ 
ville,  Cleveland,  Buflalo,  Baltimore,  Philadelphia,  New  York,  Boston, 
and  San  Francisco.  Even  wliere  State  agencies  have  superseded  those 
of  the  exchanges,  a  check  on  the  grades  has  been  maintained  through 
authorized  sampling  companies  and  standing  committees.®  (See 
p.  309.) 

Section  3.  Duplication  of  inspection  and  weighing  services. 

The  fact  that  State  boundaries  bear  no  relation  to  the  marketing 
system  results  in  concurrent,  and,  at  times,  conflicting  administra¬ 
tion  of  the  inspection  services,  notably  in  Kansas  City  and  St.  Louis.* 
The  United  States  grain  standards  act  (1916)  authorized  the  Secretary 
of  Agriculture  ^Mo  fix  and  establish  *  *  *  standards  of  quality 

and  condition  for  corn  (maize),  wheat,  rye,  oats,  barley,  flaxseed,  and 
such  other  grains  as  in  his  judgment  the  usages  of  the  trade  may 
warrant  and  permit,”  and  to  license  competent  persons  ‘Ho  inspect 
and  grade  grain  and  to  certificate  the  grade  thereof  for  shipment  or 
delivery  for  shipment  in  interstate  or  foreign  commerce  *  *  *” 

and  provided  for  appropriate  appeals  from  such  inspection.  (39 
U.  S.  Stat.  L.,  pp.  482,  484.)  It  did  not  and  could  not  eliminate 
administrative  duplication  as  between  States  and  as  between  official 
and  private  agencies. 

The  grain  in  East  St.  Louis,  whicli  lias  been  graded  by  the  Illinois 
Inspection  Department,  is  graded  again  by  the  Missouri  Inspection 
Department,  if  such  grain  later  passes  into  a  Missouri  elevator. 

^  See  p.  300.  “  The  State  commission  has  jnrisdietioii  in  these  markets  only, 

a  Note  that  the  inspection  of  wheat,  corn,  and  oats  is  subject  to  Federal  supervision  in  all  important 
grain  markets.  See  service  and  regulatory  announcements  and  bulletins  of  the  Bureau  of  Markets, 
Department  of  Agriculture, 
t*  Also,  see  Duluth-Superior  controversy,  p.  156. 


298 


TERMINAL  GRAIN  AIARKETS  AND  EXCHANGES. 


Likewise,  grain  which  has  been  graded  by  the  Missouri  Inspection 
Department  in  a  terminal  yard  on  the  Missouri  side,  provided  it  later 
goes  into  an  Illinois  elevator,  must  bo  graded  anew.  Under  each 
jurisdiction  there  are  the  usual  provisions  for  reinspection  and  appeal. 

It  is  estimated  that  about  10  per  cent  of  the  grain  which  comes  to 
the  St.  Louis  market  is  the  subject  of  double  inspection  by  Missouri 
and  Illinois  agencies;  that  is,  10  per  cent  of  the  grain  is  first  graded 
in  the  railway  yard  of  one  vState,  and  later  passes  into  the  elevator  of 
anotlier  State,  necessitating  a  double  grading.  No  estimate  is  at 
liand  as  to  the  percentage  of  changes  in  grades  when  grain  is  regraded 
by  the  second  State.  However,  the  supervising  inspector  states  that 
during  the  first  half  of  1918  he  knew  of  some  forty  or  fifty  cars  of 
grain  whose  grades  wore  lowered  by  the  Illinois  Inspection  Depart¬ 
ment  after  they  were  graded  by  the  Missouri  Inspection  Department. 
Differences  in  the  fees  required  for  corresponding  services  have 
given  additional  irritation  to  shippers. 

Kansas  City  grading  and  weighing. — In  Kansas  City  about  50  per 
cent  of  the  cars  of  grain  passing  through  the  market  are  subjected  to 
double  grading.  About  one-half  of  the  terminal  elevators  are  located 
on  the  Kansas  side  and  one-half  on  the  Missouri  side,  while  a  majority 
of  the  wheat-carrying  railways  liave  their  yards  on  the  Kansas  side. 
These  are  the  Santa  Fe,  Rock  Island,  Lhiion  Pacific,  Frisco,  Mis¬ 
souri,  Kansas  &  Texas,  and  Kansas  City  Northwestern.  The  only 
largo  road  on  the  Missouri  side  is  tlie  Burlington. 

This  means  that  grain  coming  into  the  market  from  Kansas  may  bo 
graded  both  at  Kansas  railwav  vards  and  Missouri  elevators — the 
reverse  being  true  of  grain  coming  in  from  Missouri. 

In  Kansas,  as  in  Missouri,  there  has  been  carried  on  for  years  a 
running  fight  between  the  State  legislature  and  the  board  of  trade  of 
tile  terminal  market.  In  1911  the  law  providing  a  State  inspection 
department  in  Kansas  was  declared  unconstitutional  by  the  Supremo 
Court  of  Kansas.  As  a  result,  from  1911  to  1915  the  inspection 
department  of  the  Board  of  Trade  graded  all  grain  received  on  the 
Kansas  side.  In  1915  the  State  inspection  department  was  reor¬ 
ganized  by  the  legislature  to  conform  with  deficiencies  shown  by  the 
court,  and  the  Board  of  Trade  discontinued  all  grading  operations. 

Prior  to  1917  weighing  in  Kansas  City  was  supervised  by  Board  of 
Trade  inspectors,  and  the  actual  weighing  was  done  by  vState  emplo^^ees 
in  the  respective  jurisdictions.  In  tliat  year  the  vStates  of  Kansas  and 
Missouri  jirohibited  the  Board  of  Trade  from  having  such  inspectors 
at  the  elevators.  The  Kansas  City  Board  of  Trade  contested  the 
establishment  of  the  Missouri  weighing  department  until  the  law  was 
sustained  by  the  supreme  court  of  the  State. 

Owing  to  the  strenuous  objection  among  shipj)ers  of  grain  to  the 
frequent  double  inspection  charges,  the  Kansas  and  Missouri  inspcc- 


299 


INSPECTION  AND  WEICIHING. 

lion  departments  later  reached  an  agreement  by  which  the  fee  for 
inspecting  a  car  of  grain  going  into  an  elevator^  which  had  previ¬ 
ously  been  the  subject  of  a  yard  inspection  by  tlio  other  State,  was 
reduced  to  15  cents,  provided  the  elevator  grade  corresponded  with 
tlie  yard  grade.  In  case  it  did  not,  then  the  full  inspection  charges 
were  paid,  viz,  65  cents  for  inspection  and  the  delivery  of  a  sample 
to  the  consignee,  and  25  cents  additional  for  moisture  test  on  wheat 
and  corn,  made  necessary  by  the  Federal  grading  system. 

This  charge  of  15  cents  Avas  called  a  “review”  charge  and  accord¬ 
ing  to  the  inspection  department  of  I^ansas^'Ss”  proven  unsatis¬ 
factory.  It  is  necessary  to  do  just  as  mucJi  Avork  in  the  grading-  of 
that  grain  AAdiich  has  previously  been  inspected  bA’  the  other  State 
as  it  is  for  the  grading  of  the  grain  Avhich  has  not  been  proAuously 
inspected.  Moreover,  it  is  reported  that  the  operation  of  the  Federal 
grades  has  entailed  far  more  AAmrk  in  the  grading  of  grain,  so  that 
it  has  made  necessary  a  large  increase  in  the  force  of  the  Kansas 
inspection  department,  and  there  has  been  a  decrease  in  its  rcA^enue. 

In  Kansas  City  the  burden  of  a  double  inspection  charge  is  borne 
Avliolly.hy  the  shipper.  In  St.  Louis  the  elc Abator  receiAung  the  grain 
pays  the  second  charge  in  case  such  is  exacted. 

Double  inspection  is  not  as  serious  a  matter  in  St.  Louis  as  in 
Kansas  City,  since  a  larger  proportion  of  the  grain  Avhich  enters  St. 
Louis  is  transferred  or  shipped  AAuthout  being  handled  by  an  elcA^ator. 

There  is  strong  sentiment  on  the  Kansas  City  Board  of  Trade  for 
the  elimination  of  all  State  inspection  because  of  the  alleged  “ex¬ 
cessive  expense  and  red  tape”  and  the  inequalities  of  service. 

Weighing  at  St.  Louis. — In  1911  the  Railroad  and  Warehouse 
Committee  of  Illinois  entered  into  a  formal  agreement  Avith  the 
I^Ierchants’  Exchange  of  St.  Louis  by  AAdiich  the  latter  Avas  given 
complete  jurisdiction  over  the  weighing  of  grain  in  East  St.  Louis. 
This  Avas  the  result  of  the  dissatisfaction  Avith  State  weighing  results, 
and  the  system  of  double  charges,  as  voiced  in  protest  from  the  mer¬ 
chants’  exchange,  the  millers  of  Illinois,  aiwl  the  Illinois  Grain 
Dealers  Association.^- 

The  agreement  draAAUi  up  alluded  to  the  agreement  already  exist¬ 
ing  between  the  vState  commission  and  the  Chicago  Board  of  Trade, 
AAdiereby  the  weighing  of  grain  has  been  administered  “for  a  number 
of  years  and  has  proven  A^ery  satisfactory  to  all  parties  in  interest.” 
It  stated  that  “it  is  detrimental,  in  the  judgment  of  the  commission, 
that  there  should  bo  two  supervisions  of  weighing  of  grain  in  the 
city  of  East  St.  Louis  and  Aucinity.”  The  stipulated  “sole  and  only 
object”  of  the  agreement  AAvas  “to  eliminate  the  double  charge  of 
superAusion  of  Aveighing  of  grain  in  the  city  of  East  St.  Louis  and 
A'icinity  in  the  interest  of  both  grain  buyer  and  seller  *.” 


12 1’coria  conventiou,  1909;  Decatur  conventioTi,  1910. 


300  TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 

TJie  protest  whieli  had  be.en  made  against  "'political  appointees 
in  the  weighing  service  was  reflected  in  the  following  language  of  the 
agreement: 

Tlie  mercliaiits’  exchange,  through  its  pro])er  officers,  shall  have  the  sole  power 
and  authority  to  appoint  supervisoi-s  of  weighing,  who  shall  be  under  the  absolute 
control  of  said  merchants’  exchange  or  its  officers,  with  the  right  at  any  time  to  dis¬ 
charge  any  such  employees  if,  in  their  judgment,  the  interests  of  the  business  re¬ 
quires.  The  railroad  and  warehouse  commission  may,  however,  submit  a  list  of 
names  of  citizens  of  Illinois  for  appointment  as  supervisors  of  weighing  at  places  where 
the  State  supervisors  are  now  employed,  viz,  Soutliern,  Advance,  Venice,  and 
Terminal  Elevators,  and  the  Corn  Products  plant,  at  least  double  the  names  to  be  sub¬ 
mitted  for  the  number  to  be  appointed,  and  if  the  merchants’  exchange,  or  its  proper 
officers,  linds  such  persons,  or  any  of  them,  capable  and  worthy  they  will  appoint 
them  subject  to  discharge  if  not  satisfactory.  In  case  an  employee  is  discharged  or 
resigns,  the  merchants’  exchange  will  notify  th.e  railroad  and  warehouse  commission 
of  such  vacancy,  and  the  commission  may  suggest  two  names  of  citizens  of  Illinois 
to  fill  each  vacancy;  but  the  merchants’  exchange  sliall  not  be  compelled  to  appoint 
any  person  recommended  by  the  railroad  and  warehouse  commission,  or  its  officers, 
iinle.ss  such  person  or  persons  are,  in  the  estimate  of  the  exchange,  or  its  officers,  capable 
and  efficient  for  such  service.  It  will  be  the  purpose  of  the  exchange,  through  its 
proper  officers,  to  employ  citizens  of  Illinois  for  service  at  East  St.  Louis  and  vicinity, 
but  in  case  the  persons  suggested  by  the  railroad  and  warehouse  commission  are  not 
competent  the  said  exchange  shall  be  at  liberty  to  appoint  other  persons  of  its  own 
selection,  citizens  of  the  State  of  Illinois. 

This  agreement  has  proved  satisfactory  to  the  merchants’  exchange, 
and  (it  is  reported)  has  resulted  in  more  accurate  weighing  and  the 
elimination  of  double  charges.  The  present  supervisor  of  weights 
lias  declined  to  appoint  nominees  of  the  commission  whom  he  con¬ 
sidered  to  possess  only  political  qualifications,  and  has  dismissed 
weighmen  who  had  already  been  appointed  on  such  a  basis.  At  the 
present  time,  out  of  a  total  of  25  on  the  Illinois  side  only  three  of  the 
men  who  were  employed  by  the  Illinois  weighing  department,  prior 
to  the  above  contract,  are  weighers  for  the  merchants’  exchange. 

Weighing  by  the  State  of  Missouri.— The  agreement  described 
eliminated  the  weighing  administration  of  Illinois,  but  on  the  Mis¬ 
souri  side  the  St.  Louis  Exchange  has  been  wholly  ousted  from 
jurisdiction.  In  1904  the  right  of  the  merchants.’  exchange  to  weigh 
grain  had  been  upheld  in  a  suit  instituted  against  the  exchange  by 
the  attorney  general  of  Missouri.  But  by  an  act  approved  in  1913 
the  State  Legislature  of  Missouri  set  up  a  single  warehouse  com¬ 
missioner  in  place  of  the  old  railroad  and  warehouse  commission,  and 
passed  a  statute  forbidding  any  person  or  corporation  “other  than  a 
duly  authorized  and  bonded  State  weigher  to  issue  any  weight  certifi¬ 
cate  *  *  *  (for  any)  grain  at  any  warehouse  or  elevator  in  this 
State  where  duly  appointed  and  qualified  State  weighers  are  sta¬ 
tioned  *  *  j’ 

Action  instituied  by  this  commissioner  finally  compelled  the 
Board  of  Trade  of  Kansas  City  and  the  Merchants’  Exchange  of  St. 
Louis  to  give  up  their  weighing  operations.*^ 


«  See  248  U.  S.,  305. 


301 


INSPECTION  AND  WEIGHING. 

Summary. — Tlie  theoretical  justification  of  State  inspection  is  that 
it  affords  country  shippers  protection  against  unfair  practices  by  the 
controlling  interests  in  the  terminal  market.  It  is  subject  to  two 
objections  in  practice;  (1)  State  boundaries  do  not  conform  to  market 
areas  so  that  two  State  jurisdictions  with  diverse  policies  and  methods  » 
may  be  found  in  the  same  market,  as  notably  in  St.  Louis  and  Kansas 
(fity.  (2)  LTnlcss  the  merit  system  is  well  established  appointments 
of  State  inspectors  and  weighers  may  be  made  for  political  consider¬ 
ations.  This  has  been  alleged  of  Missouri  and  Kansas  inspections, 
and  is  the  argument  invariably  advanced  in  markets  where  inspection 
through  the  exchange  agency  has  been  satisfactory  to  the  trade. 

The  obvious  test  of  any  inspection,  grading,  or  weighing  service  is 
the  degree  of  confidence  which  it  commands  from  both  buyers  and 
sellers. 

Section  4.  Personnel  of  State  departments. 

A  leading  firm  in  Chicago  reported  to  the  Federal  Trade  Com¬ 
mission  that  Board  of  Trade  sampling  was  better  than  that  of  the 
State  department,  since  the  samplers  and  inspectors  of  the  board 
were  usually  more  experienced  men.  Without  passing  on  the  validity 
of  this  statement  it  is  clear  that  the  problem  of  personnel  enters 
acutely  into  any  consideration  of  inspection  and  weighing  services. 

Federal  license. — The  likelihood  of  securing  incompetent  inspect¬ 
ors  is  being  continually  reduced  (as  affecting  wheat,  corn,  and  oats) 
by  the  regulations  of  the  Secretary  of  Agriculture  under  the  grain 
standards  act.  Lhider  the  act  all  inspectors  of  wheat,  corn,  and  oats 
in  interstate  or  foreign  commerce  must  be’  licensed  by  the  Federal 
Government.  The  inspectors  are  still  employed  by  exchange  or 
State  inspection  departments  (or  they  may  operate  independently), 
and  Federal  licenses  arc  granted  on  State  recommendation.  The 
requirement  of  a  Federal  license  has  resulted  in  a  degree  of  uniformity 
in  the  qualifications  required  of  applicants  which  tends  to  eliminate 
any  question  of  the  relative  superiority  of  State  or  exchange  inspection 
service.  Tlie  fact  that  disputes  as  to  any  grade  determined  for 
wheat,  corn,  or  oats  in  interstate  commerce  may  be  referred,  by 
appeal,  to  the  office  of  the.KeffeLaLGxait^  of  the  district, 

has  reduced  the  opportunity  for  partisan  interference  or  local  dis- 
mmination  in  establishing  the  quality  of  these  grains. 

State  inspection  personnel. — The  history  of  Minnesota  State 
inspection  in  the  Minneapolis  market  indicates  a  rigid  insistence  upon 
line  promotion  and  the  merit  system.  The  present  chief  deputy 
inspector  began  in  the  department  as  a  helper  iti  1885.  He  has  been 
helper,  deputy  inspector,  assistant  chief  inspector,  and  chief  deputy 
inspector.  All  three  of  the  assistant  chief  deputy  inspectors  began 
service  as  helpers  in  the  yards  in  1901.  The  present  chief  clerk 


* 


1918. 


302 


TERMINAL  GRAIN 


# 

MARKETS  AND  EXCHANGES. 


began  his  career  with  the  department  as  lielpcr  in  the  yards  in  1902. 
Many  of  the  helpers  and  yard  foremen  have  been  in  the  service  from 
five  to  ten  years  or  more.  Under  the  general  policy  of  promotion,  in 
the  busy  season  of  the  fall  when  the  receipts  are  large  and  the  depart¬ 
ment  is  rushed,  such  new  men  as  arc  needed  arc  taken  on  as  helpers 
in  the  sampling  yards.  These  men  arc  required  to  furnish  written 
applications  showing  certain  qualifications  as  to  competency.  From 
these  written  applications  selection  is  made.  Promotion  from  helper 
to  yard  foreman  usually  covers  a  period  of  one  to  four  years,  and 
often  more.  To  become  a  deputy  inspector  requires  that  a  man  shall 
have  had  at  least  four  years’  actual  service  in  the  sampling  of  grain. 
These  men  are  required  by  the  State  to  pass  a  written  examination 
showing  their  knowledge  of  grain,  grain  standards,  and  the  policy 
of  the  department.  First  appointments  from  the  eligible  list  are 
based  upon  the  standing  of  applicants  in  this  examination.  To 
inspect  wheat  and  corn  they  must  also  obtain  Federal  licenses. 
In  this  way  the  department  maintains  at  all  times  men  who  have 
been  trained  in  the  handling  of  grain  at  the  terminal.  The  system 
amounts  to  a  State  civil  service,  supplemented  with  personal  knowl¬ 
edge  of  the  work  that  these  men  have  been  engaged  in  for  at  least 
four  years  before  one  can  become  a  deputy  inspector.^*’ 


Illinois  and  Chicago. — The  Slate  supcrYisifig  inspector  is  at 
the  head  of  the  entire  grain  inspection  system  of  Illinois.  The 
remainder  of  the  force  consists  of  two  assistant  supervismg  inspectors, 
five  deputy  grain  inspectors,  four  grain  helpers,  one  moisture  tester, 
one  chief  clerk  and  registrar,  and  one  clerk.  The  grain  inspection 
department  itself  is  a  division  of  the  Illinois  j_lepartment  of  trfldf> 
and  commerce  which  was  created  in  1917  to  Include  as  a  subdivi- 
sjonmepublic  utilities  commission. 


While  these  statements  arc  based  on  first  hand  information,  the  following  extract  from  a  pamphlet 
issued  by  the  Minnesota  grain  inspection  and  weighing  department  shows  the  importance  attached 
to  the  problem  of  personnel: 

“The  inspectors  are  taken  from  the  oldest  samplers.  A  sampler,  after  lour  or  five  years  service  in  that 
capacity,  submits,  with  others,  to  an  examination  as  to  his  ability  to  grade  grain.  When  a  vacancy  occurs 
the  man  who  stood  highest  in  the  examination  is  promoted,  provided  that  no  man  can  be  promoted  to  an 
inspectoi’ship  who  passed  lower  than  85  per  cent.  The  man  so  promoted  may  possess  any  known  religious 
creed  or  political  faith— all  that  is  asked  of  him  in  his  new  position  is  to  give  the  State  the  best  service  of 
which  he  is  capable.  No  man  is  ever  made  an  inspector  wlio  has  net  served  from  four  to  eight  years  as  a 
sampler  or  helper.  There  arc  men  in  the  department  tc-day  (both  the  inspection  and  weighing  branches) 
wlio  began  when  the  department  Avas  organized  in  1885.  It  is  sometimes  charged  people  who  ought  to 
know  hotter  that  promotions  are  influenced  by  terminal  grain  dealers  and  elevator  men.  In  truth  and 
fact  no  man  outside  of  the  department  ever  knows  when  a  promotion  is  to  he  made.  Neither  does  the  man 
who  is  to  be  promoted.  Commission  men  and  elevator  men  have  no  more  to  do  with  these  matters  than 
they  do  in  selecting  the  men  to  work  on  the  Panama  Canal.” 

1“  The  United  States  Department  of  Agriculture  recognizes  tlie  appointees  of  State  agencies  in  prescribing 
the  ciualifications  of  licensed  grain  inspectors,  as  follows  (Regulation  2,  par.  3): 

”  In  case  the  applicant  is  a  person  duly  authorized  and  employed  to  inspect  and  grade  the  kind  of  grain 
for  which  the  license  is  sought  under  the  laws  of  a  State  having  a  State  grain  inspection  department 
established  by  the  law’s  of  such  State,  the  application  shall  contain,  or  be  accompanied  by  satisfactory 
evidence  thereof,  and  shall  otherwise  comply  with  paragraphs  1  and  2  of  this  section.” 

The  civil  administration  code  of  Illinois,  approved  Mar.  7, 1917. 


INSPECTIOX  AND  WEIOHING. 


303 


J] vain  inspector. — The  chief  grain  inspector  for  tlie  Chicago 
market  is  appointed  for  a  period  of  foiir^years  by  the  governor 
of  the  State,  subject  to  confirmation  by  the  senate.  The  present 
code  requires  that  ‘‘the  chief  grain  inspector  shall  be  a  person  who 
is  not  interested,  either  directly  or  indirectly,  in  any  warehouse  in 
this  State,  and  who  is  not  a  member  of  the  Board  of  Trade.’’ 

There  is  one  assistant  chief  inspector  who  has  general  supervision 
of  all  of  the  routine  inspection  work. 

Deinity  inspectors. — The  men  who  actually  inspect  the  grain  under 
the  present  system  are  known  as  deputy  inspectors.  There  arc  21 
men  employed.  They  arc  under  State  civil  service,  as  arc  the  other 
members  of  the  insiDcction  staff  below  the  chief  inspector.  They  are 
required  to  execute  a  bond  in  the  penal  sum  of  $5,000  at  the  time  of 
their  api^ointmcnt,  as  a  guaranty  of  tlie  faithful  discharge  of  duty, 
which  bonds  are  approved  in  the  same  manner  as  that  of  the  chief 
inspector. 

S ampler s.—Tlio  men  who  sample  the  cars  in  the  yards  under  the 
respective  yard  foremen  arc  likewise  chosen  by  civil  service.  Under 
the  present  arrangement,  both  inspectors  and  samplers  are  re¬ 
quired  to  pass  a  written  examination  on  certain  practical  tests. 
They  are  roc[uircd  to  give  evidence  that  they  know  the  practical 
handling  of  grain  so  far  as  their  duties  arc  concerned,  as  well  as  the 
technical  requirements  now  provided  under  the  Federal  grades. 

There  arejUirec  supervising  inspectors,  who  check  the  work  of  the 
deputj^nspec tors  and  review  samples  upon  which  remspection  has 


been  called.. 

There  are  at  pre^nt  some  73  samplers  and  hel2:>ers.  The  total 
list  of  the  employees  in  tlie  dejiartnient  as  of  January  1,  1918,  is  109. 
It  was  learned  from  the  chief  inspector  that  the  policy  of  the  de¬ 
partment  is  to  school  men  for  the  more  responsible  positions  through 
service  in  the  less  responsible  work.  However,  it  is  frankly  ad¬ 
mitted  that,  under  the  frequent  changes  of  administration  that  now 
obtahi,  the  department  suffers  considerably  in  the  point  of  con¬ 
tinuity  of  policy  and  also  with  regard  to  retaining  employees  on  the 
basis  of  their  experience  and  efficiency. 

'In  East  vSt.  Louis  the  officers  and  employees  of  the  inspection 
department  are  subject  to  the  civil  service  rules  of  the  vState,  and 
arc  ajipointcd  subject  to  the  consent  and  approval  of  the  civil  service! 
commission  of  Illinois. 

^  Section  <5.  Technical  methods  of  inspecting  and  grading  grain. 

In  the  following  pages  no  attempt  is  made  to  give  a  complete 
comparative  analysis  of  the  inspection  methods  followed  in  all 


'*  Secs.  12  and  7,  Civil  Administrative  Code  of  IllinoLs.  From  July,  1871,  to  August, 1891,  there  were  1 1 
chief  grain  insi)cotors,  all  of -whom  belonged  to  the  Ecpublican  Tarty;  they  were  followed  by  two  Tcrao- 
orats  ill  1S93  and  1895,  by  six  Republicans  from  1897  to  1911,  by  two  Teinocrats  from  1913  to  1915,  and  by 
two  Rcjniblicans  since  that  time. 


304 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


Diarkcts.  It  is  rather  intended  to  set  forth  the  essentials  of  the 
systems  which  now  obtain  at  the  larger  terminals.  The  require¬ 
ments  of  the  Federal  grain  standards  act  for  interstate  shipments, 
as  well  as  the  competition  between  markets,  has  resulted  in  a  high 
degree  of  uniformity  in  the  technical  methods  of  inspecting  wheat, 
corn,  and  oats. 

Laboratory  inspection.^ — The  three  main  considerations  in  arriv¬ 
ing  at  the  grade  of  wheat  are:  The  quality  of  the  grain,  its  condition, 
and  the  admixtures.  The  quality  depends  upon  soundness,  color, 
weight,  and  the  percentage  of  hard  grain.  The  condition  depends 
upon  the  moisture  content,  the  heat,  smut,  etc.  The  admixtnr(^^  nrA 
tested  by  a  process  of  sieving  and  weighing,  by  which  the  dockage 
is  determined.  Much  the  same  factors  are  considered  in  grading 
other  grains. 

On  such  a  basis  it  is  manifestl}"  impossible  to  determine  the  grade  of 
grain  scientifically  by  the  old  ^‘car-door  inspection’^  with  poor  light 
and  inadequate  apparatus.  The  laboratory  method  of  inspection  pro¬ 
vides  orderly  work  in  a  well-lighted  room  with  a  scientific  equipment. 
This  method  has  been  highly  developed  in  Minneapolis  and  Chicago 
with  substantially  the  same  methods  in  use. 

Inspection  before  arrival. — State  inspection,  notably  in  Minne¬ 
sota,  does  not  confine  its  activities  to  the  terminal  market.  In  order 
to  expedite  inspection  and  relieve  congestion  in  raih*oad  terminals 
the  Minnesota  Railroad  and  Wareliouse  Commission  has  established 
sampling  stations  at  various  interior  jioints,  and  has  even  provided 
an  inspection  and  weighing  station  at  La  Crosse^Wis.  Tlie  samples 
obtained  at  these  interior  stations  are  forwarded  by  express  to  the 
main  inspection  office,  so  that  the  bulk  of  the  grain  is  officially 
graded  before  it  reaches  the  terminal. 

The  inspection  tracks. — The  samples  of  grain  are  procured  from 
newly  arrived  cars  on  the  '‘^pection  tracks’’— special  tracks  pro¬ 
vided  for  the  purpose  by  the  railroads  in  the  larger  markets.  The 
gftififitos.J£QrL_in  crews  under  a  yard  foreman  in,  the  large  yaSIET 
TImJoroman  receives  the  car  waybills  or  recen’S's’  notices  from  the 
^railroad  and  assigns  the  cars  to  individual  samplers,  wtiom  he  holds 
accqini table.  Each  grain  car  is  tagged  by  the  railrq^  e^^'^vees 
showing  the  contents. 

The  work  begins  in  the  morning  as  soon  as  the  crew  can  see  to  work/^ 
which,  during  the  month  of  December  is  a  little  past  7  a.  m.  The 
crew  goes  at  once  to  the  shack  maintained  by  the  carrier  in  the  differ¬ 
ent  yards,  where  the  men  get  their  tools  and  change  their  clothes. 
The  cars  to  be  sampled  include  all  cars  of  grain  which  have  come  into 
the  yards  since  the  close  of  sampling  operations  on  the  day  before. 

-  --On  arrival  of  a  train  the  conductor  leaves  the  car  bills  in  the  rail¬ 
’s  The  following  descriptions  of  actual  practice  were  reported  by  agents  of  the  Bureau  of  Markets  Depart¬ 
ment  of  Agriculture.  ' 


INSPECTION  AND  AVEIGHING. 


305 


road  company's  yard  office.  A  list  of  these  hills  is  made  showing  the 
car  number,  name  of  shipper,  the 'shipping  station,  and  consignee. 
Tliese  details  are  necessary  for  issuing  the  inspection  certificates. 
From  such  a  list  the  ^^ard  sampling  foreman  with  his  crew  works  the 
cars.  A  record  of  the  seal  is  made  when  the  car  is  opened. 

The  sealek. — In  Minneapolis  the  operations  of  the  sealer  precede 
those  of  the  sampler.  He  enters  the  number  of  the  car  seal  upon  his 
record  book,  also  noting  any  defects  that  he  may  observe  in  the  con¬ 
dition  of  the  car.  He  pounds  upon  questionable  looking  spots  with 
his  crowbar  to  determine  whether  the  car  when  moving  was  likely  to 
have  been  leaking.  He  then  breaks  the  seal,  opens  the  door,  and 
leaves  the  car  to  the  sampler. 

The  sampling  operation. — Under  Minnesota  practice,  before  enter¬ 
ing  the  car,  the  sampler  records  on  an  inspection  ticket  the  car  number, 
the  initials,  the  date  of  sampling,  and  the  name  of  the  sampler.  Tliis 
ticket  is  kept  until  the  sam]ile  is  taken  and  is  placed  in  the  sample 
sack  with  the  grain  taken. 

The  sample  is  drawn  by  means  of  a  brass  or  steel  probe  about  60 
inches  long.  In  Minneapolis  the  implement  used  is  composed  of  two 
tubes,  one  within  the  other,  each  part  having  7  (sometimes  10)  equi¬ 
distant  slots  (approximately  f  inch  wide  by  3^  inches  long)  through 
which  the  grain  at  various  depths  may  enter  the  probe.  By  revolving 
the  inner  tube  the  holes  of  the  probe  are  tightly  closed  before  insertion 
and  are  opened  again  after  the  tube  has  been  plunged  into  position. 

The  holes  are  closed  again  when  the  probe  is  filled  and  samples  of 
grain  at  various  depths  in  the  load  can  thus  be  lifted  out.  Employees 
are  instructed  to  probe  the  cars  in  at  least  five  places— more  if  there 
is  reason  to  believe  that  a  car  has  been  plugged.  The  two  bottom 
holes  of  the  probe  sometimes  empty  into  separate  compartments  in 
order  to  give  a  separate  examination  of  grain  near  the  bottom  of  the 
car.  The  records  of  the  Minnesota  Railroad  &  Warehouse  Commis¬ 
sion  indicate  about  1^  per  cent  plugged  cars  in  Minneapolis  receipts.-® 
The  grain  is  carefully  emptied  onto  a  canvas  so  as  to  keep  its  relative 
position  as  in  the  car.  The  samples  thus  emptied  in  parallel  lines 
show  a  trained  man  at  once  the  comparative  qualities  in  various  points 
of  the  car  and  at  various  depths. 

In  the  Chicago  market  a  similar  device  is  used  except  that  the  probe 
consists  of  a  single  tube  inclosing  a  wooden  stick  which  must  be  with¬ 
drawn  to  let  in  the  grain.  The  limited  room  on  top  of  a  load  often 
makes  it  necessary  to  insert  this  style  of  probe  at  a  considerable  angle. 

This  grain  which  has  been  taken  by  the  several  probes  is,  after  it 
has  been  looked  over  by  the  sampler,  put  in  the  sample  bag.  In  the 
same  bag  with  each  sample  there  is  placed  a  card  giving  the  sampler’s 

20  Annual  Report  Chief  Inspector  of  Grain,  Aug.  31,  1913,  p.  12. 

168093°— 20 - 20 


306 


TKKMIIsAL  GKAIX  MARKETS  AKD  EXCHAK'GES. 


name,  the  car  number,  the  contents,  and  the  date  sample  was  taken, 
together  with  the  receiver’s  notice  from  the  carrier.  The  car  is  then 
closed  and  is  read}^  for  sealing. 

Tt  has  been  iioted  that  in  Minneapolis  the  grain  is  spread  on  a  can¬ 
vas  before  being  deposited  in  the  sample  sack.  This  practice  is  also 
recommended  by  the  Federal  grain  supervision  office. 

Another  Minneapolis  practice  which  has  Federal  indorsement  is  that 
of  placing  a  part  of  the  contents  of  the  probe  sample  in  an  air-tight 
tin  container  in  the  case  of  wheat  and  corn.  This  sample  is  used  to 
make  a  moisture  test  in  the  inspection  laboratory  in  conformity  to 
the  provisions  of  the  Federal  grades. 

In  Minneapolis  after  the  sampler  has  reached  the  end  of  the  string 
of  cars  the  sealer  goes  down  the  line,  closes  the  doors,  and  applies  the 
State  seal. 

The  record  of  this  seal  as  well  as  all  the  other  I'ecords  of  seals  and 
car  orders  arc  preserved  so  that  it  is  possible  to  ascertam  for  years 
afterwards  the  name  of  the  person  who  broke  the  seal,  who  took  the 
sample,  who  inspected  it,  and  the  condition  of  the  car  at  the  time  of 
sampling. 

Under  the  Illinois  inspection  dei)artment  no  grain  is  'taken  in  metal 
containers  for  moisture  tests.  Instead,  all  moisture  tests  are  made 
from  grain  taken  in  bags.  When  asked  the  reason  for  not  using  the 
tin  containers  the  reply  given  by  the  chief  inspector  was  that  it  takes 
extra  time  and  involves  extra  expense,  and  that  they  have  found 
from  actual  experience  that  moisture  tests  made  from  grain  taken 
promptly  in  sacks  to  the  laboratory  do  not  differ  to  any  appreciable 
extent  from  tests  made  of  similar  grain  taken  in  the  metal  containers. 

Tlic  methods  of  sampling  employed  at  the  other  interior  markets 
do  not  differ  materially  from  those  described.  For  example,  in  St. 
Louis,  after  the  car  arrives  in  the  terminal  ^nxrd  of  some  railway,  a 
joint  sample  is  obtained  by  the  Missouri  inspection  department  and 
the  Wilson  Sampling  Bureau.  If  the  grain  in  question  is  either 
wlieat,  corn,  or  oats  it  is  carried  to  the  inspection  office  in  St.  Louis, 
where  a  test  is  made.  If  the  grain  is  any  other  than  wheat  or  corn, 
the  grading  operation,  which  consists  of  a  mere  examination  of  the 
visi})le  qualities  of  the  grain,  may  take  place  either  in  the  yard  or 
later  in  the  offices  of  the  insj^ection  department.  In  any  event,  the 
results  of  the  grading  operation,  including  the  moisture  test,  if  made 
are -recorded  on  small  pan  tickets.  The  Wilson  Sampling  Bureau 
takes  the  sample  of  grain  from  the  office  of  the  Missouri  inspection 
department  and  delivers  it  to  the  consignee. 

In  Milwaukee  the  grades  are  generally  inspected  between  five  and 
six  in  therinorning.  Each  commission  house  has  a  box  in  the  vards 
in  whicli  the  samples  from  cars  consigned  to  them  are  deposited. 
These  samples  are  brought  to  the  exchange,  as  a  rule,  before  tlie 


INSPECTION  AND  WEIGHING. 


307 


market  opens,  so  that  tlie  consigned  grain  can  be  inspected  and  sold 
the  same  day.  In  busy  seasons,  liowcvcr,  there  arc  cases  where  tlio 
gi*ain  arrh'cs  on  the  table  after  the  market  opens. 

In  Louisville  the  exchange  follows  the  customary  methods  of  yard 
sampling,  except  that  a  canvas  is  not  used  in  dumping  grain  from  the 
probe.  Instead,  the  ])robc  is  emptied  directly  into  the  sample  sack. 
(.Train  is  then  brought  into  the  office  where  it  is  inspected  and  graded. 
There  is  no  trading  floor  and  the  gi*aded  samples  are  delivered  directly 
to  the  offices  of  the  various  firms.  Firms  located  outside  the  building 
get  their  samples  from  the  inspector’s  office. 

The  hammer  and  mallet  test  to  detect  leaking  from  the  car  is  not 
practiced  in  Louisville.  Instead,  whenever  a  car  is  thought  to  bo 
leaking  the  inspector  opens  it  and  looks  in  to  see  if  there  is  an}' 
depression  in  the  surface  of  the  grain ;  if  so,  a  leak  is  reported. 

Inspection  of  boatloads. — The  above  discussion  covei*s  inspec¬ 
tion  of  bulk  carload  shipments  into  or  out  of  the  market.  When 
shipment  is  by  boat  the  mechanics  of  inspecting  are  necessarily 
different.  In  (ffiicago  the  plan  is  to  have  an  inspectoi^at  the  several 
elevators,  who  is  charged  with  determining  a  grade  on  the  grain  at 
jlie  house  at  the  . time  the  cargo  is  loaded.  The  sample  of  grain  is 
ordinarily  taken  from  the  running  stream  in  the  loading  spout. 
Sometimes  grade  is  taken  by  the  use  of  the  probe  in  the  hold  of  tlie 
steamer,  but  not  often.  The  theory  is  to  get  a  representative 
sample,  and  to  know  what  kind  of  grain  is  being  loaded  while  the 
loading  is  taking  place.  For  this  purpose  the  grain  taken  at  the 
different  points-  in  the  stream  is  all  put  into  one  box,  where  it  is 
thoroughly  mixed.  From  this  the  final  sample  is  taken.  Grades 
are  determined  at  the  loading  houses  by  licensed  inspectors. 
check  their  grading,  samples  are  delivered  to  the  inspection  labora¬ 
tory  whei^  they  are  reviewed  to  determine  whether  or  not  the  grade 

fixed  by  the  inspector  at  the  house  in  each  case  is  correct.  These 
are  handled  by  special  messenger,  and  are  reviewed  promptly  when 
ix'ceived  in  the  laboratory,  in  order  that  the  grade  given  to  the  cargo 
may  be  checked  before  the  vessel  leaves  the  house. 

Uniformity  in  all  markets  is  promoted  by  the  regulation  of  the 
Secretary  of  Agriculture  prescribing  the  requirements  to  whicli  a 
sample  of  grain  must  conform  ^Uor  the  purposes  of  an  appeal  or  a 
dispute.” 

21  Sec.  7.  For  tlic  purposes  of  an  appeal  or  a  dispute  no  sample  shall  be  deemed  to  be  representative 
unless  it  comply  Tvith  the  following  requirements: 

Paragraph  1.  It  shall  be  at  least  2  quarts  in  size,  of  which  at  least  IJ  pints  shall  be  inclosed  in  a  clean, 
air-tight  container  and  the  remainder,  if  any,  in  a  clean  cloth  sack. 

Par.  2.  In  case  of  bulk  grain  in  a  carload  lot  or  in  a  wagon,  at  least  five  probes  and  as  many  more  as  may 
be  necessary  in  the  discretion  of  the  sampler,  shall  be  taken  from  the  grain  in  different  parts  of  the  car  or 
wagon,  as  the  case  may  be. 

Par.  3.  In  case  of  bulk  grain  in  a  canal  boat,  barge,  ship,  or  other  vessel,  at  least  five  probes  and  as  many 
it;ore  as  may  be  necessary  in  the  discretion  of  the  sampler,  shall  be  taken  from  the  grain  at  different  points 


308 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


In  the  inspection  laboratory. — When  a  sample  of  wheat  or 
other  grain  is  placed  upon  the  inspector’s  table  it  is  emptied  into  a 
large  pan,  where  observations  are  made  of  color,  odor,  and  general 
appearance.  In  the  determination  of  dockage  500  grams  are  put 
over  what  is  generally  called  the  ^ Packer.”  The  Emerson  kicker  is 
used  in  the  Minnesota  inspection  department.  This  machine  sepa¬ 
rates  out  from  the  grain  foreign  material,  such  as  the  wild  oats  fre¬ 
quently  found  in  wheat.  Dockage  is  determined  on  the  basis  of  per 
cent  by  weight. 

All  samples  of  corn  are  tested  for  moisture.  In  the  case  of  wheat, 
when  the  moisture  content  is  the  determining  factor,  or  from  general 
observation  of  the  inspector  is  likely  to  be  an  important  factor,  in  the 
determination  of  the  grade,  a  moisture  test  is  also  made.  It  has  been 
found  necessar)^  at  Minneapolis  under  the  new  Government  grades 
for  wheat  to  make  a  moisture  test  on  approximately  5  per  cent  of 
all  samples  of  this  grain  handled. 

This  moisture  test,  as  approved  by  the  United  States  Department 
of  Agriculture,  is  made  over  the  Brown-Duvel  moisture  tester.  The 
test  is  made  in  a  separate  laboratory  room,  connected  with 
the  main  inspection  laboratory,  by  employees  who  have  that  work 
exclusively  in  charge.  Whenever  an  inspector  finds  a  sample  on 
which  he  wants  a  moisture  test  he  makes  it  known,  and  the  contents 
in  the  air-tight  container  are  taken  to  the  moisture-test  room,  wEere 
the  test  is  made  and  the  results  reported  directly  to  him.  Then,  on 
the  basis  of  complete  study  of  the  sample  in  hand,  the  grade  of  the 
grain  is  determined.  . 

In  Minneapolis  an  average  hour’s  work  for  each  inspector  under  the 
new  standards  is  8  to  10  samples,  while  under  the  regulations  of  the 

through  each  hatch  or  opening  in  the  deck,  except  that  when  it  is  impractical  to  obtain  a  sample  in  accord- 
ance  with  the  foregoing  portion  of  this  paragraph,  it  may  be  drawn  from  the  grain  stream  while  running 
from  the  spout  or  on  the  belt  or  other  conveyor  to  or  from  the  vessel,  if  taken  in  such  a  way  as  to  shovv 
an  average  of  the  entire  lot. 

Par.  4.  In  case  of  grain  in  sacks,  samples  shall  be  drawn  from  such  number  of  sacks  selected  at  ran¬ 
dom  from  the  entire  lot  as  will,  in  the  judgment  of  the  sampler,  show  an  average  of  the  lot,  except  that 
if  the  grade  of  each  individual  sack  be  in  question,  a  sample  shall  be  drawn  from  each  sack. 

.  Par.  5.  In  case  of  grain  in  an  elevator  or  warehouse,  or  in  any  other  case  not  covered  in  this  section, 
samples  sliall  be  taken  from  as  many  different  portions  of  the  lot  or  parcel  as  will,  in  the  judgment  of  the 
sampler,  show  an  average  of  the  lot  or  parcel. 

Par.  6.  The  grain  taken  from  the  different  portions  of  a  lot  or  parcel  shall  be  thoroughly  mixed,  and 
such  mixture,  or  a  typical  portion  thereof  otherwise  complying  with  tiffs  regulation,  shall  constitute  a 
sample  of  the  entire  lot  or  parcel. 

Par.  7.  In  ease  any  portion  of  a  lot  or  parcel  of  grain  is  sour,  musty,  excessively  wet,  heating,  hot,  fire- 
burnt,  infested  with  live  w  eevils  or  other  insects  injurious  to  stored  grain,  or  otherwise  of  distinctly  low 
quality,  separate  samples  otherwise  complying  with  this  regulation  shall  be  taken,  respectively,  from  such 
portion  and  from  the  remaining  portion.  There  shall  be  filed  with  such  samples  a  statement  showing  the 
estimated  quantity  of  each  portion  of  the  grain  from  wiffeh  each  such  sample  was  taken. 

Par.  8.  In  case  it  shall  appear  that  a  lot  or  parcel  of  grain  has  been  so  loaded  or  handled  as  intentionally 
to  conceal  evidently  inferior  grain,  a  sample  of  such  inferior  grain,  otherwise  complying  with  this  regulation, 
shall  constitute  a  sample  of  the  entire  lot  or  parcel. 

(Rules  and  Regulations  of  the  Secretary  of  Agriculture  under  the  United  States  grain  standards  act  of 
Aug.  11,  1916.) 


INSPECTION  AND  WEIGHING. 


309 


old  l^Oiirds  of  vState  grain  ap))eals,  15  to  18  samples  could  be  graded 
each  hour.  Seventeen  inspectors  are  generally  required  for  the  work. 
,  Inspectoi*s,  as  well  as  samplers,  now  work  under  licenses  issued  by 
the  United  States  Department  of  Agriculture. 

Nebraska  has  no  State  supervision  of  grain  inspection.  Tlie  regula¬ 
tions  for  the  inspection,  weighing,  and  grading  of  grain  in  Omaha  are 
lixed  by  the  grain  exchange.  Supervisory  control  is  by  the  grain 
committee.  Appeals  from  the  chief  inspector  are  to  the  grain  com¬ 
mittee,  if  made  within  24  hours,  and  a  stipulated  fee  is  paid. 

Tiie  rules  of  the  Omalia  Grain  Excliange  provide  fully  as  to  how 
the  inspection  and  weighing  must  ])e  carried  on.  They  do  not  in  any 
material  respect  differ  from  the  rules  in  Minneapolis,  Chicago,  and 
Kansas  City.  The  methods  and  mechanics  are  practically  the  same 
in  all  these  cities. 

It  is  maintained  in  Omaha  that  inspection  and  grading  can  not 
be  made  in  less  than  24  hours  if  the  Federal  requirements  are  to  be 
fully  met.  The  exchange  has  adopted  this  practice,  which  is  known 
as  ^‘one-day  inspection.’’ 

In  ^lilwaukee  the  Avhole  inspection  service  is  organized  by  the 
Chamber  of  Commerce.  Wisconsin  has  provided  no  State  depart¬ 
ment  to  supervise  the  marketing  of  grain.  The  exchange  maintains  a 
committee  of  five,  designated  as  the  ^‘supervisors  of  grain  inspec¬ 
tion.”  They  control  tlie  activities  of  the  official  inspector  and 
weigher  and  hear  the  complaints  of  members.  F urther  appeal  lies  to 
the  board  of  arbitration  of  the  chamber. 

The  Illinois  State  inspection  does  not  apply  to  Peoria.  The  inspec¬ 
tion  department  was  organized  and  is  operated  by  the  Board  of 
Trade,  subject  only  to  Federal  supervision. 

In  Buffalo,  New  York  City,  Philadelphia,  Baltimore,  and  Boston 
the  commercial  body  has  charge  of  weighing  and  inspection. 

In  New  A^ork  the  Produce  Exchange  has  made  agreement  with  the 
leading  railway  trunk  lines  whereby  the  inspection  department  of  the 
exchange  has  fid!  power  to  certify  grain,  which  certificates  shall  be 
accepted  as  the  basis  of  claim  for  loss  or  damage. 

Section  6.  Sampling  by  private  agencies. 

Besides  the  sample  taken  b}^  the  State  or  oTicial  agency  (upon 
which  the  official  grade  is  issued),  samples  are  frequently  procured 
by  private  agencies  on  the  order  of  commission  men,  dealers,  elevator 
buvers,  and  other  traders.  The  commission  man  is  interested  in 
obtaining  the  best  possible  grade  for  his  consignor,  and  in  consequence 
the  best  price  procurable  for  the  grain  handled.  Hence  he  desires  an 
inspected  sample  of  the  grain  for  his  own  use,  that  he  may  be  in  a 
position  to  determine  whether  or  not  he  should  accept  the  official 
grade  or  ask  for  reinspection  or  appeal. 


Price-Current  Grain  Keportor,  Jujie  12,  1918,  p.  19. 


310 


TEPvMIITAL  GRAIN  AIARKETS  AND  EXCHANGES. 


JikcwisC;  where  the  grain  has  been  purchased  outright  from  the 
country  shipper  by  some  grain  dealer,  the  purchaser  at  the  terminal 
usuallv  sells  the  grain  within  a  short  time  to  some  terminal  elevator, 
mill,  or  exporter,  and  is  equally  interested  in  procuring  a  separate 
check  on  the  grade.  It  often  happens  that  the  buyer  also  is  interested 
in  having  a  sample.  Some  of  the  larger  mill  bujmrs  in  Minneapolis 
maintain  their  own  samplers  in  the  yards,  who  are  permitted  to  enter 
the  cars  and  take  samples  in  the  usual  way  and  seal  the  car  again 
wfth  the  firm’s  private  seal,  ^ften,  however,  a  car  is  sold  on  the 
sample  procured  for  the  seller,  which  may  be  either  "'a~commission 
man  or  a  grain  dealer. 

Sampling  in  Minneapolis. — ^Up  to.  20  years  ago  in  Minneapolis 
each  firm  had  its  own  private  sampler.  wSince  that  time  the  sampling 
has  been  done  by  two  sampling  bureaus,  directly  under  the  super¬ 
vision  of  the  chamber.  The  samples  are  taken  in  the  ^mrds  at  the 
same  time  the  car  is  opened  by  the  State  sealer  for  the  State  sampler. 
After  the  vState  sample  is  taken  the  chamber  sampler  enters  the  car, 
uses  the  same  probing  device  as  the  State  sampler,  and  takes  his 
sample  in  precisely  the  same  way.  In  no  case  is  it  permitted  that  a 
sampler  for  the  State  and  one  for  the  chamber  of  commerce  be  present 
in  the  same  car  at  the  same  time.  These  samples  taken  by  the 
chamber  samplers  are  delivered  to  the  office  of  the  grain  dealers  to 
whom  grain  is  consigned  or  sold,  to  be  used  for  trading  on  the  exchange 
floor. 

Private  samples  taken  at  the  country  points  are  boxed  and  sent 
to  Minneapolis  by  express.  Samples  taken  in  Minneapolis  yards 
arc  brought  to  the  chamber  in  automobiles.  When  the  samples  arc 
received  at  the  office  they  are  sorted  immediately  and  carried  to 
the  tables  of  the  consignees  on  the  floor  of  the  exchange.  After  sale 
the  purchaser  of  the  car  is  customarily  given  a  part  of  the  sample  in  a 
])aper  bag,  the  rest  being  retained  by  the  seller.  The  samples  of 
the  private  samplers  reach  the  table  shortly  after  9  o’clock  in  the 
morning.  The  State  grades  arc  obtained  some  time  later,  often 
two  or  three  hours,  and  they  are  then  written  on  tickets  and  placed 
in  the  pans  on  the  tables. 

The  samplers  of  each  commission  house  have  a  list  of  its  customers 
and  all  cars  consigned  to  them  arc  sampled.  Cars  consigned  to  the 
order  of  the  shipper,  and  not  to  a  commission  house,  are  handled  by 
the  sampling  company  having  the  least  cars  to  sample  that  morning, 
and  later  when  the  consignee  is  determined,  the  samples  are  exchanged 
if  necessarv. 

It  is  necessary  that  all  cars  be  sampled  as  soon  as  the}"  reach 
Minneapolis,  as  the  private  sampling  companies  are  required  to  pa}" 
the  demurrage  that  accrues  due  to  the  failure  to  inspect  promptly. 


INSPECTION  AND  WEIGHING. 


311 


1 11  Minneapolis  the  charge  made  for  sampling  has  been  30  cents  per 
car  or  bulkhead  since  September  1,  1917.  The  Minnesota  State  fee 
for  sampling  and  grading  has  been  75  cents  ($1  for  corn  and  flax). 

Practically  all  active  members  of  the  Chamber  of  Commerce  in 
Minneapolis  have  their  sampling  done  by  one  of  the  private  sampling 
companies.  Some  of  the  larger  concerns  like  the  Washburn-Crosby 
Co.,  Pillsbury  Flour  Milling  Co.,  and  others,  have  their  own 
samplers  at  some  points  and  resort  to  private  sampling  companies 
onl}^  where  the  traffic  is  light. 

Sampling  in  Duluth. ^ private  sampling  bureau  in  Duluth  is 
operated  by  the  Board  of  Trade  at  cost.  The  present  sampling  fee 
is  50  cents.  Since  the  great  volume  of  shipments  from  Duluth  is  on  a 
grade  basis  it  is  considered  important  to  have  a  check  on  the  State 
grades. 

Private  sampling  in  Chicago.^ — In  Chicago  the  Board  of. Trade 
operates  a  department  of  grain  sampling  and  seed  inspection  under 
the  control  of  the  grain  committee.  Both  State  and  Board  of  Trade 
inspectors  procure  samples  to  be  graded,  although  they  arc  rigidly 
prohibited  from  both  being  in  the  car  at  the  same  time.  Standard 
(or  type)  samples  are  made  up  by  the  Board  of  Trade  department 
at  the  beginning  of  each  season. 

S.AMPLiNG  in  St.  Louis. — The  Wilson  Sampling  Bureau,  as  official 
representative  of  the  Merchants’  Exchange  of  St.  Louis,  takes  samples 
jointly  with  the  Missouri  inspection  department.  The  two  depart¬ 
ments  send  out  an  equal  number  of  men  to  the  different  terminal  yards 
for  the  purpose  of  obtaining  a  joint  sample  of  grain  from  each  car. 
Both  private  and  State  samplers  arc  allowed  in  the  car  at  the  same 
time  in  this  jurisdiction. 

The  sampling  bureau  depends  upon  the  State  agency  for  the 
determination  of  grades.  The  Missouri  department  sends  three 
men  and  the  Wilson  bureau  three  men  to  the  Burlington  yards 
(the  heaviest  receiver),  and  each  dei)artment  sends  two  men  to  the 
Wabash  yard.  These  different  men  work  in  conjunction.  An 
employee  of  one  department  makes  the  probe  in  one  car  while  the 
employee  of  the  second  department  makes  the  probe  of  the  second 
car,  thus  alternating  from  car  to  car.  Each  sample  is  brought  to  the 
office  of  the  Missouri  inspection  department  where  it  is  graded, 
and  for  which  a  pan  ticket  is  made  out.  The  sample,  together  with* 
pan  ticket,  is  later  delivered  by  the  Wilson  Sampling  Bureau  to  the 
consignee  at  a  fee  of  35  cents  (1918).  This  expense  is  borne  entirely 
bv  the  consignee. 

In  case  the  purchaser  of  the  gi’ain  is  dissatisfied  with  the  grade  of 
the  sample,  he  may  older  the  Wilson  vSampling  Bureau  to  obtain 
another  sample.  After  the  sample  is  obtained  by  the  Wilson 


312 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


bureau  an  eye  and  nose  test''  is  made  of  it  so  as  to  decide  if  the 
grade  of  the  sample  is  equal  to  that  of  the  original  sample.  The 
chief  criterion  in  this  inspection  consists  of  weighing  the  sample; 
if  the  resultant  weight  is  one  pound  more  or  less  per  bushel  than  in 
the  case  of  the  weight  of  original  sample,  such  fact  is  reported  to 
the  purchaser,  together  with  other  observations  relating  to  the 
noticeable  attributes  of  the  grain.  The  Wilson  Sampling  Bureau 
decides,  as  a  matter  of  fact,  whether  the  grade  of  the  second  sample 
corresponds  with  that  of  the  first  sample,  and  if  it  does  not,  the 
jnirchaser  may  call  for  reinspection  by  the  Missouri  inspection 
department,  from  which  he  may  make  an  appeal  to  the  Federal 
grain  supervision  department  (provided  the  grain  is  the  subject  of 
in terstate  shipment) . 

In  other  words,  the  Missouri  department  permits  a  sampling 
company  to  procure  an  official  sample  for  the  use  of  the  consignee; 
and  to  procure  an  independent  sample  upon  further  request  and 
upon  payment  of  another  fee.  It  is  estimated  that  the  purchaser  in 
St.  Louis  calls  for  a  second  sample  in  the  case  of  about  one-third  of 
his  purchases  of  grain,  and  that  of  this  one-third,  10  per  cent  receives 
a  change  of  grade,  as  a  result  of  obtaining  and  grading  the  second 
sample. 

Sampling  in  East  St.  Louis.— Representatives  of  both  the  Wilson 
Sampling  Bureau  and  the  Illinois  inspection  department  (East  St. 
Louis)  obtain  samples  of  grain  from  cars  while  they  are  stationed  in 
the  teiminal  ^^a^rds  of  railways,  but  instead  of  securing  a  joint  sample 
as  in  the  case  of  the  Missouri  department,  each  one  obtains  a 
separate  sample.  The  Illinois  department  uses  its  sample  in  order 
to  arrive  at  the  grade  of  the  grain;  the  Wilson  bureau  takes  its 
sample  immediately  to  the  office.  Within  a  short  while  the  bureau 
communicates  with  the  Illinois  inspection  department  to  obtain 
the  grade  of  the  car  of  grain  from  which  the  sample  of  the  Wilson 
bureau  was  secured.  This  information  is  compiled  on  a  card  or 
pan  ticket  which  is  placed  in  the  sample  of  the  grain,  all  of  which 
are  delivered  to  the  consignee.  For  this  service,  also,  a  fee  of  35 
cents  is  charged  (1918),  and  is  paid  entirely  by  the  consignee.  The 
resampling  and  other  procedure  are  the  same  as  already  described 
.  itli  tlie  resampling  of  the  grain  in  St.  Louis. 

The  income  of  private  sampling  companies  is,  of  course,  derived 
from  fees  paid  by  the  members  whom  they  serve. 

Section  7.  Car  inspection. 

St.  Louis. — Lhider  both  State  and  exchange  inspection  methods 
it  is  an  obvious  duty  of  the  inspection  office  to  maintain  a  record 
of  the  condition  of  the  grain  cars  on  track  at  the  receiving  terminal. 

I  his  woik  has  been  extended  in  certain  markets  into  what  amounts 
to  a  track  inspection  department. 


IXSPPXJTTOX  AND  WEIGHING. 


313 


An  example  is  found  in  tlie  system  which  luis  heen  o])erated  by 
llie  weigliing  department  of  the  Merchants’  Exchange  of  St.  Louis. 
It  is  reported  that  the  system  was  adopted  at  the  instance  of  country 
sliippers  in  order  to  protect  them  in  preferring  claims  for  damages 
against  the  railroad.  Em])loyees  are  stationed  at  all  the  railway 
tnirds  in  this  market  where  they  conduct  ‘Hrack  inspections”  of  the 
physical  condition  of  the  grain  cars,  obtaining  seal  records,  a!id  report¬ 
ing  all  such  information  to  the  weighing  department.  When  the  car 
arrives  at  the  elevator  a  similar  inspection  is  made  by  the  ‘Alown- 
stairs”  elevator  nijin,  which  means  that  the  work  of  each  of  these 
two  men  serves  as  a  check  upon  the  otlier.  The  weighing  depart¬ 
ment  makes  a  charge  of  25  cents  for  this  service,  which  is  paid  by  the 
country  shipper. 

The  inspector  of  tlie  car  makes  out  several  reports  of  the  condition 
of  cars  examined,  one  of  which -is  made  out  immediately  and  given 
to  the  '‘light  repair  man”  stationed  at  the  "hold  track.”  This  is 
done  in  order  that  the  repah*  man  can  make  proper  and  temporary 
repairs  on  the  car  before  it  continues  its  journey  to  the  elevator  and 
thus  iirevent  a  further  loss  of  grain  from  leakage.  The  inspector 
in  his  report  to  the  repair  man  gives  the  track  number  to  show  where 
such  car  is  located  and  also  indicates  with  green  chalk  on  each  car  the 
location  of  the  different  leaks. 

Chicago. — A  car-inspection  service  was  instituted  by  the  Chicago 
Board  of  Trade  under  the  chief  weighmaster  October  5,  1915,  and 
was  even  extended  to  the  arrival  yards  of  nine  of  the  most  extensive 
inbound  grain-carrying  lines.-^  A  full  record  is  kept  of  the  inspec¬ 
tion  of  each  car,  and  it  is  the  duty  of  the  car  inspector  "to  promptly 
issue  and  deliver  an  official  certificate  to  the  consignor  or  the  consignor 
to  be  notified  as  evidence  of  the  physical  condition  in  which  he  found 
the  car,  the  condition  of  its  seals  and  whether  sealed  or  not  on  de¬ 
parture,  together  with  any  other  report  on  the  condition  of  the  car 
relative  to  its  safe  use  for  transporting  grain.” 

Section  8.  Inspection  charges  and  revenues. 

Both  State  and  exchange  inspection  offices  are  presumed  to  be 
self-supporting.  The  two  sources  of  income  are  the  inspection  fees 
and  the  sale  of  grain  taken  in  samples.  The  latter  is,  of  course,  a 
meager  revenue  except  on  the  large  exchanges. 

Under  statutory  inspection  the  fees  are  usually  fixed  by  the  State 
utilities  or  warehouse  commission 

-3 1915  Annual  Report,  p.  34. 

For  example,  in  Missouri  the  chief  inspector  “is  hereby  authorized  and  directed  to  collect  such  charges 
for  the  inspection  and  weighing  of  grain  as  may  be  established  from  time  to  time  by  the  Warehouse  Com¬ 
mission,  and  all  other  moneys  that  may  become  due  on  account  of  inspection  and  weighing  services  in  the 
department,  and  deposit  the  same  with  the  State  treasm’er  to  the  credit  of  the  Missouri  State  Grain  Inspec- 
tion  Department,  and  only  to  be  drawn  out  by  checks,  to  be  countersigned  by  the  Warehouse  Commis¬ 
sioner,  for  the  payment  ofsalaries  and  other  expenses  of  the  department  upon  pay  rolls  and  bills  of  expense 
approved  by  said  commissioner  and  the  State  auditor.’'  (Report  of  Warehouse  Commissioner  of  Mis¬ 
souri,  1913,  p.  255.) 


314  TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 

Under  exchange  inspection  the  grain  committee  (or  inspection 
committee)  is  generally  authorized  to  control  the  charges  for  in¬ 
spection.-^ 

In  Chicago  the  inspection  fees  arc  fixed  by  the  Illinois  Public  Utili¬ 
ties  Commission  at  a  rate  calculated  to  cover  the  budget  of  the  depart¬ 
ment  without  profit  to  the  State. 

The  Minnesota  inspection  fees  for  Minneapolis  have  varied  some¬ 
what  according  to  the  volume  of  grain  received  at  the  market  and 
the  operation  costs  of  the  department,  as  the  record  shows: 


Wheat 

andcoarse 

grains. 

Flax  and 
corn. 

Aiurnct'  100*1^  Ancrnsit  lOOT  . . . . . . 

Cents. 

20 

25 

35 

15 

15 

35 

25 

40 

50 

Cents. 

75 

75 

75 

75 

50 

75 

75 

75 

Sent  1  1909  Sent  1  1910  . 

Oct  10  1910-Julv  1  1913  . 

Feb  1  1913  Nov  1,  1913  . 

Nov  1  1913- Aue’  1.  1914 . 

All"  1  1914  Oct  1  1915  . 

Oct  1  1915-Oct  1.  191& . . 

Oct  1  1916  Dec.  1. 1916  . 

Dec  1  1916-Oct.  1.  1917 . 

Below  is  given  a  financial  statement  showing  receipts,  disbursc- 
incnts,  the  gain  and  the  loss  for  the  fiscal  years  ending  June  30, 1916, 
and  June  30,  1917.  In  discussing  this  matter  the  chief  grain  inspector 
stated  that  inspection  under  the  United  States  grain  standards  act 
takes  more  time  and  increases  tlie  cost  of  the  service.  Hence  the  de¬ 
ficit  for  1917. 

25  E.  g.,  Rules  oltlie  Comuacrcial  Exchange  of  Philadelpliia,  charges  for  inspection: 

Sec.  11.  The  grain  committee  shall  have  power  to  alter  the  charges  for  inspection  of  grain  from  time 
to  time,  when  it  shall  deem  such  change  advisable,  but  notice  of  any  change,  whether  to  high  or  lower 
charges,  must  be  posted  upon  the  bulletin  board  of  the  exchange  at  least  30  days  before  the  altered  charges 
become  operative. 

Sec.  12.  The  grain  committee  shall,  at  its  first  regular  meeting  or  at  a  special  meeting  called  lor  the  pur¬ 
pose,  fix  the  charges  for  inspection  for  such  period  as  it  secs  fit,  but  in  no  event  for  a  period  longer  than  its 
tenine  of  office.  The  charges  fixed  by  the  grain  committee  shall  remain  in  force  until  the  committee  fixing 
them  or  a  succeeding  committee  shall  change  them. 

Sec.  13.  The  charges  for  inspection  of  grain  shall  be  alien  upon  such  grain  and  may, in  the  judgment  of 
the  grain  committee,  be  treated  as  “advance  charges,  ”  and  payment  of  same  may  be  required  of  the  carrier 
or  warehousemair  in  whose  possession  the  grain  is  at  the  time  of  such  inspection. 

Sec.  14.  The  inspection  and  sampling  charges  on  grain  sold  on  Philadelphia  grades  shall  be  paid  by  the 
seller  and  on  other  inspections  by  the  buyer. 

Sec.  15.  All  charges  for  inspection  shall  bo  collected  by  the  secretary  of  the  commercial  exchange  not  less 
frequently  than  once  a  month  and  shall  be  promptly  paid  over  to  the  treasury  of  the  exchange,  who  shall 
keep  t  hem  in  a  separate  fund  which  shall  be  known  as  the  “grain  inspection  fund.”  Salaries  and  other 
expenses  connected  with  the  inspection  department  shall  be  audited  by  the  grain  committee  and  paid  - 
by  the  treasurer  from  said  “grain  inspect  ion  fund”  under  direction  of  the  finance  committee. 

Sec.  K).  Neither  the  entire  “grain  inspection  fund”  nor  any  portion  thereof  shall  be  appropriated 
for  any  other  pui’pose  than  in  the  maintenance  and  promotion  of  the  inspection  department,  nor  shall  be 
transferred  to  a  reserve  or  other  special  fimd  nor  to  the  general  fund  of  the  exchange,  except  by  the  board 
of  directors  and  with  the  approval  of  the  grain  and  finance  committees;  but  the  board  may  with  the 
approval  ofthc  aforesaid  committees  transfer  amoimts  of  money  frvom  the  “grain  inspection  fund”  to  the 
genera!  fund  of  the  exchange,  to  carry  out  recommended  purpnsoi  in  the  conduct  of  the  affairs  of  the  ex¬ 
change.  (Annual  Report,  Commercial  Exchange,  Fhi’adclphia,  1917.) 


INSPECTION  AND  WEIGHING. 


315 


Financial  statcmenL,  Chicago. 


Receipts. 

Disburse¬ 

ments. 

Gain. 

1^035. 

.Tilly  1,  1915,  to  June  30,  1916,  inclusive . 

$193, 137.  85 
164,677.47 

$188,967.85 
194, 200.  80 

M,  170. 00 

July  1,  1916’  to  June  30^  1917^  inclusive . 

$29, 523.  3  5 

Likewise  in  Minneapolis  a  recent  marked  increase  in  inspection 
cliarges  is  accounted  for  b}^  the  general  increased  cost  of  labor  and 
the  larger  staff  necessary  to  inspect  grain  under  the  Lhiited  States 
grain  standards  act  requirements. 


Statement  showing  the  earnings  and  expenses,  profit  and  loss,  by  departments,  at 

Minyicapolis. 


CROP  YEAR  ENDING  AUG.  31,  1915. 


Earnirigs. 

Expenses. 

Gain. 

Loss. 

Inspection . 

$141, 164. 82 
111,6.57. 64 

$114, 184.12 
126,311.94 
11,252.31 

$26,980.70 

Weighing. . . . . 

$14,654.30 

11,252.31 

-\ppeal.  ."1 . 

CROP  YEAR  ENDING  AUG.  31,  191G. 


Inspection 

Weighing, 

Appeal.... 


$170,851. 18 

$134, 215. 31 

$36,635.87 

103,910.29 

146,028.82 

3.50 

11,130. 32 

$42, 118. 53 
11,126.  82 


The  fees  given  in  Table  75  (p.  270)  are  the  charges  for  the  regular 
first  inspection.  In  case  of  reinspection  this  is  done  without  charge 
if  the  grade  is  raised  or  lowered,  and  a  charge  is  generally  made  in 
case  the  grade  is  sustained. 

Louisville  offers  an  exception  to  the  rule  in  that  the  department  is 
not  self-supporting,  and  depends  upon  assessments  made  upon  grain 
firms  to  make  up  the  deficit.  Tliis  market,  however,  does  not  com¬ 
mand  a  large  volume  of  shipments,  and  the  Board  of  Trade  inspection 
is  virtuallv  for  the  benefit  of  six  grain  firms  and  two  milling  com- 
panics.  * 

Section  9.  Reinspection  and  appeals. 

At  least  two  appeals  are  open  after  the  initial  grade  has  been  taken 
on  a  car  of  grain.  Where  State  inspection  exists  reinspection  may  be 
obtained  from  a  supervising  inspector  or  the  chief  ins^iector,  with 
further  appeal  to  a  State  board  constituted  for  that  purpose.  Under 
exchange  inspection  similar  reinspection  is  provided,  and  appeal  lies 
to  the  appropriate  committee.  In  any  case,  when  grain  shipped  in 
interstate  commerce  has  been  inspected  by  an  inspector  licensed  by 
the  Federal  Government,  appeal  may  be  had  to  the  office  of  Federal 
grain  supervision  for  that  district. 


316  TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 

T]ie  inspection  services  of  all  the  markets  are  in  such  a  state  of  flux 
that  anything  more  than  a  bare  outline  of  the  facilities  provided 
would  be  unsatisfactory.  For  technical  discussions  of  the  adminis¬ 
tration  of  standard  grades  reference  should  be  had  to  the  publications 
of  the  Bureau  of  Markets,  Department  of  Agriculture. 

Keinspection  is  generally  instituted  on  written  application  to  a 
supervising  inspector  within  a  stated  period  after  the  original  inspec¬ 
tion,  upon  the  deposit  of  an  amount  equal  to  the  reinspection  fee. 

The  following  table  shows  the  results  of  appeals  taken  to  the  State 
board  of  grain  appeals  at  Minneapolis  during  1914-15  and  1915-16: 


Appeals. 


1914-15 

1915-16 

Number. 

Per  cent. 

Number. 

Per  cent. 

Total  cars  inspected . 

227,208 

325,665 

. io.T 

Per  cent  of  cars  appealed . 

7.3 

Number  of  cars  appealed . 

16, 703 
1,172 
331 
681 
2,183 
14,519 

33,2i2 
2,580 
1,033 
899 
4,509 
28, 700 

Raised  to  higher  grade . 

7.02 
1.98 
4.07 
13.07 
86. 93 

7.17 
3.  71 
2. 71 
13. 59 
86.  41 

G  rade  lowered . 

nock'aee  changed . 

Total  chances . 

Grades  sustained . 

In  Chicago  reinspection  is  done  under  the  direction  of  one  of  the 
supervising  inspectors.  Below  is  given  a  record  of  the  calls  for  rein¬ 
spection  during  the  years  1915,  1916,  and  1917,  showing  the  requests 
that  were  canceied,  the  cases  in  which  the  grade  was  maintained,  and 
the  cases  in  which  the  grade  was  changed. 


Rcinspection  (cars). 


Called. 

Requests 

canceled. 

Sus¬ 

tained. 

Changed. 

July  1, 1914,  to  June 30, 1915,  inclusive . 

3,975 
3, 161 
1,464 

22 

91 

35 

2,176 

1,587 

641 

1,777 

1,483 

788 

July  1.  1915,  to  June  30, 1916,  inclusive . 

July  1, 1916,  to  Juno  30,  1917,  inclusive . 

.. 

If  the  grade  as  determined  from  reinspection  is  unsatisfactory-  to 
either  party  concerned,  an  appeal  may  be  taken  to  the  Illinois  S^te 
Board  of  Grain  Appeals.  The  party  requesting  the  appeal  signs^ a 
formal  application.  The  board  is  then  called  together  by  the  chief 
grain  inspector.  If  there  is  reason  to  believe  that  the  sample  already 
taken  is  not  representative,  another  sample  is  taken  by  some  regular 
employee  of  the  inspection  department.  The  board  reviews  the 
sample  and  fixes  the  grade.  Any  interested  party  may  be  present 
during  the  time  the  review  is  being  taken,  but  he  is  forbidden  to 
make  any  suggestions  with  reference  to  the  grade.  If  the  grade  is 
sustained,  the  deposit  fee  of  $5  is  retained.  If  the  grade  is  changed 
this  amount  is  reminded. 


INSPECTION  AND  WEIGHING. 


317 


On  grain  inspected  under  the  Federal  grain  standards  act,  appeal 
may  be  taken  to  a  Federal  grain  supervision  office  upon  deposit  of 
a  sum  sufficient  to  cover  the  fees  and  charges.  The  schedule  of  fees 
announced  February  24,  1919,  was  as  follows: 

For  ])ulk  grain  in  carload  lots,  per  car. 

t"or  bulk  or  sacked  grain  in  wagon  lots,  $1  per  wagon. 

For  bulk  grain  other  than  in  carload  or  wagon  lots,  $:3  per  2,000  bushels  or  fraction 
thereof,  not  to  exceed  $50  for  any  one  inspection  lot  or  parcel. 

h'or  sacked'grain  other  than  in  wagon  lots,  1  cent  per  sack. 

Such  further  charges  may  be  made  for  telegrams,  express,  parcel  ]308t,  registry  fees, 
traveling  expenses,  and  other  items  paid  or  incurred  by  the  Department  of  Agricul¬ 
ture  on  account  of  a  dispute,  or  an  appeal  taken  from  an  inspection  made  at  a  point 
where  no  licensed  inspector  is  located,  and  for  oral  hearings,  as  will  reimburse  the 
department;  all  charges  above  the  minimum,  and  all  of  such  additional  items,  to  be 
determined  in  each  case  by  the  Secretary  of'Agricidture. 

Appeal  must  be  taken  (a)  before  the  grain  leaves  the  place  where 
the  inspection  appealed  from  was  made;  (b)' before  the  identity  of 
tlie  grain  has  been  lost;  and  (c)  as  promptly  as  possible,  but  in  no 
event  later  than  the  close  of  business  on  the  second  business  day 
following  the  date  the  grading  was  performed  as  shown  by  the  record. 

A  report  that  inspection  and  grading  by  the  Omaha  inspection  was 
loose  and  arbitrarily  high  led  to  the  following  stud}^  of  all  the  super¬ 
visions  and  appeals  made  by  the  Omaha  grain  supervisors  from  Octo¬ 
ber  1,  1917,  to  June  29,  1918,  inclusive.  There  were  1,047  cars  super¬ 
vised  and  appealed  of  which  285  were  wheat  and  762  corn.  The  re¬ 
sult  of  the  supervision  is  as  follows: 


Cars  arriving  in  Omaha. 

Cars  shipped  out. 

Sustained. 

Raised. 

Lowered. 

Sustained. 

Raised. 

Lowered. 

AVheat; 

Niiml)pr  of  cars . 

104 

s 

98 

28 

6 

31 

Per  cent . 

49 

4 

47 

43 

9 

48 

Corn; 

Number  of  cars . 

275 

SO 

79 

154 

17 

157 

Percent . 

63 

18.5 

18.5 

47 

6 

48 

The  table  shows  that  on -over  1,000  supervisions  and  appeals,  the 
results  foi‘  wheat  inspected  in  and  out  and  corn  inspected  out  of 
Omaha,  the  percentages  are  strikingly  similar  and  show  a  general 
tendency  to  grade  all  grain  too  easily.  In  the  case  of  incoming  corn 
the  inspection  was  much  more  efficient,  as  63  per  cent  of  inspections 
were  upheld  by  the  Federal  grain  supervisors  and  only  37  per  cent  were 
changed;  18|  per  cent  were  lowered,  while  18^  per  cent  were  raised. 

This  analysis  of  the  Federal  grain  supervisors’  records  shows  no 
])ositive  results.  The  new  system  of  Federal  grading  has  been  in 
operation  only  a  short  time  and  it  is  to  be  expected  that  the  inspec¬ 
tion  department  in  the  various  markets  would  take  some  time  before 
meeting  the  Government  standards.  One  would  expect  to  find  that 


318 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


the  grade  would  be  raised  on  a  majority  of  appeals  for  grain  coming 
into  the  market.  It  would  not  be  appealed  unless  the  shipper  believed 
that  the  grade  was  too  low,  and  for  this  reason  a  larger  percentage 
of  the  appeals  should  show  that  the  grade  was  raised.  The  exact  opjx)- 
site  is  true  in  grading  grain  which  is  shippe  dout.  Neither  one  of  these 
results  are  strikingly  shown  in  the  study  and  one  would  be  inclined 
to  believe  that  the  inspection  department  at  Om.aha  is  fairly  efficient. 

Peoria  inspection. — similar  experiment  was  made  in  Peoria. 
Tiiis  record  was  taken  for  the  period  f)f  January  1,  1917,  to  January 
30,  1918.  During  this  period  there  were  2,351  supervisions  and  ap- 
]ieals,  of  which  2,264  were  for  corn  and  87  for  wheat.  The  result  of 
the  supervision  is  as  follows: 


Cars  arriving  in  P 

coria. 

’ 

Cars  shipped  out. 

Sustained. 

Raised. 

Lowered. 

Sustained. 

Raised. 

Lowered. 

Wheat: 

Number  of  cars . 

51 

10 

12 

11 

3 

Per  cent . 

09.9 

1.3.7 

16.4 

78.6 

21. 4 

Corn: 

Number  of  cars . 

1.659 

114 

172 

249 

18 

52 

Per  cent . 

85.4 

5.8 

8.8 

78 

5.7 

16.3 

This  table  shows  a  very  high  efficiency  for  the  Peoria  inspection 
department,  since  over  85  per  cent  of  the  original  grades  on  corn  com¬ 
ing  into  this  market  was  sustained  by  Federal  supervisors,  and  78 
])or  cent  of  corn  sent  out  was  sustained/  Such  a  very  small  quantity 
of  wheat  was  handled  that  the  percentages  as  appl3'ing  to  wheat  have 
practically  no  significance.  It  will  be  noted  that  most  of  the  super¬ 
visions  were  given  on  incoming  grain.  This  is  accounted  for  by  the 
fact  that  during  the  past  3"ear  probably  75  per  cent  of  all  grains 
received  in  Peoria  was  consumed.  One  of  the  reasons  That  such  a 
liigh  percentage  of  grades  was  sustained  may  ])c  due  to  the  fact  that 
there  was  so  much  sample  corn  received  in  this  market,  sample  grade 
being  usually  so  far  below  the  line  that  it  would  not  be  raised  and 
could  not  be  lowered. 

In  Indianapolis  there  were  187  supervisions  of  wheat  and  1,229  of 
corn  during  the  period  Januaiy  1,  1917,  to  July  1,  1918,  inclusive. 
The  record  was  as  follows: 


Cars  arriving  in  Indianapolis. 

Cars  shipped  out  of  Indianapolis. 

Sustained. 

Raised. 

Lowered. 

Sustained. 

Raised. 

Lowered. 

Wheat: 

Number  of  cars . 

127 

12 

13 

19 

1 

15 

Per  cent . 

83.5 

8 

•  8.5 

54.4 

2.8 

42.8 

Corn: 

Number  of  cars . 

657 

72 

71 

292 

25 

112 

Per  cent . 

82 

9 

9 

68.1 

5.8 

26.1 

INSPECTION  AND  WEIGHING, 


319 


Section  10.  Federal  grades. 

Whatever  the  effect  of  the  Federal  grades  upon  inspection  costs 
and  upon  the  country  2:>rices  there  seems  to  be  no  question  that  they 
Jiavc  instituted  a  nation-wide  uniformity  which  has  greatly  benefited 
the  mill  buyers. 

The  receiving  interests  at  Buffalo  nov/  state  that  they  have  no 
reluctance  in  buying  wheat  by  grades,  whereas  prior  to  the  intro¬ 
duction  of  these  grades  ^^tlic  grade  placed  by  western  inspection 
vs'ould  be  below  the  standard  used  in  the  East.’' 

Section  11.  Weighing. 

Wheat  is  weighed  by  State  and  exchange  officials  for  two  purposes: 
(1)  At  the  inspection  laboratory  as  a  factor  in  determining  the  grade  / 
aiid  dockage;  (2)  at  the  receiving  elevator  or  on  track  scales  to  check  ^ 
the  quantity  of  the  shipment.  The  latter  function  is  that  of  the 
oflicial  weighing  departments  in  the  terminal  markets.  No  Federal 
supervision  exists  with  reference  to  weighing. 

State  weighing  departments  arc  coordinate  with  State  inspection 
departments  where  such  exist,  except  in  Illinois  wlicre  by  long¬ 
standing  agreement  the  weighing  of  grain  in  Chicago  and  East  St. 
Louis  has  been  delegated  to  the  commercial  bodies  in  those  markets. 
(See  p.  299.)  Weighing  b}^  a  State  department  offers  the  possible 
advantage  of  a  Statc-wdde  rather  than  a  wholly  local  service.  The 
Minnesota  Aveighing  department,  for  cxam2:>lo,  Avill  maintain  weighers 
at  country  stations  for  any  elevator  Avhere  tlie  volume  handled  is 
large  enough  to  warrant  it.-*”*  - 

Grain  is  officially  weighed  either  on  a  track  scale  while  in  the  car 
or  in  a  hopjief  scale  in  the  ciqoola  of  an  elevator.  Scale  experts 
differ  as  to  the  comi^aratiA^e  merits  of  track  and  hopjier  scales.  The 
limitations  of  yard  si)acc  frequently  j^rohibit  track  weighing  and  the 
tendency  in  the  trade  is  toward  a  greater  use  of  the  hopper  scale. 
It  is  reported  that  out  of  72  Aveighing  stations  su23erAdsed  at  Minne¬ 
apolis,  45  are  cqui2:>ped  Avitli  both  hoj^per  and  track  scales  and  19 
use  track  scales  entireW.  Iiop])er  scales  arc  considered  the  more 
accurate  in  Kansas  City. 

A  iieAver  type  of  basement  hoj^per  scale  has  been  installed  by  the 
Washburn-Crosby  Co.,  of  Minneapolis,  AAfficreby  the  grain  is  run  into 
a  hopper  beneath  the  track  and  Aveighed  before  being  clcA^ated. 
This,  of  course,  preA^ents  Avastage  from  the  holding  back  or  diA^ersion 
of  the  grain  in  the  course  of  elevation. 

Tkack-scale  operations. — For  track  A\mghing  cars  are  handled 
in  groups  or  strings  in  the  folloAAung  manner: 

1.  The  scales  are  examined  by  the  weigher  and  balanced. 

2.  The  car  is  detached  and  “spotted.” 


“  See  p.  321. 


320 


TEIIMINAI.  GRAIN  MARKETS  AND  EXCHANGES. 

3.  Pile  weigher  then  determineg  the  weight  wliich  is  recorded  by 
Jiim  and  by  the  weigher  of  the  receiving  house. 

4.  The  car  is  emptied  and  weighed  again  to  determine  the  tare. 

5.  llie  taro  is  recorded  and  deduction  made  to  determine  the 
Aveigjit  of  the  load. 

Iypical  operation  of  cupola  scale. — The  operation  of  a  hop¬ 
per  scale  in  tlie  cupola  is  as  follows: 

1.  rile  car  is  unloaded  (often  by  use  of  power  shovels)  into  the 
pit  beneath  the  track. 

2.  The  grain  is  elevated  directly  into  the  garner  above  the  scale. 
^3.  The  supervising  weigher  sends  up  the  car  ticket  to  the  weigher 
in  the  cupola. 

4.  The  scale  is  balanced  and  the  scale  hopper  valve  closed. 

5.  Ihe  grain  is  then  drawn  down  from  the  garner  into  the  hopper 
and  weighed. 

6.  rile  weight  is  entered  in  the  weigher’s  book  and  registered  on  a 
card  (frequently  by  means  of  the  type  registering  beam). 

Weights  to  carriers. — In  Chicago  weights  on  all  grain  sold  on 
board  of  trade  weiglits  (95  per  cent  of  the  grain  sold  in  the  terminal) 
are  furnished  also  by  the  weighing  department  to  the  respective 
caiiieis  at  the  rate  of  5  cents  per  car.  Since  1899  these  weights 
liave  been  accepted  as  the  basis  for  freiglit  bills  by  all  the  railroads 
entering  Chicago. 

In  all  cases  the  weiglits  furnished  the  railroads  are  the  same  as 
those  shown  on  the  regular  weiglit  certilicates  issued  by  the  depart¬ 
ment.  The  railroads  are  willing  to  pay  for  this  service  rather  than 
weigli  the  cars  over  their  own  equipment,  which  they  would  be  re¬ 
quired  to  maintain,  and  the  practice  would  require  much  yard  room 
foi  the  necessary  svitcliing  incident  to  weighing  all  cars  over  rail- 
j'oad-track  scales.  The  present  arrangement  facilitates  dispatch  in 
liandling  the  cars,  makes  all  freight  bills  for  grain  received  available 
for  settlement  within  24  hours  after  the  grrin  is  unloaded. 

Weighing  records. — In  Chicago  weights  taken  are  reported 
each  day  by  each  weigher  to  the  weighmaster  on  a  special  form  pro¬ 
vided  for  the  purpose.  The  certificate  of  w-  i  dit  issued  in  the  weigh¬ 
master  s  office  is  made  out  on  the  basis  of  t-iis  daily  report  from  the 
weighers.  These  records  from  the  individu  d  weigliers  are  filed  as 
received  from  the  different  houses,  each  house  separately.  These 
files  are  kept  by  the  department  for  eight  years  before  they  are 
destroyed. 

Weight  certificates  (Chicago). — Weights  covering  grain  re¬ 
ceived  aie  entered  on  white  certificates,  while  those  covering  grain 
shipped  out  of  this  market  are  recorded  on  yellow  forms.  All  cer¬ 
tilicates  are  made  out  at  the  earliest  practicable  hour  in  the  day 
following  the  reports  li-om  the  different  weighers  sent  in  on  the 


INSPECTION  AND  WEIGHING. 


321 


afternoon  of  tlie  day  before.  A  box  is  provided  for  each  member  of 
tlie  grain  trade  where  the  weight  certificates  covering  grain  in  which 
each  member  of  the  trade  is  interested  are  made  available  to  mes¬ 
sengers  who  are  sent  for  tliem.  Some  few  are  mailed  to  parties  who 
have  no  down-town  office. 

Most  of  the  scales  used  by  the  weighing  department  are  equipped 
with  a  mechanical  self-registering  device.  Each  weigher  who  weighs 
grain  over  scales  equipped  with  this  mechanism  is  required  by  the 
Board  of  Trade  weighmaster  to  record  first  in  his  tally  book  the 
record  shown  by  the  scale  beam.  The  weigher  then  checks  his  tally 
book  with  the  scale  ticket  made  by  the  self-registering  device  to 
see  that  the  scale  beam  record  agrees  with  the  ticket.  The  weigher’s 
daily  report  is  made  up  from  his  tally  book,  and  is  checked  back 
before  it  is  mailed  on  to  the  weighmaster.  No  first  weights  are 
allowed  to  be  recorded  on  any  other  record  than  the  prescribed  tally 
book.  In  the  case  of  scales  not  equipped  with  the  self-registering 
device,  the  first  record  put  in  the  tally  book  is  taken  from  the 
weights  used  in  the  weighing  operation  plus  the  reading  of  the  scale 
beam.  This  recorded  weight  is  then  checked  by  examination  of  the 
exact  denominations  of  weights  used  in  the  draft  together  with  the 
scale-beam  reading.  This  precaution  is  taken  to  reduce  error  to  the 
minimum. 

Scale  inspection. — In  Minneapolis  and  Chicago  the  weighing 
departments  offer  a  scale  inspection  service  to  the  trade.  A  scale 
so  tested  is  sealed  against  willful  or  accidental  changing  of  the  scale 
leverage. 

The  Chicago  Board  of  Trade  weighing  department  is  called  upon 
frequently  to  test  the  accuracy  of  scales  at  country  points  tributary 
to  Chicago.  The  following  table  shows  the  number  of  these  scales 
tested  by  Chicago  Board  of  Trade  experts  during  the  four  years 
1913-1916,  inclusive: 


Year. 

Number 

tested. 

Number 

correct. 

Number 

incorrect. 

Per  cent 
correct. 

1913  . . 

141 

57 

84 

40 

1914  . 

74 

28 

46 

38 

1915  . 

51 

14 

37 

28 

1916  . 

55 

20 

35 

38 

Service  at  country  stations. — ^In  order  to  avoid  congestion 
at  Minneapolis  and  Duluth  the  Minnesota  weighing  department  will 
maintain  weighers  at  country  stations  for  any  elevator  where  the 
volume  handled  is  large  enough  to  warrant  it.  Grain  handling 
firms  outside  the  terminal  markets  are  afforded  the  benefit  of  State 
supervision  of  weights.  State  weighers  are  now'  _ maintained  at 
Appleton,  Faribault,  Hastings,  Janesville,  Kastota,  Little  Falls, 
168693°— 20 - 21 


322 


TEKMIK-AL  GRAIN  MARKETS  AND  EXCHANGES. 


Montgomery,  Morristown,  New  Kiciiinond,  Waseca,  New  Ulm,  Red 
Wing,  and  Wabasha,  in  Minnesota;  also  at  Davenport,  Iowa,  and 
Valley  Cit}',  N.  Dak.  For  weighing  flax  a  Minnesota  State  weigher 
is  now  stationed  at  Portland,  Greg.,  and  at  Davenport,  Iowa. 

Section  12.  Personnel  of  weighing  departments. 

Minnesota. — Under  the  Minnesota  Railroad  and  Warehouse 
Commission  the  policy  of  appointment  and  promotion  on  merit 
obtains  in  the  weighing  department  just  as  it  does  in  the  inspection 
department.  The  present  State  weighmaster  has  been  identified 
with  the  department  for  17  years,  and  the  chief  clerk  has  .been  in 
the  service  for  14  years.  Permanent  appointments  are  made  from 
the  ranks  of  helpers.  A  policy  of  line  promotion  is  followed.  The 
schedule  of  employees  conforms  generally  to  the  following  schedule: 

In  Minneapolis;  1  weighmaster,  1  chief  clerk,  103  weighers,  5  clerks. 

Outside  [Minneapolis:  22  State  weighers,  4  State  weighers  and  inspectors. 

Chicago  Board  of  Trade. — Appointment  and  promotion  on  a 
merit  basis  likewise  exists  in  Chicago,  where  the  Board  of  Trade  by 
agreement  with  the  State  of  Illinois  and  with  the  general  consent  of 
tlie  grain  trade  takes  jurisdiction  over  all  weighing  in  the  market. 

Tile  weighmaster  has  served  the  department  in  that  capacity  for 
20  years,  and  his  assistant  has  been  in  the  service  for  nearly  30  years. 
Tiieir  salaries  are,  respectively,  $12,000  and  $4,500. 

The  other  positions  are,  4  supervisors— 2  over  Chicago  districts,  1  over  South  Chi¬ 
cago,  1  over  inspection  of  condition  of  cars  in  yards— 1  special  agent;  1  esthnator 
with  3  helpers— estimate  grain  in  both  regular  and  custodian  houses;  110  weighers, 
scale  inspectors,  car  inspectors  and  clerks.  (Jan.  1,  1917). 


CirAPTER  VII. 

QUOTATION  SERVICES  OF  THE  EXCHANGES. 

Ix  GEXERAL.^ — A  fulictioii  of  primary  importance  to  any  exchange 
is  that  of  collecting,  recording,  and  distributing  quotations  and  market 
information.  The  cash  and  future  cpiotation  services  afforded  to 
membei’s  and  outside  customers  focuses  the  attention  of  tradem  on 
the  larger  exchanges;  and,  aside  from  providing  a  trading  floor  for 
buvers  and  sellers,  the  dissemintition  of  market  inf ormation  is  the  most 
conspicuous  service  of  exchanges  to  the  trade.  The  quotation  serv¬ 
ice  is  of  especial  concern  to  grain  merchants  who  are  not  exchange 
members.  The  exchange  member  may,  with  little  difficulty,  ascer¬ 
tain  the  prcvaihng  prices  m  the  trading  haU;  but  a  country  shipper 
(e.  g.,  in  North  Dakota)  must  rely  on  the  published  information  sent 
him  from  the  terminal  market.  Whether  he  relies  upon  daily  price 
cards,  price  currents,  the  market  letters  of  commission  men,  or  other 
sources,  he  is  none  the  less  dependent  upon  the  exchange  price  record¬ 
ing  agencies.  (Sec  Vol.  I.) 

Cash  quotations. — Every  active  grain  exchange  issues  prices  once 
or  twice  each  business  day,  representing  actual  sales  or  estimated  cash 
values.  These  quotations  are  by  grade  and  frequently  indicate  any 
special  conditions  which  have  influenced  the  price.  Sinctrthevrestern 
primary  market  prices  govern  trading  at  the  secondary  points  to  a  large 
extent,  this  discussion  will  include  only  the  primary  centos.  The  de¬ 
pendence  of  the  secondary  markets  upon  prices  at  primary  centers  is 
indicated  in  the  method  of  determining  quotations  in  New  York.  The 
New  York  Produce  Exchange  has  for  a  number  of  years  published  in  its 
annual  statistical  report  daily  prices  of  grain  in  New  Tork  City. 
These  prices,  except  in  the  case  of  oats,  do  not  generally  represent  the 
actual  price  at  which  transactions  were  made,  but  are  made  up  from 
Buffalo  prices  by  adding,  an  arbitrary  figure  to  cover  freight  and 
terminal  charges  to  New  York.  The  Produce  Exchange  has  no 
quotation  committee,  and  it  is  reported  that  the  only  object  in  hav¬ 
ing  daily  prices  is  to  determine  the  commercial  value  of  grain  for  the 
purposes  of  setthng  disputes  between  buyers  andsellem.  The  quota¬ 
tions  of  prices  on  grain  in  New  York  City  published  by  the  West¬ 
ern  Union  Telegraph  Co.  are  usually  made  on  a  Chicago  basis  plus  the 
additional  charges  for  bringing  the  grain  to  New  Tork. 

Grains  quoted  in  cash  marhets. — ^ Wheat,  corn,  oats,  rye,  and  bar¬ 
ley  are  all  officially  quoted  at  Chicago,  Milwaukee,  Minneapolis, 
Duluth,  Kansas  City,  St.  Louis,  Omaha,  and  Peoria,  and  the  grades 

323 


324  TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 

quoted  vary  with  the  location  of  the  market.  Obviously  there  will 
be  few  sales  of  No.  1  northern  spring  wheat  at  St.  Louis/ and  No. 1 
red  winter  does  not  appear  in  Duluth. 

An  effort  is  made  in  the  primary  markets  to  record  the  actual  cash 
sales/  stating  number  of  cars  sold,  grade,  and  price.  The  following 
extract  from  St.  Louis  wheat  quotations ^  will  illustrate: 

Sales  on  track,  local  weights,  unless  otherwise  noted:  No.  2,  2  cars  61-lb.  test,  at$2.02 
one  this  side  local  one  del.  E.  side  dest.,  1  car  GO^-lb.  soft,  at  $2.01  this  side,  1  car  60-lb 
soft,  at  $2  this  side  dest.,  1  car  weevil  bored  at  $1.97  this  side.  No.  3,  1  car  584-lb 
te;d  at  $1.97  del.  this  side,  2  cars  57^-lb.,  at  $1.96^  this  side,  1  car  do,  at  $1.96  do,  1  car 
56-lb.  test,  at  $1.95  do.,  2  cars  do.,  at  $1.92,  one  del.  this  side  local,  one  east  side  dest., 
1  car  unsound,  at  $1.90  this  side.  No.  4,  2  cars  badly  mow  burnt,  at  $1.75  del.  this  side, 
1  car  do.,  at  $1.70  do.  Sample  grade,  1  car  53J-lb.  bleached  and  damaged,  at  $1.76, 
1  car  oniony  and  skin  burnt,  at  $L.89. 

With  the  exception  of  Cliicago  the  exchanges  in  the  primary  markets 
depend  upon  trade  publications  to  quote  all  cash  sales.  At  Chicago 
the  official  cash  quotations  are  transmitted  over  the  wires  by  the  Cleve¬ 
land  Telegraph  Co.  at  12  noon  and  at  the  close  of  the  market  at  1.15. 
The  quotations  represent  the  actual  high,  low,  and  closing  prices  at 
which  sales  were  transacted. 

In  vSt.  Louis  and  Indianapolis  the  official  cash  closing  price  represents 
the  last  actual  sale,  but  in  Minneapolis  and  Duluth  the  official  ‘‘  close” 
may  or  may  not  represent  actual  sales.  In  Duluth  the  buying 
(mostly  in  the  hands  of  terminal  elevator  operators)  is  so  concen¬ 
trated  that  these  buyers  may  be  easily  canvassed  and  the  closing 
price  quotation  is  the  highest  price  any  one  of  the  large  operators 
is  willing  to  pay.  In  Minneapohs,  on  the  other  hand,  the  ‘‘close”  is 
determined  by  closing  price  committees,  and  represents  their 
opinion  of  the  value  of  grain  at  the  termination  of  the  trading  session. 
The  closing  price  quotations  of  these  two  markets  are,  therefore,  not 
reliable  for  comparative  purposes. 

Nor  do  the  other  quotations  afford  any  adequate  opportunity  for  a 
country  shipper  to  contrast  the  prices  obtaining  on  these  two  ex¬ 
changes.  In  Minneapolis  it  is  required  that  all  original  sales,  though' 
not  resales,  be  reported,  while  in  Duluth  no  such  regulation  exists. 
It  is  claimed  to  be  customary  in  Duluth  for  sellers  to  report  aU  prices 
at  which  transactions  were  made,  but  not  aU  cars  of  grain  at  these 
prices.  That  is,  if  a  sale  ,of  two  cars  of  grain  at  98  cents  has  been 
recorded,  and  subsequently  10  more  cars  are  sold  at  the  same  price, 
the  latter  sale,  more  often  than  not,  is  not  reported.  As  a  result  any 
average  of  the  published  Duluth  quotations  is  bound  to  be  inaccurate. 

The  cash  closing  quotations  are  most  frequently  stated  as  a  range. 
This  fact  is  explained  by  the  secretary  of  the  Duluth  Board  of  Trade 
as  follows : 


^  See  Ch.  V,  sec.  18. 


s  St.  Louis  Daily  Market  Reporter. 


QUOTATION  SERVICES  OF  THE  EXCHANGES. 


325 


J 


*  *  -  *  the  daily  cash  closing  prices  of  wheat  are  as  a  rule  made  by  single  quo¬ 
tation,  but  there  are  times  wdien  the  close  is  on  a  range.  There  are  times  when,  owing 
to  a  peculiar  condition  of  a  crop,  grain  within  the  same  grade  will  vary  considerably 
in  some  features  and  will  sell  according  to  the  sample  of  the  indi\ddual  car;  at  such 
times  are  closing  prices  shown  at  a  range. 

Barley  prices  are  always  closed  upon  a  range,  and  a  wide  one,  because  barley  does 
not  sell  by  grade,  but  entirely  by  sample,  and  there  is,  of  course,  mde  variance  in 
the  quality  of  barley. 

Although  the  markets  apparently  proceed  on  the  principle  of  quoting 
all  reported  sales,  no  attempt  is  made  to  keep  an  accurate  record  of 
the  volume  of  selling.  Frequently  when  a  sale  is  made  at  a  selling 
price  already  established,  the  sale  will  not  he  reported.  The  chief 
concern  of  commission  men  is  to  be  able  to  confirm  a  price  obtained 
by  reference  to  the  official  record.  Consequently  there  is  less  effort 
made  to  report  sales  when  the  transaction  involves  no  change  in  price. 

Nominal  prices. — In  certain  instances  nominal  prices  are  made 
up  when  there  has  been  no  demand  for  a  given  grade,  and  are  pub¬ 
lished  for  the  guidance  of  country  shippers.  Nominal  prices  are 
usually  determined  by  a  market  committee.  In  the  Kansas  City 
market — 

*  *  *  They  fill  out  a  sheet  at  the  close  of  the  market,  quoting  price  at  which, 
in  their  judgment,  grain  that  was  not  on  the  market  would  have  brought. 

Where  there  are  no  sales  the  price  named  by  the  cash  market  committee  is  a  price, 
that  in  their  judgment,  the  grain  would  have  brought,  and  is  designated  as  “nominal.’’ 


To-arrive  ‘prices. — On  markets  where  the  volume  of  to-arrive 
trading  is  relatively  large  and  continuous,  as  for  example,  in  Chicago, 
a  distinct  to-arrive  market  is  maintained  and  to-arrive  prices  are  pub¬ 
lished.  It  is  provided  in  the  rules  of  the  Chicago  Board  of  Trade 


*  *  *  board  of  directors  shall  establish  and  maintain  during  a  part  or  the 

whole  of  each  day  upon  which  the  exchange  is  open  for  business,  a  place  where  buyers 
and  sellers  of  wheat,  corn,  oats,  and  rye  to  arrive  may  gather  and  freely  buy  or  sell 
or  offer  to  buy  or  sell  the  various  commodities  traded  in  thereon.  *  *  * 


The  Chicago  Board  of  Trade  began  to  record  to-arrive  bids  on 
October  6,  1913.  These  bids  made  during  market  hours  are  re¬ 
ported  by  the  different  firms  and  are  posted  on  the  board.  They  cover 
the  principal  grains — wheat,  corn,  and  oats.  AU  details  regarding  the 
specifications  are  also  recorded  in  permanent  form.  The  specifica¬ 
tions  not  only  cover  the  variety  and  grade  of  the  grain  and  the  date 
or  period  when  shipment  must  be  made,  but  also  the  character  of 
the  billing.  Thus  some  bids  may  be  for  ^^Trans-Mississippi”  billing, 
some  on  ‘Mllincus  proportional”  billing,  and  some  Track  Chicago;” 
akliough  the  latter  billing  is  not  frequently  used.  In  some  cases 
the  bids  indicate  the  shipping  territory,  such  as  Nebraska  or  Kansas. 


■<Rule  4,  sec.  32. 


s  » 


326 


TERMIXAL  GRAIX  AIARKETS  AXD  EXCHAXGES. 


Tlie  practice  prevails  of  quoting  prices  on  to-arrive  bids  at  a  dis¬ 
count  or  premium  on  some  future  delivery.  When  the  period  is  very 
short,  for  example,  a  live-day  or  ten-day  shipment,  the  current  delivery 
])rice  is  frequently  quoted,  e.  g.,  July  2:>rice. 

If  the  bids  are  sent  out  during  the  market  hours  and  accepted 
during  the  market,  the  future-price  basis  is  the  price  prevaihng  at 
the  time  of  day  when  the  telegram  is  received.  This  makes  it  very 
essential  that  the  Board  of  Trade  keep  a  record  of  the  consecutive 
changes  in  prices  of  future  transactions  for  the  purpose  of  adjusting 
any  disputes,  that  may  arise  as  to  what  the  price  basis  may  be  on 
the  to-arrive  bid  accepted  during  the  market  hours. 

If  the  bids  are  accepted  after  the  market  closes,  and  before  the 
opening  of  the  market  the  next  day,  the  closing  price  is  used  as  the 
basis.  Accordingly,  on  each  day  in  the  same  book  in  which  the  to- 
arrive  bids  are  posted  there  are  also  posted  the  closing  prices  on  the 
carious  future  months  in  each  commodity. 

To-arrive  prices  are  quoted  at,  over,  or  under  the  prevailing  futures 
price  in  Kansas  City,  as  the  following  extract  from  the  Kansas  City 
Daily  Price  Current  ^  shows: 

TO-ARRIVE  MARKET. 

T]ie  following  bids  were  posted  on  the  to-arrive  market  at  the  Kansas  City  Board 
of  Trade  at  noon  to  day:  No.  3  white  oats,  sliipment  20  days,  one-half  cent  under 
Chicago  July  price;  No.  3  mixed,  Ayhite,  or  No.  3  yellow  corn,  shipment  10  days, 
Chicago- July  price,  3  cents  off  if  No.  4. 

Future  quotations. — Quotations  of  grain  futures  were  pub¬ 
lished  regularly  by  five  markets  ^  prior  to  the  war  on  the  following 
grains: 

Chicago. — Wheat,  corn,  oats. 

Minneapolis. — Wheat,  oats. 

Kansas  City. — Wheat,  corn,  oats. 

Duluth. — Wheat. 

St.  Louis. — ^AVheat,  corn,  oats. 

Cliicago  is  the  leading  grain  futures  market  of  the  world  and  has 
published  future  quotations  (under  varying  delivery  systems)  for 
wheat,  corn,  and  oats  each  business  day  since  1877.  The  future 
fpiotatioii  service  at  Chicago  is,  then,  of  controlling  importance  in  the 
trade.  It  must  be  remembered  that  prices  of  futures  do  not  repre¬ 
sent  the  value  of  actual  grain  at  the  date  of  sale,  but  rather  the  esti¬ 
mates  of  traders  as  to  what  the  grain  vfill  be  worth  in  some  specified 
future  delivery  month. 

Future  quotations  are  to  be  distinguished  from  cash  prices  in  that  a 
more  or  less  continuous  record  of  market  fluctuations  is  published. 
The  word  continuous is  relative  and  is  specifically  defined  in  the 
contract  entered  into  between  the  Chicago  Board  of  Trade  and  the 


<May  7, 1919. 

“  Quotations  arc  published  to  a  lesser  extent  on  certain  other  markets, 
details. 


See  Vol.  V,  Ch.  I,  sec.  3,  for 


QUOTATIOX  SERVICES  OF  THE  EXCHANGES. 


327 


Western  Union  and  Postal  Telegraph  Companies  (April,  1901),  as 
follows: 

Tlie  words  “continuous  quotations'”  *  *  *  shall  be  construed  to  mean  every 
service  of  quotations  wherein  the  price  of  any  commodity  shall  be  quoted  oftener 
than  at  intervals  of  10  minutes. 

When  new  sales  are  not  reported  for  a  given  commodity  within  the 
lO-minute  interval,  the  previous  quotation  is  necessarily  repeated 
on  the  wires.  When  there  is  a  luU  in  the  market  at  Chicago  and  a 
cessation  of  actual  transactions,  nominal  quotations  known  as  ^^bids” 
or  sellers’^  (Chicago),  arc  sometimes  sent  out. 

Continuous  quotations”  as  transmitted  over  the  wires  are  pub¬ 
lished  in  Minneapolis  in  the  next  day’s  issue  of  the  Daily  Market 
Record.  The  following  wuU  illustrate: 


CONTINUOUS  QUOTATIONS. 


The  following  table  shows  each  fluctuation  in  the  Minneapolis  May  future  to-day 
(Jan.  3): 


Time: 


Trice. 


9.30.. 

9.30., 

9.31., 
9.3U 

9.32., 

9.33., 

9.34. , 
9.341 

9.35. , 
9.3G. 


Opening,  high,  low,  and  closing  prices. — In  the  local  journals 
and  bulletins  of  grain  futures  markets  the  opening,  high,  low,  and 
closing  prices  are  generally  published.  The  high,  low,  and  closing 
prices  indicate  the  range  and  are  of  comparative  interest  in  the 
various  futures  markets.  The  opening  and  closing  quotations  are 
frcqitently  stated  in  a  range  for  reasons  assigned  as  follows: 

Chicago:  *  *  *  So  many  trades  are  made  at  the  opening  that  they  are  not  all 
made  at  the  same  price  and  for  that  reason  the  opening  quotation  necessarily  is  a 
range  from  between  the  highest  and  lowest  opening  trade;  and  this  is  also  true  of  the 
close. 

Kansas  City:  The  opening  and  closing  quotations  are  sometimes  at  a  single  price 
and  sometimes  on  a  range  of  prices  as  from  $1,514  to  $1.51|,  this  range  del^ending  u|)on 
trades  being  made  practically  simultaneously,  at  the  opening  and  close. 

Closing  quotations  do  not  necessarily  list  the  last  actual  sale,  but  do  represent  the 
drice  at  which  it  is  possible  to  trade  in  relation  to  the  last  prewous  sale.  For  instance, 
a  sale  takes  place  at  $1,511,  the  market  is  offered  down  to  $1.51|,  without  any  trans¬ 
actions,  that  being  the  last  quotation  previous  to  the  close,  the  close  would  be  quoted 


328 


TERMINAL  GRAIN  MARKETS  AND  EXCHANGES. 


I1.51J.  On  the  other  hand,  with  the  market  bid  up  from  a  previous  sale  of  $1.51^  to  1 

J?I.51|,  with  no  transactions  taking  place,  the  close  would  be  quoted  bid.  Offers  | 

to  sell  above  the  last  previous  sale  or  offers  to  buy  below  the  last  previous  sale  are  not 
quoted  until  the  market  has  been  bid  up  or  offered  down  to  that  price.  i 

At  the  opening  traders  are  allowed  an  opportunity  to  execute  all  of  their  opening  orders  J 

and  have  the  price  of  such  transactions  included  in  the  opening  range,  provided  such 
trades  are  made  within  a  maximum  time  of  two  minutes  after  the  opening  gong  sounds 
at  9.30,  This  does  not  necessarily  mean  that  all  prices  made  between  9.30  and  9.32  ' 

are  included  in  the  opening  range. 

Example:  One  or  several  traders  have  orders  to  buy  at  the  opening  with  no  price 
limit.  At  the  sound  of  the  opening  gong  they  bid  $1.50  for  July  corn  taking  all  that  can 
be  secured  at  that  price,  then  bid  $1.50-J-,  J,  and  up  to  51,  and  buying  all  that  anyone 
will  sell  up  to  $1.51.  Doing  this,  within  the  first  two  minutes,  the  opening  range 
would  be  $1,50  to  $1.51.  If  however,  $1.50  was  bid  and  trades  made  at  that  price, 

•with  more  offered  at  that  price  than  was  immediately  taken,  there  would  be  no 
upward  range  from  $1.50,  even  though  sales  were  later  made  within  the  2-minute 
limit  above  $1.50. 

The  quotation  reporter,  subject  to  the  supervision  of  the  future  market  report  com¬ 
mittee,  determines  the  opening  range  of  prices  on  the  basis  explained  above. 

Methods  of  collecting  quotations. — Future  quotations  are 
usually  collected  by  an  exchange  agency  in  compliance  with  the  con¬ 
tracts  with  telegraph  companies.  In  Chicago  the  quotations  are 
collected  and  distributed  (under  supervision  of  the  board  of  trade) 
by  the  Cleveland  Telegraph  Co.  which  operates  a  local  ticker  service 
(see  Ch.  Ill,  sec.  10).  Some  12  employees  of  this  company  are 
stationed  on  the  floor.  These  reporters,  in  collecting  quotations  from 
the  pits,  mark  the  changes  in  price  and  the  time  on  slips  of  paper, 
which  are  transmitted  by  automatic  overhead  carriers  to  the  telegraph 
operator,  who  stamps  them  again  with  the  sending  time.  The  slips  are 
then  placed  on  spindles  until  the  close  of  the  market,  and  the  price 
fluctuations  are  later  transcribed  on  the  permanent  records. 

In  other  futures  markets  the  quotations  are  collected  and  given  to 
the  telegraph  companies  by  officials  of  the  exchange. 

The  Chicago,  Minneapolis,  Duluth,  and  Kansas  City  exchanges 
have  entered  into  formal  agreements  with  the  telegraph  companies 
in  an  effort  to  maintain  absolute  control  over  the  collection  and  dis¬ 
tribution  of  future  quotations  and  prevent  bucketshops  from  receiv¬ 
ing  service. 

Cash  quotations  are  collected  and  posted  either  by  officers  of  the 
exchange  or  by  authorized  representatives  of  a  local  market  journal 
(as  in  Omaha  and  St.  Louis).  In  any  case,  the  permanent  statistical 
records  of  the  exchange  are  preserved  for  reference  in  the  secretary’s 
office.  The  method  of  collecting  original  cash  quotations  at  St.  Louis 
is  as  follows: 

*  *  *  I.oiiis  Daily  ^Market  Reporter,  or  Merchants’  Exchange  Price 

Current,  have  their  reporters  on  the  floor,  and  as  the  samples  are  brought  in  by  the 
sampling  bureau,  after  Having  been  inspected  and  graded  by  the  Missouri  or  Illinois 
State  Grain  Inspection  Department,  the  grain  is  displayed  for  sale  and  when  sold,  - 
reported  to  the  reporter  who  makes  a  record  of  same.  The  sales  for  the  day  go  to 
make  up  the  cash  market. 


V 


APPENDIX. 

DEFINITION  OF  GRAIN  MARKETING  TERMS. 


Section  1.  Markets. 

The  following  definitions  are  made  for  purposes  of  clearness  in  discussion  rather 
than  as  conclusions  or  findings  of  fact.  Many  of  the  terms  of  the  trade  are  manifestly 
too  variable  in  use  and  too  complex  for  final  definition  in  a  short  paragraph.  The 
definitions  are  given,  therefore,  wuth  the  qualification  that  they  are  explanatory  of 
terms  and  not  statements  as  to  invariable  usage. 

Grain  market. — The  term  grain  market  as  used  in  the  report  is  necessarily  broad  and 
imdusive.  It  in(dudes  both  terminal  and  country  trading  points.  The  definition 
can  be  no  more  restricted  than  that  of  the  United  States  Supreme  Court  in  referring 
to  the  operation  of  a  warehouse  along  the  railroad  right  of  way  in  a  Minnesota  village: 

“  *  *  *  q;'h0  state  court  well  said  that  the  defendant’s  warehouse  could  be 
fairly  regarded  ‘as  a  sort  of  public  market  where  the  farmers  come  with  their  grain 
for  the  purpose  of  selling  the  same,  and  where  the  purchaser,  a  paiTy  in  iilterest,  acts 
as  market-master,  weighmaster,  inspector,  and  grader  of  the  grain.’”  (Cargill  y. 
Minnesota,  180,  U.  S.  452). 

The  market  so  defined  may  be  more  strictly  termed  a  country  market  as  distin¬ 
guished  from  the  terminal  market  which  is  the  objective  of  a  movement  of  grain  in 
carload  (or  boatload)  lots.  The  grain  is  first  concentrated  at  the  local  loading  and 
shipping  points,  which  are  known  as  country  markets;  and  it  then  moves  to  points 
of  greater  concentration  known  as  terminal  markets. 

Primarij  and  secondary  markets.' — Primary  and  secondary  markets  are  defined  with 
reference  to  position  in  the  grain  movement.  They  are  determined  from  the  sources 
of  their  receipts.  In  the  primary  market  the  bulk  of  the  grain  received  originates  at 
local  shipping  points  in  the  producing  areas.  The  primary  market  is  the  first  terminal 
point  where  grain  originating  from  country  stations  is  concentrated  for  sale  in  carload 
lots.  A  market  is  primary  to  the  extent  that  it  collects  grain  from  such  local  loading 
points.  Every  primary  market  is,  in  fact,  adjacent  to  some  producing  area,  although 
a  part  of  its  receipts  may  have  passed  in  transit  through  other  terminals. 

The  secondary  market  receives  the  bulk  of  its  grain  from  other  terminal  markets. 
While  it  receives  a  certain  volume  of  grain  originated  in  the  vicinity,  its  main  busi¬ 
ness  as  a  market  in  the  general  scheme  consists  of  redistributing  or  forwarding,  by 
rail  or  water,  shipments  originated  at  other  terminals. 

Cash  market.-^A  cash  market  as  distinguished  from  a  futures  market  denotes  a 
meeting  place  of  buyers  and  sellers  for  trading  in  grain  on  the  basis  of  immediate  or 
early  delivery  and  payment.  In  a  general  sense  the  cash  market  includes  to-arrive 
as  well  as  spot  sales,  delivery  being  deferred  on  a  to-arrive  contract  because  of  the 
nonarrival  of  the  grain  in  the  terminal.  The  term  cash  market  does  not  necessarily 
refer  to  a  trading  floor  or  to  any  limited  period  of  trading. 

To-arrive  market. — The  term  to-arrive  market  is  used  by  the  trade  with  reference  to 
the  sale  of  shipments  which  have  not  reached  the  terminal  as  distinguished  from 
grain  on  track  or  in  store  at  the  terminal.  The  to-arrive  market  is  frequently  made  a 
distinct  section  of  the  cash  market  since — 

(1)  The  grain  purchased  has  not  yet 'reached  the  terminal  and  frequently  has  not 
been  shipped  from  the  country  station; 

(2)  In  the  great  majority  of  cases  the  sale  is  made  on  grade  which  may  or  may  not 
be  true  of  other  cash  grain ; 

to)  The  transaction,  if  a  sale  on  grade,  presumes  a  specific  grade,  although  other 
grades  may  be  delivered  at  a  premium  or  a  discount  acceptable  to  the  buyer. 

329 


330 


TERMINAL  GRAIN  AIARKETS  AND  EXCHANGES. 


The  to-anive  market  differs  from  the  futures  market  in  the  following  resj^ccts: 

(1)  'N^diereas  in  a  futures  market  delivery  takes  place  on  a  small  percentage  of  the 
contracts,  in  a  to-arrive  market  on  practically  all  of  the  contracts  delivery  is  actually 
made. 

(2)  Whereas  in  the  futures  market  both  deliverable  gmdes  and  delivery  periods 
are  necessarily  uniform,  in  the  to-arrive  market  a  specific  grade  is  usually  contem- 
})lated  for  each  contract,  and  the  delivery  period  is  more  frequently  a  matter  of  indi- 
^•idual  arrangement. 

The  call  marJcct. — In  order  to  provide  “continuous”  or  daily  quotations  on  the 
grades  of  grain  traded  in,  it  is  sometimes  necessary  in  a  narrow  market  to  resort  to  the 
auction  or  call  method  of  creating  market  levels.  Trading  under  this  arrangement 
is  sometimes  referred  to  as  the  call  market. 

Futures  'iimrhet.—ThQ  term  futui-es  market  designates  a  meeting  place  of  merchants 
or  traders  Avhere  contracts  may  be  made  for  the  delivery  at  some  specified  future  time 
(usually  Avi thin  a  certain  month)  of  commodities  hypothetically  in  store  and  repre¬ 
sented  by  regular  warehouse  receipts.  It  is  in-esumed  that  delivery  is  intended,  but 
future  trades  may  be,  and  in  the  vast  majority  of  instances  are,  closed  by  contra- 
transactions  in  the  pit  prior  to  delivery.  Delivery  normally  recpiires  the  presenta¬ 
tion  of  regular  Avarehouse  receipts. 

Section  2.  Cash  traders  and  trading  terms. 

Grain  commission  merchant  or  receiver. — The  trader  in  grain  on  commission,  known 
as  the  commission  man,  receives  grain  for  sale  for  account  of  the  consignor,  and  sells 
(or  reconsigns)  the  same  as  the  agent  of  such  consignor.  Ordinarily  the  commission 
merchants  receive  grain  on  consignment  and,  to  distinguish  them  from  futui-e  com¬ 
mission  operators  and  from  shippers  on  commission,  are  referred  to  as  receiA'ers. 
This  is  especially  true  in  Chicago,  Avhere  the  term  “commissionTnorchant”  signifies 
an  operator  in  the  futures  market,  Avhile  the  cash  commission  man  is  a  “receiver.” 
The  commission  merchant,  as  such,  takes  title  to  no  grain,  although  his  concern  may, 
and  frequently  does,  buy  and  sell  grain  as  a  dealer,  and  grain  bought  to-arrive  is 
frequently  “handled  on  a  commission  basis.” 

The  commission  merchant  receiA’'es  the  consignment,  takes  possession  of  the  grain 
as  an  agent,  conducts  all  arrangements  necessary  for  its  sale,  and  accounts  to  his 
juiiicipal  upon  receipt  of  payment. 

Shipper. — The  term  shipper  has  a  special  meaning  in  the  grain  trade  only  as  it 
applies  to  traders  in  the  terminal  market  who  make  a  business  of  shipping  on  order. 
Any  dealer  in  or  OAvner  of  grain  may  become  a  shipper  in  the  broad  sense. 

Dealer  and  trader. —Tina  member  who  operates  on  his  OAvn  account  in  the  cash  market 
is  referred  to  in  this  report  as  a  dealer  or  trader.  One  who  operates  on  his  own 
account  in  the  futures  market  is  never  referred  to  as  a  dealer,  but  ahvays  as  a  trader. 

Cash  broker. — A  close  distinction  is  made  betAveen  the  broker  and  the  commission 
man  in  the  cash  grain  trade,  with  the  effect  that  the  former  business  is  not  followed 
by  a  numerous  body  of  traders,  except  in  export  markets.  The  functions  of  the 
broker  are  so  restricted  as  to  require  reference  to  an  established  definition.  As 
rec-ently  defined  by  the  Grain  Dealers’  National  Association  (rule  3G) : 

“(A)  A  broker  is  one  Avhois  engaged  for  others,  on  a  commission  basis,  in  negotiating 
contracts  relative  to  property' AAdth  the  custody  of  which;  actual  or  constructive,  he 
has  no  concern. 

“'A. person  is  not  a  broker  (1)  AAdio  has  possession  and  absolute  control  of  mer¬ 
chandise  shipped  to  him  to  sell  and  collect  the  price  (therefore  a  commission 
merchant  to  Avliom  grain  is  consigned  for  sale  is  not  a  broker);  (2)  who  receives  a 
salary  instead  of  a  commission  or  brokerage;  (3)  Avho  acts  for  one  principal  to  the 
exclusion  of  all  others  *  *  *. 

“(E)  A  broker  who  in  good  faith  negotiates  a  contract  which  is  in  accord  Avith 
instructions  from  both  his  principals,  Avho  at  the  time  of  negotiation  adA'ises  each 


APPENDIX. 


331 


principal  the  name  of  the  other,  and  who  completes  such  ncgotiatioirs  in  accordance 
with  the  rules  and  customs  governing  such  transactions,  thereby  fulfills  all  his  obli¬ 
gations  and  has  no  further  liability  to  either  of  his  principals.  The  contract  so 
negotiated  is  valid  and  binding  between  the  buyer  and  seller,  the  same  as  if  it  had 
been  negotiated  directly  between  theni.”^ 

Consignment— A  consignment  of  grain  usually  means  one  or  more  carload  lots 
consigned  to  a  commission  merchant  by  a  country  shipper  for  sale  in  the  terminal 
market.  It  is  thus  distinguished  from  the  sale  on  a  to-ariive  bid  and  tlie  sale  on 
track  in  the  country. 

To-arrive  (purchasing  io-arrive). — When  grain  is  purchased  directly  from  the  country 
by  a  terminal  market  buyer  the  contract  is  frequently  based  on  deferred  arrival  at  the 
terminal,  i.  e.,  a  purchase  is  made  of  “grain  to-arrive.”  While  the  to-anive  method 
resembles  future  trading  in  some  respects,  under  present  conditions  it  is  strictly  a  cash 
contract,  the  time  element  representing  the  estimated  shipping  or  transit  period, 
drain  is  often  bought  to-arrive  by  houses  doing  a  commission  business  and  is  so  handled 
“on  a  commission  basis,”  that  is,  the  commission  house  acts  as  buying  agent  for  the 
terminal  market  buyer.  In  many  instances,  however,  grain  is  bought  to-arrive  by  a 
dealer  direct  from  the  country,  so  that  to-arrive  buying  is  generally  contrasted  with 
a  purchase  at  the  terminal  of  grain  which  has  been  received  on  consignment. 

On-trach  (purchasing  on-trach). — Purchasing  on-track  means  a  purchase  of  the  car  of 
grain  as  it  lies  on  the  railroad  track  in  the  country  or  in  the  terminal  market.  For  the 
purposes  of  terminal  marketing  the  term  on-track  is  distinguished  from  in-store  and  de¬ 
notes,  in  the  majority  of  cases,  the  initial  purchase  of  the  grain  in  that  market.  Re¬ 
sales  of  cars  on  track  after  the  initial  purchase  are  exceptions  to  this  rule. 

Spot  sale— A  sale  of  grain  on  track  at  the  terminal  in  carload  lots  is  referred  to  in 
exchange  usage  as  a  spot  sale. 

Sample  market  (selling  on  sample).— Where  grain  is  bought  and  sold  on  the  basis  of 
official  samples,  generally  displayed  on  sample  tables  in  the  exchange  hall,  the  term 
sample  market  is  used.  Under  this  method  of  trading  the  individual  car  is  sold  on  its 
merits  as  viewed  by  the  buyers  and  not  wholly  from  the  grade  determined  by  the  in¬ 
spector.  Buyers  for  milling  and  converting  purposes  generally  prefer  the  sample 
market. 

Grade  market  (selling  on  grade).— When  the  official  inspection  is  relied  upon  to  deter¬ 
mine  the  value  of  grain  the  trading  is  referred  to  as  selling  on  grade,  or  a  grade  market. 
Such  a  market  is  considered  favorable  to  forwarding  in  large  bulk  and  to  the  export 
business.  / 

Spreading  .—Trading  to  take  advantage  of  price  differences  between  different  mar¬ 
kets  by  purchasing  in  one  and  selling  in  another  when  the  markets  are  “out  of  line,” 
is  known  as  spreading.  Markets  are  “out  of  line”  when  the  differences  in  price  are 
greater  than  can  be  explained  by  normal  differences  in  transportation  cost. 

Section  3.  Future  traders  and  trading  terms. 

Future  commission  house.— Orders  for  the  purchase  or  sale,  or  purchase  and  sale,  of 
futures  are  received  and  executed  by  (or  through)  future  commission  houses.  The 
future  trading  of  nonmembei’s  is  necessarily  conducted  through  such  commission 
houses.  The  commission  house  is  the  typical  middleman  in  the  futures  market,  just 
as  the  receiver  is  the  typical  middleman  in  the  cash  market.  As  developed  later  in 
this  report,  the  future  commission  house  may  execute  trades  through  a  pit  broker  or 
may  have  a  member  of  the  firm  in  the  pits.  Few  commission  houses  trade  on  their 
own  account,  but  the  partners  usually  trade  as  customers  of  their  own  or  another  firm. 
The  commission  house  as  such  is  merely  an  agent.  It  has  the  same  relation  to  futures 
as  the  stock  broker  has  to  stock-exchange  business,  and  the  general  term  applicable 
to  both  is  broker  in  the  sense  in  which  it  refers  to  an  agent  in  speculative  trading. 

1  The  Amer.  Elev.  and  Grain  Trade,  Oct.  15, 1919,  p,  339. 


t 


332 


TEBMIlsAL  GEAIX  MARKETS  AKD  EXCHANGES. 


Pit  broker. — A  pit  broker  executes  future  trades  in  the  pit  for  other  members,  and 
for  members  only.  He  is  compensated  by  a  ‘‘brokerage”  fee  much  smaller  than  the 
commission  rate  and  “gives  up”  trades  thus  executed  to  the  member  that  gave  the 
order,  presumably  a  commission  house  which  is  handling  the  account  and  is  respon¬ 
sible  to  the  customer.  J f  the  trader  is  a  member  not  executing  his  own  trades,  he  may 
or  may  not  himself  give  the  order  to  the  pit  broker,  and  may  have  the  trade  given  up 
either  to  himself  or  to  some  commission  house  carrying  an  account  for  him. 

Pit  scalper.~Pit  traders  not  only  act  as  pit  brokers  but  also  trade  on  their  own 
account.  Most  such  trading  is  designed  to  take  advantage  of  fluctuations  occurring 
at  brief  intervals  during  the  session,  and  is  called  pit  scalping.  At  Chicago  many  pit 
traders  trade  only  on  their  own  account  and  are  thus  exclusively  pit  scalpers.  A 
considerable  number  of  such  Chicago  pit  scalpers  are  members  of  the  Clearing  House. 

Wire  house. — The  term  wire  house  signifies  primarily  a  commission  house  which 
solicits  or  receives  orders  for  future  trades  over  private  leased  wires  for  execution  on 
exchange.  The  grain  wire  house  is  primarily  identified  with  the  futures  market,  but  in 
Chicago  the  private  wires  are  used  also  for  bids  on  to-arrive  grain  and  some  of  the 
Chicago  wire  houses  do  a  large  general  receiving  business. 

Terminal  elevator.— An  elevator  or  warehouse  located  at  a  terminal  market  which 
is  equipped  to  receive,  transfer,  and  store  grain  is  called  a  terminal  elevator.  Public 
terminal  elevators  are  subject  to  State  regulation.  In  some  States  the  proprietor  may 
perform  the  ser\dces  of  a  public  warehouseman  with  reference  to  his  own  grain,  while 
in  others  (notably  Illinois)  he  is  forbidden  to  merchandise  any  grain  which  he 
receives  as  a  public  warehouseman. 

Regular  elevator.— An  elevator  is  “regular”  by  virtue  of  the  validity  of  its  receipts 
for  delivery  on  a  future  contract.  A  regular  elevator  is  a  terminal— often  a  public- 
warehouse  approved  and  supervised  by  the  local  exchange  and  subject  to  certain 
rules  and  regulations  with  reference  to  deliveries  in  the  futures  market.  The  term 
“regular  elevator,”  therefore,  means  that  the  receipts  will  constitute  valid  delivery 
on  future  contracts.  It  does  not  mean,  in  all  cases,  that  the  elevator  operates  under 
a  vState  license. 


Futures  and  future  fntdiriy.— Contracts  for  grain  to  be  delivered,  or  deliverable,  at 
a  future  time,  usually  during  a  specified  month,  have  become  known  as  futures.  Such 
contracts  are  employed  in  future  trading.  Unless  future  trades  are  closed  by 
contratransactions  in  the  pit  before  the  end  of  the  specified  delivery  period,  the 
contiacts  normally  must  be  satisfied  by  the  delivery  of  regular  warehouse  receipts 
representing  actual  grain.  In  practice,  the  great  bulk  of  future  trades  are  closed 
without  such  delivery  taking  place.  “Grain  future  quotations,”  as  published  in 
the  daily  press,  refers  to  prices  on  trades  in  futures. 

Options.— future  contract  includes  an  option  as  to  timie  of  delivery  within  the 
specified  delivery  month.  Under  present  practices ‘"'deli veries  on  futures  are  at 
“seller’s  option.”  That  is,  the  buyer  must  accept  the  warehouse  receipt  and  pay  for 
it  ui  der  circumstances  prescribed  by  the  exchange  on  any  business  day,  within  the 
delivery  month  that  the  seller  may  choose  for  tender. 

IGitures  were  formerly  generally  referred  tc  as  “options.”  It  is  convenient  to  use 
the  term  in  the  looser  sense  as  a  collective  name  for  future  trades  relating  to  a  specified 
grain  and  delivery  month,  referring  for  example  to  prices  for  “the  May  wheat  option  ” 
of  a  given  year. 


In  a  strict  sense,  the  option  contracts  dealt  in  on  the  grain  exchanges  are  the  ‘‘puts 
and  calls  ’  or  “bids  and  offeis’  or  “privileges,”  all  these  being  different  names  for 
the  same  thing. 

Pnmbges—Bids  and  offers— Puts  and  calls .—Pr\\i\eges  are  option  contracts,  in  the 
strict  lepl  sense  of  the  term,  whereby  the  piircha.'^er  may,  at  his  choice  vithin  a  speci¬ 
fied  period  “exorcise”  the  option  of  entering  into  a  future  contract  with  the  seller  of 
such  privilege  coniract  at  the  price  named  therein,  k  privilege  binding  the  opposite 
party  to  sell  the  future,  is  at  Chicago  called  a  “bid,”  and  one  which  thus  conditionally 


APPENDIX. 


333 


binds  him  to  buy  llio  future  is  an  ‘‘offer.”  The  buyer  of  the  privilege  becomes  the 
seller  of  the  future  in  the  first  ease  and  the  buyer  of  the  future  in  the  second.  Bids 
are  also  known  as  “puts”  and  offers,  as  “calls.”  Privileges  are  also  referred  to  at 
('hicago  as  “indemnities,  ”  but  this  term  properly  relates  to  a  slightly  different  type 
of  contract,  now  ob.solete. 

Hedge. — The  practice  of  jirotccting  a  cash  purcliase  by  selling  a  future  (to  be  bought 
in  upon  the  sale  of  the  actual  grain)  or  vice  versa,  so  as  to  insure  the  trader  against  loss 
from  changes  in  the  market  price  level,  is  called  hedging.  Hedging  supposes  a  nearly 
parallel  movement  in  cash  and  future  prices.  Since  the  hedging  purchase  or  sale  of  a 
future  is  entered  into  for  protection  only,  it  isin  the  majority  of  cases  closed  by  a  contra- 
transaction  in  the  pit  rather  than  by  delivery  and  payment. 

Hedging  purchases  are  made  by  flour  millers  to  protect  their  contracts  for  delivery 
of  flour  at  a  specified  price.  That  is,  the  miller  hedges  a  sale  of  flour  against  a  rise  in 
the  price  of  wheat  by  an  immediate  purchase  of  wheat  in  the  futures  market,  closing 
the  trade  in  future  wheat  after  the  flour  contract  has  been  satisfied. 

The  •pit. — The  term  “pit”  is  often  used  synonymously  with  the  term  “futures 
market.”  It  is  derived  from  the  form  of  the  future  trading  space  in  the  exchange 
'  hall  which  is  an  octagonal  or  circular  arrangement  of  ascending  steps.  On  the 
Chicago  trading  floor  four  such  pits  are  provided,  respectively,  for  wheat,  com,  oats,  . 
and  provisions.  The  step  arrangement  is  designed  to  place  the  traders  on  different 
levels  and  enable  any  buyer  to  see  any  desired  seller,  or  vice  versa. 

Contract  grades. — The  standard  grades  of  grain  deliverable  on  future  contracts  in 
specific  satisfaction  thereof  under  the  exchange  rules  are  the  contract  grades.  The 
grade  is  ordinarily  not  designated  in  a  futiue  contract.  The  term  “deliverable  grades  ” 
includes  these  and  also  any  gi’ades  that  may  be  delivered  on  future  contracts  at  a  pre- 
mi  imi,  discount,  or  otherwise. 

Margin. — A  margin  is  a  cash  deposit  made  generally  to  secure  other  parties  at  in¬ 
terest  in  a  future  trade  against  losses  due  to  possible  or  actual  changes  in  the  price 
above  or  below  that  at  which  the  future  trade  was  originally  made.  Each  commission 
house  interested  in  a  future  trade,  may  be  required  to  deposit  a  margin  for  the  protec¬ 
tion  of  the  other.  Likewise,  the  customer  may  be  required  to  deposit  a  margin  for 
the  protection  of  the  commission  house  acting  as  his  agent. 

Clearing  house. — The  central  agency  for  facilitating  the  making  of  settlements  on 
future  contracts  entered  into  between  members  of  a  grain  exchange  is  known  as  a 
clearing  house.  The  form  of  organization  and  methods  of  the  cleai'ing  house  differ, 
especially  as  between  Chicago  and  other  exchanges. 

Delivery. — On  cash  sales  delivery  of  grain  differs  little  from  the  delivery  of  any 
commodity  under  the  general  law  of  sales.  In  view  of  the  unsettle'd'state  of  tliis  law 
it  is  undesirable  to  attempt  a  rigid  definition  of  delivery  on  cash  grain  contracts  at 
tliis  point. 

On  future  contracts  delivery  takes  on  a  special  form,  regular  warehouse  receipts' 
usually  being  delivered  on  or  before  the  last  business  day  of  the  delivery  month  during 
certain  hours.  Default  on  delivery  usually  calls  for  liquidation  of  damages  on  the 
basis  of  the  difference  between  the  contract  and  the  market  value,  frequently  requiring 
a  referee  or  committee  of  arbitration  to  determine  such  “true  market  value.” 

Bwriri  s/io/?.— The  essential  points  in  the  definitions  of  “bucket  shops”  found  in 
State  law  and  grain  trade  usage  are  these: 

1.  The  concern  in  question  follows  the  form  of  acting  as  a  commission  house  buying 
ar  selling  grain  and  securities  on  “margin,”  using  exchange  quotations  as  a  basis. 

2.  The  customer  deposits  a  “margin”  to  protect  the  operator  and  also  pays  him 
“commissions”  for  “executing  deals.” 

3.  At  least  on  the  part  of  the  operator,  there  is  no  intention  of  actual  future  delivery 
of  the  commodity  and  no  purchase  or  sale  is  actually  made  on  exchange.  Frequently 
the  customer  understands  also  that  the  ‘‘.sales”  are  wholly  fictitious,  i,  e.,  without 
contemplation  of  delivery. 


o 


REPORT 


OF  THE 


FEDERAL  TRADE  COMMISSION 


ON 


THE  GRAIN  TRADE 


VOL.  Ill 

TERMINAL  GRAIN  MARKETING 


December  21,  1921 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICE 
1922 


FEDERAL  TRADE  COMMISSION. 


Nelson  B.  Gaskill,  Chairman. 
Victor  Murdock. 

John  F.  Nugent. 

Huston  Thompson. 

J.  P.  Yoder,  Secretary. 


.  I 

A 

s  • 


ADDITIONAL  COPIES 


OF  THIS  PUBI.ICATION  MAY  BE  PROCURED  FROM 
THE  SUPERINTENDENT  OF  DOCUMENTS 
GOVERNMENT  PRINTING  OFFICE 
WASHINGTON,  D.  C. 

AT 

30  CENTS  PER  COPY 


V 


r 


CONTENTS. 


Page. 


Acknowledgment .  x 

Letter  of  submittal . xi 

Summary . 1 

Chapter  I. — The  Car-Lot  Movement  of  Grain. 

Sec.  1.  Wheat  production  and  the  marketing  movement .  23 

Importance  of  wheat  in  the  grain  trade .  23 

Quantity  and  characteristics  of  the  wheat  crop . . .  23 

Location  of  car-lot  wheat  supplies .  24 

2.  Milling  demand  for  wheat .  26 

Total  demand . .  26 

Demand  for  hard  spring  wheat .  27 

Demand  for  hard  winter  and  hard  spring  wheat  compared .  28 

Localization  of  milling  demand  as  indicated  by  capacity  and  output 

of  flour .  29 

Sources  of  mill  purchases .  30 

Preference  for  country-run  wheat .  31 

Export  demand .  33 

3.  Corn  production  and  the  marketing  movement .  34 

Production  and  distribution .  34 

Consumption  of  corn .  34 

Export  demand . 35 

4.  Oats  production  and  the  marketing  movement . .  35 

Localization  of  production .  35 

Consumptive  demand .  35 

5.  Barley  production  and  the  marketing  movement .  36 

Localization  of  production . 36 

Consumption .  36 

6.  Rye  production  and  the  marketing  movement .  37 

Production .  37 

Consumption . . .  37 

7.  Summary  as  to  the  trading  centers .  37 

Chapter  II. — Receiving  and  Purchasing  from  Country  Points. 

Sec.  1.  Comparison  of  methods . - .  39 

2.  -Nature  of  the  consignment  business .  40 

Introductory .  40 

Functions  of  the  commission  merchant .  41 

3.  Operating  methods  of  commission  men .  42 

Shipping  arrangements .  42 

Notice  of  shipment .  42 

Inspection  and  sampling . ' .  43 

Selling  the  grain .  44 

Records  of  sale . . . -- .  46 

Hedging . 47 

Delivery  and  acceptance. . .  47 

The  invoice .  48 

The  account  sales .  48 

Commission  charges .  51 

4.  Employment  of  solicitors . . . ' .  51 

Functions  of  the  solicitor . . . - . .  51 

Advantages  and  disadvantages  of  employing  solicitors .  53 

5.  Wire-house  competition . . .  53 

6.  Commission  merchants’  associations .  56 


III 


IV 


CONTENTS. 


Page. 

Sec.  7.  State  license  and  regulation  of  commission  merchants .  57 

Extent  of  legislation .  57 

Administrative  regulation .  58 

Constitutionality .  59 

8.  Purchasing  direct  from  country  points .  61 

In  general .  61 

To-arrive  bids .  62 

On-track  bids .  63 

Confirmation . .  66 

The  shipment  period .  67 

Delivery . .r .  67 

Regulation  of  after-market  bids .  68 

Conditions  affecting  the  “  to-arrive  ’  ’  business .  69 

Economic  effects  of  selling  direct .  70 

9.  Marketing  operations  of  line  elevator  companies .  71 

Extent  of  this  type  of  organization .  71 

Price  instructions  to  agents .  73 

Traffic  departments . * .  74 

Supervision  of  agents .  76 

Competitive  methods .  76 

Alleged  economy  of  line  elevator  operation .  77 

Chapter  III. — Transportation  and  Railroad  Terminal  Facilities. 

Sec.  1.  Relation  of  the  freight  rate  structure  to  grain  marketing .  79 

The  rate  increases  of  1920 .  79 

Subsequent  ad  justments .  81 

Relation  of  1921  rates  to  prices  .fr .  82 

2.  Railroad  construction  of  grain  elevators .  83 

3.  The  elevation  allowance  cases .  85 

The  Peavey  case .  85 

The  second  Peavey  case .  86 

The  third  Peavey  case .  87 

The  matter  of  alleged  discrimination  against  St.  Louis, .  88 

The  Diffenbaugh  decision . 89 

Subsequent  orders  and  decisions .  90 

4.  The  practice  of  leasing .  92 

Extent  of  leasing .  92 

Reasons  for  leasing . “ .  92 

5.  Examples  of  leasing  arrangements .  94 

Lease  of  the  South  Chicago  elevators . . .  94 

The  Keystone  Elevator  Co.  case . .  96 

6.  Special  obligations  in  lease  agreements .  97 

Tonnage  stipulations .  97 

Agreements  to  operate  as  public  elevators .  98 

Free  switching .  99 

7.  Agreements  prior  to  construction .  99 

8.  Nominal  rentals  forbidden .  101 

9.  Effects  of  leasing  at  Kansas  City .  101 

10.  Services  and  charges  under  railroad  operation . 103 

The  carrier  as  warehouseman .  103 

Court  decisions .  104 

Utilization  of  capacity .  107 

Chapter  IV. — ^Warehousing  and  Storage  at  Terminal  Points. 

Sec.  1.  The  terminal  elevator  system  in  general .  110 

Necessity  of  terminal  storage .  110 

Description  of  terminal  elevator  plants  and  facilities .  110 

Floating  elevators .  114 

2.  Utilization  of  capacity .  115 

Variations  in  capacity  turnover . 115 

Storage  elevators .  115 

Transfer  elevators  in  the  interior .  115 

Elevators  at  export  points .  116 


CONTENTS. 


V 


Sec.  2,  Utilization  of  capacity — Continued. 

Variations  in  stocks  at  terminal  points .  116 

Elevator  services  enumerated .  1^7 

Storage . . . . . . .  11^ 

Unloading  and  loading — receiving  and  loading — elevation.  . . .  118 

Direct  transfer . 

Cleaning . : .  11^ 

Cooling — blowing — turning — running  to  condition .  118 

Mixing .  119 

Drying . . . 

Clipping — smutting . 

Bleaching . 119 

Mixing  and  conditioning  under  railroad  operation .  119 

Elevator  operating  records .  120 

3.  Ownership  and  control  of  terminal  elevators .  123 

Railroad  elevators .  12^ 

•  Elevators  operated  by  dealers .  127 

4.  Public  elevators  as  defined  by  State  laws .  128 

5.  Constitutionality  of  grain  warehouse  laws .  130 

Munn  V.  Illinois .  130 

Budd  V.  New  York .  131 

Brass  v.  North  Dakota .  132 

6.  Statutory  requirements  of  public  elevators .  134 

In  general .  134 

Warehouse  receipts . - .  130 

Railroad  elevators .  130 

Grain  owned  by  the  operator  in  a  public  warehouse .  lob 

7.  Evasion  of  the  warehouse  law  in  Chicago .  137 

Method  of  evasion .  137 

Illustrations  of  go-to-store  sales . .  139 

8.  Exchange  regulation  of  elevators . ' .  142 

Regular  elevators . . . - .  ji" 

9.  Status  of  the  public  warehousing  business .  143 

Decline  of  public  warehousing .  143 

*  The  transfer  business .  140 

10.  Remedies  for  the  terminal  elevator  situation . .  147 

Chapter  V.— Merchandising  and  Shipping  Business  in  Terminal 

Markets. 

Sec.  1.  Operations  of  terminal  elevator  companies .  150 

Introductory .  jOb 

Rules  and  regulations . -  -  •  -  jou 

2.  Mixing  and  conditioning  by  terminal  elevators .  104 

The  mixing  process . .  -  -  104 

Results  of  mixing  wheat  by  private  elevators .  l^o 

Chicago .  joo 

Minneapolis . 

Duluth.., . 

Kansas  City . 

Comparison  of  four  markets . 

Mixing  profits  per  bushel .  o 

Mixing  to  make  ‘  ‘  contract  ”  corn .  lo^ 

Economic  aspects  of  mixing . 1"^ 

3.  Merchandising  by  terminal  elevator  companies .  loi 

Introductory . 

The  ‘  ‘  carrying  charge  ’’  theory .  i^" 

Selling  for  local  delivery.... . 

Shipping  operations  of  terminal  elevators . . 

4.  Mixing  and  conditioning  for  others  by  private  elevator  companies .  ibb 

5!  Manipulation  of  future  deliveries . 

6.  The  business  of  shippers  not  operating  elevators .  J  'b 

Operations  of  a  Minneapolis  shipper .  J 

Operations  of  a  Buffalo  shipper . 


VI 


CONTENTS. 


Sec.  7.  Exporting . 

General  conditions 
Typical  operations 
Customary  costs. . . 


Page. 

172 

172 

173 

174 


Chapter  VI.— Operations  of  Cash  Grain  Brokers. 

General  functions . 

Typical  operations  of  brokers  on  exchangp 

Brokers  operating  without  exchange  nrivilee-cs . 

Brokers’  bids  and  offers .  . 

The  seaboard  brokers . . . [ . 

Chapter  VII.— Financing  the  Grain  Trade. 

Introductory . 

Financing  country  elevators  in  the  Northwest 

Development  of  the  practice . * . . 

Rates  of  interest . [  . 

Risks  and  security . !!!!!]. . 

Guaranty  agreements . [ . 

Mutual  contracts . *  ] . . 

Economic  effects  of  financing. . . 

Opinion  of  the  Federal  Land  Bank. .!!!!!!!! . 

3.  Financing  the  cash  commission  business  at  Duiuth*. . 

4.  Conclusions  on  financing . 

Chapter  VIII.— The  Grain  Bulletin. 


Sec.  1. 

2. 

3. 

4. 

5. 


Sec.  1. 

2. 


176 

177 

178 

179 
181 


183 
184' 

184 

185 

186 

187 

188 
191 
193 
193 
196 


Sec.  1.  Market  news  agencies  in  general .  -.q- 

2.  Gmeral  statement  mtli  reference  to  competitive  conditi'o'us  and  'aOTee- 

buying  m  territory  covered  by  the  Grain  Bulletin  197 
Letters  by  line-elevator  companies  summarizing  price  conditions 
at  their  various  stations .  g  p  conaiuons 

3.  Early  history  of  dailjr  price  bulletins  in  the  Northwest .  on? 

1  he  J  umper  service .  .  ^ 

The  Hoslans  service .  .  - 

4.  Development  of  Grain  Bulletin  (burant’sVseVvice .  onfi 

Early  organization .  . 

5.  The  system  in  operation . . .  . 

The  basing  sheet . onn 

The  card  service .  . 

Card  prices  July  to  October,'  1920'  . 

The  Montana  service . !!!.!!... .  o 

Extent  of  the  Grain  Bulletin  service _  ' '  *  *  oi  c 

Cost  of  the  service .  . 

6.  F ailure  of  the  State  bulletin .  qj!: 

7.  Variations  in  normal  margins  of  Grain  Bul'letin  'card "  .  HI 

Between  different  grades  of  the'  same  grain'.'.'.'. .  of? 

Between  different  years .  .  qjo 

Other  variations .  .  ^7q 

Variations  as  between  stations* !  .*  .* .’  .* ?  ’ '  .*  * ' ' '  .  oi  9 

8.  Question  as  to  influence  of  line-elevator  interests  on  the  Grain  Bulletin 

price  card 220 

Relation  of  Grain  Bulletin  to  country  price  competition  in  geneml !  220 

Question  whether  past  influence  of  line  elevators  on  price  card  still 

9.  Mr.  Durant  and  the  line  companies'. '. ! .' .' .'  .* .' .’ .’ .'  .* .' .  oor 

Promotion  of  the  Grain  Bulletin  by  line  companies. .  225 

Mr.  Durant’s  position  politically . .  . !  226 

lA  XT'  b^urant,  agent  for  elevator  pools,  etc .  ooi 

10.  Extent  to  which  card  is  followed .  .  oof 

11.  Conclusion .  . 


CONTENTS. 


VII 


Chapter  IX. — Price  of  Cash  Grain  and  Closing  Price  Committees. 

Sec.  1.  Cash  prices  reported . 

2.  Closing  prices . 

3.  Conclusion . 


Page. 

236 

238 

243 


Chapter  X. — Insurance  Charges  by  Duluth  Commission  Men. 


Sec.  1.  Reasons  for  insuring  consigned  grain . 

2.  The  insurable  risk . 

3.  Income  realized  on  insurance  accounts . 

4.  The  rate  charged . 

5.  Summary . : - 

Chapter  XI. — Scalping  in  the  Cash  Markets. 


247 

247 

249 

250 

251 


Sec.  1.  Nature  and  character  of  scalping . 

Definitions  of  scalping . 

Markets  studied . 

Joint  account  scalping . 

Lack  of  specialization  in  scalping . . 

2.  Estimated  extent  of  scalping . 

3.  Probable  percentage  of  consigned  cars  scalped . . . . . 

4.  Probable  percentage  of  Minneapolis  grain  concerns  engaged  in  scalping. . 

5.  Number  of  scalping  operations  to  which  .scalped  cars  were  subjected. . . 

6.  Scalping  profits  and  losses . 

7.  Conclusion . 


252 

252 

252 

252 

253 
253 
255 

259 

260 
261 
263 


LIST  OF  FORMS. 

1.  Car  shipment  report . 

2.  Account  sales . 

3.  Controlling  card  record . . 

4.  To-arrive  bid  card  issued  from  Kansas  City. . . . . . . 

5.  To-arrive  bid  card  issued  from  Chicago  for  grain  to  be  delivered  at  mills  in 

Iowa . 

6.  On-track  bid  card  issued  by  Kansas  City  receivers  and  shippers . . . 

7 .  On-track  bid  card  of  a  dealer  located  at  Indianapolis  and  Cincinnati . 

8.  Brokers’  bid  card  for  grain  f.  o.  b.  cars  on  track  in  the  country . 

9.  Bid  card  issued  by  a  Buffalo  elevator  company  for  grain  f.  o.  b.  cars  at 

designated  rate  points . 

10.  Confirmation  of  to-arrive  transaction  recommended  by  Chicago  Board  of 

Trade . . . - . 

11.  Price  instruction  card  for  line  elevator  agents . 

12.  Claim  for  loss  in  transit . 

13.  Unloading  record,  Western  Maryland  (Port  Covington)  grain  elevator,  Bal¬ 

timore  . - . 

14.  Operating  record,  pneumatic  marine  tower.  Western  Maryland  (Port  Cov¬ 

ington)  grain  elevator,  Baltimore . . . 

15.  Warehouse  receipt  issued  for  special-binned  grain . 

16.  “  Ordinary  ”  warehouse  receipt  issued  by  a  private  elevator  company . 

17.  Notice  of  transfer  from  car  to  car . - . -  -  -  - 

18.  Loading  record.  Western  Maryland  (Port  Covington)  grain  elevator,  Bal¬ 

timore  . . . ; . : - ; . 

19.  Public  warehouse  receipt  as  issued  at  Minneapolis,  Minn . 

20.  Offer  card  issued  by  Kansas  City  elevator  company . . 

21.  Offer  card  issued  by  Kansas  City  elevator  company,  sample  basis,  including 

closing  cash  prices . 

22.  Offer  card  issued  by  a  Chicago  terminal  elevator  company . 

23.  Quotation  sheet,  basis  Philadelphia  rate  points,  issued  by  a  large  grain  dis¬ 

tributing  company . . . 

24.  Offer  card  issued  by  a  Buffalo  mill  and  elevator  company . 

25.  Card  bid  issued  by  a  cash  grain  broker . . . 

26.  Offer  card  issued  by  a  brokerage  concern  at  Pittsburgh . . 

27.  Offer  card  issued  by  an  export  and  domestic  broker  at  St.  Louis . 

28.  Confirmation  blank  used  by  a  cash  grain  broker  on  the  seaboard . 

29.  Guaranty  agreement  between  country  shipper  and  commission  house . 


43 

48 

50 

62 

63 

64 

65 

65 

66 

66 

74 

75 

120 

121 

122 

122 

122 

123 

136 

164 

165 

166 

167 

168 

179 

180 
180 
181 
187 


VIII 


CONTENTS. 


4 


30.  Mutual  contract  between  country  shipper  and  commission  house . 

31.  Specimen  of  basing  sheet  used  by  the  Grain  Bulletin  office  on  May  5, 1920 '  *  210 

32.  Grain  Bulletin  card  (Durant’s) .  In 

•  EXHIBIT  A. 

Analysis  of  the  FRDS  (Frank  R.  Durant’s  special)  account,  1913-1917,  inclusive  268 

LIST  OF  APPENDIX  TABLES. 

Table  1.  Repr^entation  of  casii  commission  merchants  on  specified  exchanges, 

. .  ’ 

2.  Methods  of  obtaining  grain  at  specified  markets,  1913-1917! ! ! ! !  .* ! ! !  276 

3.  High,  low,  and  average  stocks  of  the  five  grains  combined,  in  terrns 

of  ratios  to  the  rated  elevator  capacity  of  each  market,  at  15  speci¬ 
fied  terminal  points  for  the  two-year  period  1919-90  077 

4.  Average  combined  stocks  in  elevators  at  15  terminal  points  foreach 

of  the  five  grains  and  for  all  grains  combined,  and  ratio  of  com¬ 
bined  stocks  of  all  grains  to  aggregate  storage  capacity,  by  six- 

5.  Grain  stocks  (M  bushels)  at  15  specified  terminal  points,  by  six-rnonth 

periods,  January,  1919-December,  1920 . . .  978 

6.  Capacity  of  public  and  private  terminal  grain  elevators  at  specified 

interior  and  seaboard  points  in  the  United  States,  Julv  1  1920  288 

7.  Terminal  gram  elevators  owned  by  railroads  and  leased  to  dealers  at 

specified  markets,  1920 .  280 

8.  Total  terminal  elevator  capacity  at  specified  interior  and*  seaboard 

points  as  related  to  the  total_  capacity  owned  by  railroads  and 
leased  to  dealers  and  the  capacity  owned  and  operated  by  railroads 
or  subsidiary  companies .  ^  nqo 

9.  Storage  capacity  in  elevators  operated  by  millers  and  converters'  at  ‘ 

20  specified  markets,^  July  1,  1920 .  290 

10.  Elevator  storage  capacity  at  Fort  William  and  Port  Arthur^  Canada* 

11.  Dracription  rf/eleVatoV  facilities  10^ handling  ^ 

19  A  shipments  at  52  terminal  points  in  the  United  States  292 

12.  Analysis  of  purchases  of  wheat,  corn,  oats,  and  of  barley  and  rye 

at  specified  priinary  markets,  showing  proportion  purchased  bv 
elevator  companies,  and  distribution  of  elevator  purchases  by 
sources,  for  the  five-year  period  1913-1917 .  ^  qii 

13.  R^ults  of  mixing  operations  in  wheat  at  six  private  *  eievators* 

Chicago,  for  the  crop  year  1914-15 .  ’  o.-. 

14.  Results  of  mixing  operations  in  wheat*  at  six* private* eievators* 

Chicago,  for  the  crop  year  1915-16 .  ’  o^o 

15.  Results  of  mixing  operations  in  wheat*  at  six* private* elevators 

Chicago,  for  the  crop  year  1916-17 _  ’  312 

IG.  operations  in  wheat  at  certain  Chicago  iievators, 

17.  Results  of  nuxing  operations  in  wheat  by 'the 'public 'elevators' ‘at 

Minneapolis  for  the  crop  year  1912-13 .  on  o 

18.  R^ults  of  mixing  operations  in  wheat  by  *  the 'pubYic*  elevators*  "at 

Minneapolis  for  the  crop  year  1913-14 .  on  o 

19.  Results  of  mixing  operations  in  wheat  by'tl'm'ptoii'elevatorV  at 

Minneapolis  for  the  crop  year  1914-15 .  on 4 

20.  Results  of  mixing  operations  in  wheat  by't'he'pu'blic 'elevators* at 

Minneapolis  for  the  croji  year  1915-16  0^4 

'  •  by-ihe-publii-ele^tom  a-t 

23.  Results  of  mixing  operations  in  wheat  *by  two  Duluth  elevator *c*o*m*- 

panies  for  the  crop  year  1912-13 .  on  r 

24.  Results  of  mixing  operations  in  wheat*  *b*y*t*wo* Duluth  *eieva*torc*om*- 

panies  for  the  crop  year  1913-14 . . .  on . 

25.  Results  of  mixing  operations  in  wheat  by  two  Dutoth*  *eievator  *c*o*m*- 

panies  for  the  crop  year  1914-15 . . .  ]  33^^ 


CONTENTS.  IX 

Page. 

Table  26.  Results  of  mixing  operations  in  wheat  by  two  Duluth  elevator  com¬ 
panies  for  the  crop  year  1915-16 .  316 

27.  Results  of  mixing  operations  in  wheat  by  two  Duluth  elevator  com¬ 

panies  for  the  crop  year  1916-17 .  316 

28.  Results  of  mixing  operations  in  wheat  by  two  Duluth  elevator  com¬ 

panies,  1912-13  to  1916-17 .  317 

29.  Results  of  mixing  operations  in  wheat  at  six  licensed  public  elevators 

at  Kansas  City  for  the  crop  year  1913-14 .  317 

30.  Results  of  mixing  operations  in  wheat  at  six  licensed  public  elevators 

at  Kansas  City  for  the  crop  year  1914^15 .  318 

31.  Results  of  mixing  operations  in  wheat  at  six  licensed  public  elevators 

at  Kansas  City  for  the  crop  year  1915-16 .  318 

32.  Results  of  mixing  operations  in  wheat  at  six  licensed  public  elevators 

at  Kansas  City  for  the  crop  year  1916-17 .  319 

33.  Results  of  mixing  operations  in  wheat  at  six  licensed  public  elevators 

at  Kansas  City,  1913-14  to  1916-17 .  319 

34.  “Ins”  and  “outs”  and  mixing  profits  in  wheat  of  the  Minneapolis 

public  terminal  elevators  for  the  crop  year  1913-14 .  320 

35.  “Ins”  and  “outs”  and  mixing  profits  in  wheat  of  the  Minneapolis 

public  elevators  for  the  crop  year  1914-15 .  322 

36.  “Ins”  and  “outs”  and  mixing  profits  in  wheat  of  the  Minneapolis 

public  elevators  for  the  crop  year  1915-16 .  324 

37.  Analysis  of  insmance  accounts*of  Duluth  commission  men  showing 

amounts  collected,  expended,  and  insurance  account  credit  bal¬ 
ances  for  five  years,  1913-1917 .  326 

38.  Deviations  over  and  under  Grain  Bulletin  card  prices  by  four  types 

of  country  elevators  in  Minnesota,  North  and  South  Dakota,  and 
Montana  combined,  for  consecutive  crop  years,  1912-13  to  1916-17.  327 

39.  Deviations  over  and  under  Grain  Bulletin  card  prices  by  four  types 

of  country  elevators  in  Minnesota,  North  and  South  Dakota,  and 
Montana  combined,  for  consecutive  crop  years,  1912-13  to  1916-17.  328 

40.  Deviations  over  and  under  Grain  Bulletin  card  prices  by  four  types 

of  country  elevators  in  Minnesota,  North  and  South  Dakota,  and 
Montana  combined,  for  consecutive  crop  years,  1912-13  to  1916-17.  329 

41.  Deviations  over  and  under  Grain  Bulletin  card  prices  by  four  types 

of  country  elevators  in  Minnesota,  North  and  South  Dakota,  and 
Montana  combined,  for  consecutive  crop  years,  1912-13  to  1916-17 .  330 

42.  Profits  and  losses  on  the  first,  second,  third,  and  fourth  scalps  of  180 

cars  in  the  Minneapolis  market,  crop  year  1916-17 .  331 

43.  Character  of  purchases  of  wheat  reported  by  198  wheat  flour  milling 

companies  for  the  mill  year  1915-16 .  332 


i 


ACKNOWLEDGMENT. 


The  Commission  desires  to  make  acknowledgment  in  connection 
with  this  volume  of  the  Report  on  the  Grain  Trade  of  the  services 
rendered  by  Messrs.  W.  PI.  S.  Stevens,  assistant  chief  economist  and 
examiner  in  charge  of  the  inquiry,  and  Edmund  Brown,  jr.  Impor¬ 
tant  assistance  was  rendered  by  ^Messrs.  John  R.  Dowlan  and  Byron 
Phelps  Parry. 

The  Commission  desires  to  acknowledge  the  assistance  of  the  Bureau 
of  Markets  of  the  Department  of  Agriculture  in  the  prosecution  of 
^e  field  work,  particularly  in  connection  with  mixing  results  for 
Chicago  terminal  elevators.  Acknowledgment  is  also  due  to  the  Inter¬ 
state  Commerce  Commission  for  its  courtesy  in  supplying  informa- 
tion  in  regard  to  freight  rates,  leases  of  railroad-owned  elevators,  and 
kindred  data. 


LETTER  OF  SUBMITTAL. 


Federal  Trade  Commission, 
Washington,  December  21,  1921, 

To  the  Congress  oj  the  United  States: 

There  is  submitted  herewith  a  report  on  Terminal  Grain  Marketing, 
being  Volume  III  of  the  Commission's  report  on  the  Grain  Trade, 
embodying  certain  conclusions  and  recommendations  of  the  Com¬ 
mission  with  reference  to  the  marketing  of  cash  grain. 

In  the  movement  of  most  of  the  grain  from  the  farms  where  it  is 
produced  to  the  place  of  consumption  the  first  step  is  from  farm  to 
country  elevator,  the  second  from  country  elevator  to  terminal  mar¬ 
ket.  About  70  per  cent  of  the  total  shipments  of  country  elevator 

frain  (wheat,  corn,  oats,  rye,  and  barley)  go  to  these  terminal  mar- 
ets,  i.  e.,  markets  receiving  over  1,000  cars  a  year.  This  movement 
of  grain  to  terminal  markets  is  usually  handled  in  one  of  three  ways ; 
(1)  consigned  to  a  grain  commission  man  or  receiver  who  sells  it  for 
a  commission;  (2)  sold  ‘^on-track"  in  the  country;  or  (3)  sold  ^Ho- 
arrive,”  i.  e.,  to  be  shipped  to  or  to  arrive  at  a  terminal  market  or 
other  destination  within  a  specified  period  of  time.  At  the  terminal 
market  the  grain  is  usually  bought  by  (1)  millers,  maltsters,  feed 
manufacturers,  or  other  converters,  or  (2)  dealers  and  shippers, 
including  particularly  the  great  terminal  elevators.  Those  in  the 
first  group  buy,  of  course,  for*  the  purpose  of  converting  the  raw 
grain  into  some  form  of  grain  product.  Those  in  the  second  group 
purchase  with  the  expectation  of  deriving  a  profit  from  subsequent 
resale. 

An  interesting  subdivision  of  this  latter  group  at  Minneapolis  is 
the  scalper.  A  car  of  grain  is  defined  in  this  report  as  scalped  when 
it  has  passed  through  the  hands  of  one  or  more  iniddlemen  in  the 
same  market  other  than  the  consignee,  prior  to  delivery  on  either  a 
“to-arrive"  or  on  a  future  contract,  or  prior  to  delivery  to  a  concern 
or  its  agent  engaged  in  storing,  conditioning,  converting,  or  shipping 
grain.  A  substantial  proportion  of  all  the  country  grain  received  at 
Minneapolis  has  been  thus  scalped.  In  occasional  instances  cars 
have  been  scalped  two,  three,  and  four  times  on  the  same  day. 
Nearly  10  per  cent  of  the  cars  scalped  on  the  tests  made  by  the 
Commission  in  this  inquiry  were  repurchased  by  the  concerns  to 
which  these  cars  were  originally  consigned  for  sale.  Generally  speak¬ 
ing,  the  scalping  middleman  makes  a  profit  by  reselling  the  grain  at  a 
higher  price  than  that  paid,  though  in  some  instances  he  rnay  either 
resell  at  the  same  price  as  he  purchased  or  below  that  price. 

Grain  moving  to  the  terminal  market  from  a  country  elevator 
usually  bears  certain  charges  besides  those  of  transportation.  One 
of  these  charges  is  the  commission  paid  the  receiver  as  agent  for  dis¬ 
posing  of  the  grain.  Other  charges  include  the  fees  for  weighing, 

•  XI 


XII 


TERMINAL  GRAIN  MARKETING. 


inspection,  and  the  like.  At  Duluth  it  has  been  the  custom  for  several 
years  to  levy  so-called  insurance  charges  upon  consignors  to  cover  an 
alleged  liability  for  loss  on  grain  after  delivery  at  the  elevators,  but 
before  unloading. 

Taking  the  country  generally,  both  the  buying  of  grain  by  the 
country  elevators  and  its  movement  to  the  terminal  or  other  market 
are  usually  financed  through  regular  banking  channels.  In  the  N orth- 
west  area,  however,  the  commission  houses  at  Minneapolis  and  Duluth 
largely  finance  the  country  elevator,  with  the  understanding  that 
the  financed  elevator  shall  ship  at  least  a  considerable  part  of  its 
grain  to  the  financing  house.  At  Duluth  several  of  the  commission 
houses  have  been  accustomed  to  procure  a  large  proportion  of  their 
funds  from  certain  terminal  elevators  under  similar  understandings. 
In  other  words,  it  is  understood  that  commission  men,  the  agents  of 
the  seller,  are  to  sell  grain  consigned  to  them  to  the  terminal  elevator 
buyers  advancing  them  funds. 

Much  of  the  grain  which  reaches  the  terminal  market  is  stored  either 
in  the  establishment  of  a  miller,  maltster,  feed  manufacturer,  or  other 
converter,  or  else  in  the  terminal  elevators  operated  by  grain  mer¬ 
chandisers.  A  large  proportion  of  the  terminal  elevator  storage 
capacity,  aside  from  that  of  grain  converters,  is  owned  by  railroads. 
Except  at  seaboard  points,  however,  such  storage;  is  not  usually 
^erated  by  the  railroads,  but  instead  is  leased  to  grain  merchandisers. 
The  rentals  paid  to  the  railroads  by  the  lessees  have  frequently  been 
very  low.  In  addition  the  lessee  concerns  have  often  received 
remuneration  from  the  railroads  in  the  form  of  allowances  for  elevat¬ 
ing  grain,  even  though  the  bulk  of  such  grain  may  have  been  owned 
by  the  lessee  merchandisers  in  question. 

One  of  the  chief  sources  of  profit  of  the  elevator  merchandiser  is 
from  the  mixing  of  lower  grade  grain  with  higher  grade.  This  raises 
the  average  grade  of  the  grain  and  thus  makes  it  possible  for  the 
mixer  to  procure  a  better  average  price  for  it.  In  thus  raising  the 
average  grade  some  of  the  grain  which  was  graded  in  the  lower 
grades  on  inspection  is  mixed  with  the  higher  grade  or  grades 
and  emerges  in  such  higher  grade  or  grades,  and  also  some  of  the 
grain  of  the  higher  grade  or  grades  whi(3i  is  mixed  may  emerge  in  a 
lower  grade  or  grades.  This  last  is  not  necessarily  the  case,  however, 
since  the  result  of  the  introduction  of  grain  of  a  lower  grade  into  grain 
of  a  higher  grade  may  be  merely  to  reduce  the  quality  of  the  higher 
grade  to  the  bottom  level  of  tne  inspection  requirements  for  that 
grade,  that  is,  make  the  mixture  what  is  commonly  called  ‘^skin” 
grade.  As  an  example  of  mixing  results  over  a  period  of  years  the 
combined  mixing  operations  of  several  elevators  at  Chicago  showed 
that  of  the  total  grain  received  “in”  45.7  per  cent  was  contract 
grade,  i.  e..  Nos.  1  and  2  of  certain  varieties,  while  on  the  ‘‘out-turn’’ 
or  grain  leaving  the  elevators  95  per  cent  of  the  total  was  contract 
grade. 

Most  of  the  terminal  market  exchanges  issue  official  prices  for  cash 
grain.  At  certain  markets  the  method  of  determining  cash  closing 
prices  is  by  applying  premiums  or  discounts  at  which  cash  grain  is 
selling  over  or  under  the  future,  to  the  future  closing  quotation,  in 
order  to  arrive  at  the  cash  close  for  the  day.  To  use  a  hypothetical 
case,  if  the  closing  price  committee  (usually  composed  of  three  or  four 


LETTER  OF  SUBMITTAL. 


XIII 


members  of  the  exchange)  finds  that  cash  grain  is  selling  at  2  cents 
under  the  future  price,  this  discount  would  be  deducted  from  the  last 
future  quotation,  say  $1.27,  giving  $1.25  as  the  cash  closing  price  for 
the  day.  A  study  of  cash  closing  prices  reveals  the  fact  that  these 
prices  are  much  more  frequently  below  than  above  the  prices  pre¬ 
vailing  during  the  day.  This  the  Commission  believes  to  be  partially 
due  to  the  fact  that  members  of  the  closing  price  committee  are  so 
frequently  buyers,  or  else  connected  with  houses  directly  or  indirectly 
interested  in  buving,  and  that  the  price  psychology  of  the  buyer  tends 
to  be  downward  rather  than  upward. 

Closing  prices  are,  as  a  rule,  used  as  basic  prices  for  country  pur¬ 
chasing.  These  quotations  are  printed  in  the  various  trade  publica¬ 
tions,  by  the  newspapers,  and  otherwise.  In  the  Northwest  the 
closing  prices  are  usually  employed  as  a  basis  by  the  Grain  Bulletin, 
a  privately  controlled  price  card  service,  sent  each  day  to  several 
thousand  country  elevators.  This  card  service  states  a  buying  price 
for  the  elevators  at  each  station;  in  other  words,  a  price  made  up  by 
deducting  from  terminal  market  prices  the  freight  to  the  local  station 
and  a  more  or  less  arbitrary  handling  margin  to  cover  the  elevator’s 
cost  and  profit.  This  inquiry  shows  that  while  this  service  is  not  now 
subject  to  private  and  interested  influence,  so  far  as  the  evidence  dis¬ 
closes,  it  was  srd)ject  to  such  influence  in  the  past  that  it  permitted 
alterations  in  quotations  at  interested  requests  and  has  been  used 

for  collusive  buying.  i  i  i 

The  Commission  believes  that  certain  changes  are  desirable  in  the 

grain  business,  particularly  at  terminal  markets.  These  changes  call 

for ;  .  .  . 

(1)  Improved  banking  arrangements  for  the  gram  movement  m  the 

Northwest.  .  . 

(2)  The  elimination  of  financing  of  commission  houses  by  terminal 

elevators  wherever  it  may  appear.  -i  i 

(3)  The  operation  of  public  terminal  elevators  by  railroad  com¬ 
panies  as  an  adjunct  to  the  transportation  service. 

(4)  Improvement  in  the  methods  of  making  up  cash  quotations. 

G5)  The  elimination  or  reduction  of  so-called  insurance  charges 

levied  on  country  shippers  at  the  Duluth  market. 

(6)  The  adoption  of  some  form  of  governmental  supervision  of 
privately  issued  country  price  reports  of  wide  circulation  such  as  the 
Grain  Bulletin  card. 

(7)  The  prohibition  of  cash  grain  scalping  by  concerns  acting 
directly  or  indirectly  as  commission  men  or  receivers. 

FINANCING. 

In  the  financing  of  the  cash  grain  business  improved  banking 
'  arrangements  are  needed  in  the  producing  areas  of  the  Northwest 
so  that  country  shippers  need  not  be  dependent  upon  terminal 
market  commission  houses  for  their  working  funds.  While,  in  other 
sections  of  the  country,  grain  is  financed  through  regular  banking 
channels,  the  country  dealer  in  the  Northwest  usually  draws  upon 
a  commission  house  for  operating  funds  and  thereby  becomes  obli¬ 
gated  to  ship  to  this  concern.  This  causes  commission-house  com¬ 
petition  in  financing  as  well  as  in  the  handling  of  grain,  which  m 
turn  results  in  the  assumption  of  heavy  financial  risks  by  the  com- 


XIV 


TERMINAL  GRAIN  MARKETING. 


mission  houses,  and  sometimes  the  acceptance  of  inadequate  security 
lor  the  funds  advanced.  It  also  probably  tends  to  keep  out  of  the 
co^ission  business  men  with  small  capital  or  credit. 

Moreover,  the  practice  leads  to  a  multiplication  of  solicitors  and 
expenses,  and  thus  has  a  tendency  to  create  high  commission  rates, 
inis  is  due  not  only  to  the  fact  that  such  financing  requires  extensive 
solicitation  to  secure  the  business  in  the  first  place,  but  also  to  the 
necessity  ol  maintaining  some  check  upon  the  subsequent  operations 
of  the  financed  elevators.  As  pointed  out  in  Volume  I,  however, 
f  of  evidence  to  indicate  that  in  a  large  portion 

of  the  JN  orthwest  the  elevators  can  borrow  more  cheaply  from  the 
commission  houses  than  from  the  local  banks.  As  long  as  this 
contmues  to  be  true,  it  is  doubtful  if  any  material  improvement 
wim  reference  to  commission-house  financing  can  be  expected. 

Ihe  financing  of  Duluth  commission  houses  by  terminal  elevator 
operators  tends  to  have  a  restrictive  effect  upon  competition  and 
should  be  eliminated.  Commission  houses  are  the  agents  of  country 
elevators  for  the  sale  of  their  gram  and  as  such  it  is  their  duty  to 
obtam  the  best  possible  prices.  Arrangements  under  which  they 
turn  over  pain  consigned  to  them  to  certain  terminal  elevators 
because  ol  funds  advanced  are  not  conducive  to  free  competition  in 
the  sale  of  gram  nor  presumably  to  the  consignees  procuring  the  best 
obtainable  price  therefor.  »  r  & 


PRIVATE  WIRES. 

The  private  wire  systems  were  established  primardy  for  future 
trading,  bi^  in  recent  years  have  gone  extensively  into  the  cash 
business.  Ibe  use  of  private  wires  in  connection  with  this  cash 
gram  business  has  been  bitterly  opposed  by  many  of  the  commission 
houses  on  the  ground  that  where  the  country  elevator  receives 
market  advice,  together  with  base-ball  scores  and  other  information 
over  private  wires,  it  is  influenced  to  give  its  business,  both  cash 
and  future,  to  the  house  furnishing  such  service,  while  a  firm  carry¬ 
ing  on  an  ordinary  cash  business  can  not  afford  the  heavy  investment 
requ^ed  for  pen  a,  comparatively  small  system  of  private  wires. 
On  the  other  hand,  it  is  pgued  that  the  solicitation  of  consignments 
y  wire  houses,  particularly  at  Chicago,  counteracts  to  a  certain 
ptent  the  efforts  of  termmal  elevator  owners  to  buy  directly  from 
e  country,  and  therelp  tends  to  sustain  the  volume  of  sample 

the^urchasem  floor  and  so  to  increase  competition  among 

So  far  as  the  conduct  of  the  cash  grain  commission  business  is 
cerned,  the  private  wire  is  an  expensive  facility.  Generally 

business  any  such  necessity  for  speed 
^  transactions  involved,  as  in  the  case  of  future  trading 

the  hedging  transactions  of  country  elevators. 
W  lie,  therefore,  it  may  be  that  this  is  an  economical  method  of 
hamlling  grain  purchases  and  sales,  as  long  as  cash  and  future  busi- 

^speculative  business  takes  care  of  the 
larger  slmre  of  the  expense,  it  by  no  means  follows  that  this  is  true 
If  private  wires  are  employed  for  the  transaction  of  only  the  cash 

oZrsnfflJ'i  busmess  including  hedges.  This  would  necessarily  re¬ 
quire  sufficiently  high  commission  rates  to  cover  the  entire  expense 


LETTER  OF  SUBMITTAL. 


XV 


of  the  facility  and  would  probably  tend  to  restrict  the  commission 
business  to  a  comparatively  few  concerns  possessing  large  capital. 

State  legislation  against  private  wire  houses  as  a  facility  for 
gambling  relates  chiefly  to  future  trading,  and  has  been  discussed  in 
Volume  V. 

REMEDIES  FOR  TERMINAL  ELEVATOR  SITUATION. 

Grain  merchandising  on  the  part  of  operators  of  licensed  public 
elevators  appears  to  be  contrary  to  sound  principles  of  public  ware¬ 
housing,  leading  to  dissatisfaction  on  the  part  of  growers  and  millers, 
and  to  ill  feeling  throughout  the  grain  trade.  This  situation  gives 
to  the  large  elevator  merchandisers  practical  control  of  deliverable 
grain  at  the  terminal  markets,  facilitates  the  manipulation  of  futures, 
and  has  doubtless  been  at  times  responsible  for  the  failure  of  the  cash 
and  future  markets  to  move  in  harmony. 

A  possible  remedy  for  the  existing  situation  is  to  make  it  practi¬ 
cable  for  grain  dealers  not  operating  elevators  to  store  grain  in  public 
elevators  in  competition  with  the  big  elevator  merchandisers.  To 
accomplish  this  would  apparently  require  a  reduction  in  storage 
charges.  But  the  indications  are  that  even  at  present  storage  rates 
a  purely  storage  and  transfer  elevator  can  not  be  profitably  operated 
at  interior  terminal  points.  This  difficulty  might  be  met  in  either  of 
two  ways.  The  railroads  might  be  required  to  operate  elevators  for 
the  convenience  of  their  shippers;  or  the  government,  presumably  the 
State  government,  might  operate  storage  elevators  at  rates  sufficiently 
low  to  permit  dealers  without  elevators  to  compete  with  the  elevator 
merchandisers. 

It  may  be  objected  to  proposed  remedies  that  the  operation  of 
public  warehouses  by  the  railroads  in  such  manner  or  at  such  storage 
rates  as  would  restore  the  possibility  of  the  utilization  of  public 
storage  by  cash  grain  handlers  generally  would  involve  a  loss  to  the 
railroads.  This  is  not  a  conclusive  objection  and  may  not  really 
apply  in  the  case  of  railroad  operations.  Kailroad  elevators  are  at 
present,  and  in  the  past,  have  been  leased  to  their  operators  at  rentals 
often  nominal  and  frequently  insufficient  to  afford  an  adequate 
return  on- the  investment.  Furthermore,  it  is  not  at  all  impossible 
that  railroad  elevators  could  be  operated  profitably  at  interior  ter¬ 
minals  if  the  storage  rates  were  made  sufficiently  low  to  enable  cash 
handlers  generally  to  employ  these  facilities  in  competition  with 
private  elevator  merchandisers.  Adequate  profit  from  a  purely 
storage  and  transfer  elevator  is  chiefly  a  question  of  volume  of  busi¬ 
ness.  If  rates  were  sufficiently  low  to  enable  dealers  without  eleva¬ 
tors  to  use  these  facilities,  there  should  be  a  vast  increase  in  the 
quantity  stored  by  grain  handlers  and  a  great  increase  in  the  degree 
of  utilization  of  capacity,  such  as  to  mean  possibly  a  direct  profit  as 
well  as  other  indirect  advantages  to  the  railroads  owning  the  elevators. 

The  restoration  of  a  normal  situation  as  regards  the  use  of  public 
storage  in  the  grain  trade  would  apparently  be  so  generally  beneficial 
to  the  trade  and  to  the  public  as  to  justify  appropriate  legislation. 

CASH  GRAIN  PRICES  AND  QUOTATIONS. 

Cash  grain  prices  as  at  present  reported  for  the  various  exchanges, 
and  the  methods  of  recording  and  computing  such  prices,  taking  the 


XVI 


TERMINAL  GRAIN  MARKETING. 


exchanges  as  a  whole,  are  not  sufficiently  accurate.  Terminal 
market  prices  serve  as  a  basis  for  the  prices  paid  in  the  country,  and 
it  is  therefore  of  vital  importance  to  the  grower  that  records  of  cash 
prices  actually  paid  should  be  as  complete  and  accurate  as  possible, 
and  that  any  prices  compiled  or  selected  from  them  for  publication 
and  circularizing  should  be  determined  as  objectively  and  correctly 
as  possible. 

In  the  first  place,  every  cash  sale  made  should  be  required  to  be 
reported  promptly,  together  with  the  time  of  the  transaction,  regard¬ 
less  of  whether  other  sales  have  been  made  at  the  same  time  and 
price  or  not. 

Second,  it  is  regarded  as  fundamental  that  in  the  issuance  of  prices, 
such  as  opening,  high,  low,  and  closing,  the  element  of  human  judg¬ 
ment  should  be,  so  far  as  practicable,  eliminated.  These  prices  ought 
to  represent  actual  purchases  and  sales,  so  far  as  possible,  and  in  the 
case  of;  opening  and  closing  quotations,  prices  on  transactions  within 
a  definite  period  of  the  opening  or  the  close.  Highs  and  lows  should 
likewise  represent  in  all  cases  actual  transactions.  If  it  is  found 
necessary  to  use  bid  or  asked  prices  or  nominal  prices  they  should  be 
so  labeled  and  any  necessary  explanations  made.  It  is  important, 
also,  that  the  procedure  of  closing  price  committees  should  be  more 
definitely  prescribed. 

Finally,  it  is  recommended  that  all  the  exchanges  should  publish 
quotations  on  a  uniform  basis,  each  kind  of  quotation  to  be  made  up 
by  as  nearly  uniform  methods  and  principles  as  practicable. 

The  exchanges  have  apparently  devoted  less  attention  to  these 
matters  than  their  importance  demands.  It  is  believed  that  they 
would  perform  a  considerable  public  service  if  they  would  undertake 
a  careful  study  of  the  situation,  with  a  view  to  the  establishment  of 
a  system  of  cash  price  quotations  along  the  lines  already  indicated, 
or  along  other  lines  if  they  should  seem  better  calculated  to  improve 
the  situation. 

INSURANCE  CHARGES  AT  DULUTH. 

For  several  years  Duluth  receivers  have  levied  so-called  insurance 
charges  upon  consignors  to  cover  an  alleged  liability  for  loss  on  grain 
after  delivery,  but  before  unloading  at  the  elevators.  While  the  ex¬ 
istence  of  any  such  liability  as  that  alleged  is  a  matter  of  dispute,  the 
best  evidence  available  would  indicate  that  it  does  not  exist. 

During  the  five  years  ending  with  1917  Duluth  grain  receivers  col¬ 
lected  for  such  insurance  charges  more  than  $69,000  in  excess  of  any 
expenditures  made  by  them  for  such  insurance,  but  these  insurance 
tolls  were  never  questioned  by  the  exchange  authorities.  The  rates  at 
which  the  insurance  was  billed  to  shippers  were  (on  the  basis  of  the 
1917  rate  card)  considerably  in  excess  of  the  rates  charged  by  regular - 
insurance  companies.  This  insurance  income,  therefore,  represented 
the  amount  charged  shippers  over  the  amount  paid  insurance  com¬ 
panies  where  the  commission  houses  insured  through  such  companies. 
Where  the  commission  men  carried  their  own  risks  (i.  e.,  did  not  pur¬ 
chase  insurance  from  insurance  companies)  this  income  theoretically 
represented  excess  of  charges  billed  over  losses  paid.  As  no  losses 
apparently  occurred,  the  income  was  presumably  the  total  amount 
of  charges  billed. 


LETTER  OF  SUBMITTAL. 


XVII 


Even  supposing  that  a  liability  for.  loss  actually  exists,  there  is  no 
justification  for  billing  shippers  a  charge  in  excess  of  regular  premium 
rates  for  insurance  in  the  case  of  companies  purchasing  insurance,  or 
in  excess  of  loss  ratios  in  the  case  of  those  companies  which  do  not 
purchase  regular  insurance  but  prefer  to  carry  their  own  risk. 

THE  GRAIN  BULLETIN. 

As  shown  in  Volume  I  of  this  report  the  Commission  is  in  possession 
of  hundreds  of  letters  from  the  files  of  line  companies  covering  the 
period  1912-1920,  which  clearly  evidence  either  agreements  as  to 
country  prices,  grades,  dockages,  etc.,  or  else  such  harmonious  and 
cooperative  action  with  reference  to  these  matters  as  would  bring 
about  practically  the  same  elimination  of  competition  as  could  be 
secured  by  more  specific  agreements.  Cooperative  or  farmers’ 
elevators,  and  independent  and  mill  elevators  are  also  frequently 
involved  in  these  agreements  and  practices.  In  meeting  compe¬ 
tition  there  are  numerous  indications  that  the  line  companies  not 
infrequently  have  worked  together  in  endeavoring  not  only  to  prevent 
competition  among  themselves  but  also  to  take  business  from  their 
competitors  of  other  types. 

Much  contention  has  obtained  as  to  the  relation  of  the  Grain  Bulle¬ 
tin  to  this  situation.  The  Grain  Bulletin  is  conveniently  adapted  to 
use  as  the  basis  for  price  agreements,  and  down  to  the  time  of  this 
investigation,  and  even  subsequent  thereto,  as  shown  in  Volume  I 
of  this  report,  the  card  has  been  repeatedly  and  continuously  so 
employed.  That  F.  R.  Durant,  proprietor  of  the  Grain  Bulletin, 
has  acted  in  collusion  with  the  line-elevator  companies  in  recent 
years  in  determining  the  daily  price  quotations  to  be  issued  at  par¬ 
ticular  stations  does  not  necessarily  follow.  The  conditions  surround¬ 
ing  the  issuance  of  the  card  is  a  separate  question  from  the  use  made 
of  the  card  by  subscribers  to  it. 

It  is  clear  that  the  Grain  Bulletin  was  originally  organized  and 
financed  by  some  Minneapolis  line-elevator  companies;  that  Mr. 
Durant  in  the  early  years  acted  for  the  line-elevator  companies  in 
pooling  arrangements,  and  until  a  comparatively  recent  date  handled 
for  them  questions  pertaining  to  the  closing  and  wrecking  of  country 
elevators  on  a  rental  basis,  and  received  and  disbursed  funds  for 
political  and  legislative  purposes  on  behalf  of  these  concerns.  Records 
of  disbursement  and  a  few  letters  showing  the  nature  of  these  activi¬ 
ties  are  printed  in  the  body  of  and  appendix  to  this  report. 

It  seems  fairly  certain  that  prior  to  1913  the  line-elevator  compa¬ 
nies  largely  influenced  the  price  policy  of  the  Grain  Bulletin  price 
card,  and  that  it  was  operated  to  a  greater  or  less  extent  in  their 
interest,  although  prices  were  also  adjusted  at  the  request  of  non¬ 
line  elevators.  Following  the  passage  of  State  antidiscrimination 
laws  of  1913,  special  local  card  adjustments  appear  to  have  been 
made  only  at  the  request  of  nonline  elevators  or  of  a  line  elevator 
which  desired  an  adjustment  for  all  of  its  stations.  In  1917,  under 
war  conditions,  Mr.  Durant  dropped  the  practice  of  adjusting  card 
prices  upon  request  (special  cards)  even  for  nonlines  and  has  not 
resumed  this  plan  so  far  as  any  evidence  has  been  obtained. 

56976“— 22 - 2, 


XVIII 


TERMIKAL  GRAIN  MARKETING. 


’’f  evidence  has  been 

tound,  JVIt.  Durant  does  not  appear  to  be  operating  the  Grain  Bulletin 

card  at  the  present  time  in  the  interest  of  any^ particular  class  of 
subscribers  or  as  a  price-fixing  mechanism,  whatever  he  did  in  the 

past  and  whatever  hjs  present  relations  with  the  line  companies 
are  in  political  and  other  activities.  companies 

thft*  InVL°f  the  Commission  is  of  the  opinion 

that  some  form  of  governmental  regulation  or  supervision  of  the 
card,  State  or  Federal,  is  probably  desirable.  e^’^ision  ol  the 

Just  what  form  this  regulation  should  take  would  require  a  much 
ore  detailed  canvass  of  the  situation  than  that  made  by  the  Com- 

mXSv  L\*e  the^r*^  “d  supervision  should 

probably  take  the  form  of  regular  reports  to  some  srovernmental 

agency.  All  such  reports  should  be  made  mattem  of  public  record! 

”i®'de  because  of  the  important  influ¬ 
ence  of  the  card  on  buying  prices  and  of  the  large  uncontrolled  and 
unsupervised  discretion  now  exercised  by  a  single  individual  who  is 
responsible  for  computing  and  sending  out  these  prices. 

CASH  GRAIN  SCALPING. 

it  nL  already  stated,  a  car  of  grain  is  held  to  he  scalped  when 

maTet  olheT^than®  B?"  “middlemen  in^ the  same 

market  other  than  the  consignee,  prior  to  delivery  on  either 

to-arrive  or  future  contracts,  or  prior  to  delivery  to  a  concern  or 

grain^  engaged  in  storing,  conditioning,  converting,  or  shipping 

Little  or  no  cash  grain  scalping  was  found  at  Chicago  or  Kansas 
City.  At  Minneapolis,  however,  the  results  of  the  tests  made  bv  the 

percentage  of  cars  scaB  in^this 

clea5v*’^eSaflishS’^^^i*i*^®tw"ir  ®®‘‘*P.®d  cars  certain  facts  were 
early  established,  (1)  that  the  consignments  of  certain  lars-e 

scalpers  are  much  more  heavily  scalped  than  the  consignments  of 

other  receivers;  (2)  that  the  two  largest  scalpers  irEernolis 

scalped  respectively  71  and  81  per  cent  of  the  cL  which  the^Cr! 

chased  froiri  each  other;  (3)  that  a  substantial  proportion  of  the  cars 

sMOTableTroShin^of'th^^  original  consignees;  (4)  that  a  con- 
b  aeraDle  proportion  of  the  scalped  cars  were  sold  by  the  scalper  on 

the  same  day  as  purchased,  some  being  scalped  oime  some  ^twice 
and  others  tW  times  on  the  same  day  ^  ’  '^®®’ 

Ihe  foregoing  facts  would  seem  to  indicate  that  scalping  as  it  has 

Lrj  nrocure'th^^  scalping  commissio/houses  to 

laii  to  procure  the  best  obtainable  prices  for  consignors 

lack  orsMdf  in“th‘p°F  ’^®  ‘'deged  to  be  due  to 

acK  01  slQll  on  the  part  of  the  consignee  seller,  but  there  is  no  excuse 

SaK°SdiF«f  ®e^lpers  whose  consigned 

gram  is,  as  indicated,  most  heavily  scalped.  The  mere  fact  that  an 

OTgamzation  is  a  large  scalper  would  indicate  that  it  has  in  its  emnlov 

^e^ttmiliaritv  within  competent  judges  of  grain'or  whriSyl 
great  lamiliarity  with  the  requirements  of  various  buyers  or  both 

The  proper  protection  of  the  interest  of  the  consi^oT  ought  to 


LETTER  OF  SUBMITTAL. 


XIX 


require  that  the  best  talents  of  a  commission-house  organization 
should  be  employed  for  the  purpose  of  selling  its  consignments. 
Scalping,  however,  affords  an  outside  profit  over  and  above  the  com¬ 
mission  obtained  by  a  receiver  for  selling  grain  and  in  addition,  in 
the  case  of  a  salaried  employee  scalping  on  joint  account  for  such  a 
house,  an  extra  source*of  revenue  besides  his  salary.  So  long  as  this 
is  the  case  it  certainly  would  not  be  surprising  if  many  scalping  ope^ 
ators  were  more  interested  in  the  possibilities  of  extra  profit  from  such 
operations  than  in  procuring  the  best  possible  prices  obtainable  for 
consigned  grain  which  they  are  supposed  to  sell.  • 

The  foregoing  considerations  suggest  the  conclusion  that  scalping 
as  conducted  at  Minneapolis  has  been  to  a  large  degree  at  the 
expense  of  the  consignment  business  and  of  the  consignors  of  the. 
grain  in  at  least  a  considerable  proportion  of  cases.  Commission 
houses  devoting  their  entire  time  and  attention  solely  to  the  sale  of 
grain  should  be  able  to  absorb  a  very  considerable  proportion  of 
the  profits  now  obtained  by  the  scalpers  and  thus  to  procure  a  higher 
price  for  consigned  cars  which  are  scalped  than  is  now  obtained  for 
such  cars  on  the  first  sale.  It  is  believed  that  the  practice  tends 
to  collusion,  logrolling,  lack  of  attention  to  selling  on  the  P^^t  of 
consignees,  and  to  sales  to  scalpers  when  better  prices  could  be 
realized  in  the  absence  of  such  transactions.  If  there  are  any  ad¬ 
vantages  to  the  practice  they  should  be  obtainable  through  the 
operations  of  scalpers  who  are  not  connected,  either  dire^ly  or 
indirectly,  with  commission-house  consignees  or  concerns  affiliated 

with  such  consignees.  ,  .  i  j  .i,  ^ 

For  these  reasons,  therefore,  the  Commission  concludes  that  cash 
grain  scalping  by  concerns  or  individuals  in  any  way  connected  with 
the  cash  grain  commission  business,  either  directly  or  indirectly, 
should  be  strictly  forbidden. 

Respectfully,  _  ^  . 

Nelson  B.  Gaskill,  Chairman. 

Victor  Murdock. 

John  F.  Nugent. 

Huston  Thompson 


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SUMMARY. 


The  report  on  Terminal  Grain  Marketing  (Volume  III  of  the  Report 
on  the  Grain  Trade)  deals  with  the  handling  of  cash  gram  by  the 
various  factors  at  the  terminal  markets. 


GRAIN  PRODUCTION  AND  MARKETING  MOVEMENT. 


most  important  surplus  wheat-producing  areas  m 
the  United  States  are  the  spring  wheat  area  in  the  Northwest,  center¬ 
ing  in  the  Dakotas  and  including  Minnesota  and  Montana,  the  hard 
winter  wheat  area,  centering  in  Kansas  and  including  Nebraska,  parts 
of  Oklahoma,  Nevada,  and  Texas,  and  the  smaller,  Imt  proimc 
wheat  area  of  the  Pacific  Northwest.  Minneapolis  and  Duluth  are 
the  principal  markets  for  the  carlot  movement  in  the  spring  wheat 
areaf while  Kansas  City,  Chicago,  St.  Louis,  and  Omaha  are  the  chief 
markets  for  the  hard  winter  wheat  movement.  The  distribution  of 
the  hard  winter  wheat  crop  is  much  more  widespread  than  that  ot  the 
hard  spring  crop.  The  available  information  would  indicate  that 
exports  of  har(i  winter  wheat  are  both  absolutely  and  relatively 
grkter  than  those  of  hard  spring,  the  demand  of  domestic  mills, 
particularly  the  larger  mills  in  the  vicinity  of  Minneapolis,  leaving 
only  a  negligible  quantity  of  hard  spring  wheat  for  export. 

Com.— The  heaviest  production  of  corn  centers  in  Iowa  and  Illinois, 
although  corn  is  pne  oi  the  most  widely  distributed  crop^  Chicago 
is  the  greatest  distributing  center  for  corn  in  the  United  States,  and 
the  inspections  indicate  that  for  1920-21  the  other  primary  markets, 
in  the  order  of  importance  next  to  Chicago,  were  St.  Louis,  Kansas 
Citv,  Milwaukee,  Omaha,  and  Indianapolis.  It  is  estimated  that 
about  80  per  cent  of  the  corn  crop  is  consumed  on  farms  where  grown, 
and  the  proportion  of  the  corn  crop  marketed  represents  m  con¬ 
sequence  but  a  small  proportion  of  the  entire  crop.  The  size  ot 
the  crop,  however,  is  so  great  that  the  carlot  movement  ot  corn  is 
heavy.  Approximately  3  per  cent  of  the  corn  crop  has  been  normally 
absorbed  by  the  manufacturers  of  corn  meal;  about  1  per  cent  in  the 
production  of  grits,  and  about  2  per  cent  in  the  manufacture  ot  corn 
starch  and  glucose.  The  export  demand  for  corn  has  never  been 


§ats. — The  area  of  surplus  oats  production  in  the  United  States  has 
conformed  closely  to  that  of  corn,  except  that  oats  are  raised  m  lar^e 
quantities  considerably  farther  north.  Thus,  while  Iowa  and  Illinois 
are  the  leading  States  for  both  oats  and  corn  production,  the  area  ol 
heaviest  oats  production  extends  into  Minnesota,  Wisconsin,  and  other 
States  to  the  north  of  the  corn  belt.  As  with  corn,  the  bulk  of  the 
oats  crop  (about  70  per  cent)  is  consumed  on  the 
80  per  cent  of  the  remainder  comes  from  the  North  Central  States. 
Chicago  is  the  chief  outlet  for  oats  as  well  as  corn.  Minneapolis,  Mil¬ 
waukee,  and  St.  Louis  are  normally  the  next  largest  oats  markets. 


^  TERMINAL  GRAIN  MARKETING. 

Bye  QT^  larley.—kA  compared  with  wheat,  corn,  or  oats  the  barlev 
and  particularly  the  rye  crops  are  very  small.  The  chief  barley  product 

in®  United  States  are  the  extreme  West,  particularly 
Cadiforma,  and  the  upper  M  ssissippi  Valley  States-Miilnesotrthe 
Dakotas,  and  Wisconsin.  The  leacfing  States  in  the  rye  production 
have  been  Wisconsin,  Minnesota,  Michigan,  Pennsylvania,  and  North 
Dakota.  Feeding  on  the  farms  accounts  for  more  than  half  of  the 
barley  crop.  Minneapolis  has  been  the  chief  market  for  barley  and 
also  rye,  and  Chicago,  Milwaukee,  and  Duluth  are  next  in  importence 
in  each  of  these  grains.  During  the  war  a  considerable  proportion  of 

b^s  bpiin  ^  crop  was  exported.  Since  the  adoption  of  profcbition  there 
has  been  a  small  increase  in  the  consumption  of  rye  by  flour  mills  and 
relative  to  the  size  of  the  crop  an  extremely  heavy  exportation  of  this 
cereal  to  Europe.  A  considerable  proportion  of  the  Minneapolis 
receipts  have  been  consumed  by  the  local  mills.  ^ 

RECEIVING  AND  PURCHASING  PROM  COUNTRY  POINTS. 

ConsMftmenf  Jus W.— Grain  comes  into  the  primary  markets 
either  by  shipment  on  consignment  to  a  commission  house  to  be 

shinn^*^  i®fi,^^  Purchase  from  the  country 

V  *  “ethod  the  gram  is  usually  sold  by  sample  on 

ffrade^’’  fn®!;  officially  inipecteS  and 

of  o  ^  F  ^  second  method,  which  comprises  various  conditions 

samnbn^^^  *0  delivery,  and  the  operations  of 

amphng,  inspecting  and  weighing  take  place  when  the  grain  is 

delivered.  Frequently  the  commission  houses  handle  direct  transac¬ 
tions  in  addition  to  their  consignment  business.  The  consignment 
business  holds  a  prominent  place  in  the  cash  trading  of  all  the  larger 

on  markets  has  been  carrfed 

on  tor  a  long  period  of  time. 

A  merchant. — The  commission  merchant  may  be 

dehned  as  one  who  acts  as  a  selling  agent  of  the  shipper  and  who 
does  not  take  title  to  the  gram  shipped,  although  frequently  securing 

reclTvffiVbns-n^°“i^'  advances  made  against  it.  Incidental  to  thf 
receivmg  business  the  commission  man  or  receiver  frequently  under¬ 
takes  other  functions  connected  with  the  marketing  of  grain  for 
country  shippers.  Thus  the  commission  man  may  finance  in  part  or 
a  most  entirely  the  operations  of  the  country  elevators.  He  may 
buy  and  sell  futures  to  cover  hedging  accounts  of  his  country  elevator 
customers  In  some  cases,  particularly  in  the  Northwest,  he  may 

f asMon^^fl  c,  the  country  elevator  in  much  the  same 

ashion  as  the  head  office  of  a  line-elevator  company  supervises  the 
operations  of  its  country  stations.  As  a  rule  tois^  is  Tound  only 
m  those  cases  where  the  commission  house  is  financing  the  elevator 
The  commission  house  may  also  supply  country  Shippers  with 
market  information,  assist  in  procuring  cars  for  shipment,  and  arrange 
£simWe  conditioning  of  grain  in  terminal  houses  when 

thr  fntire«tl  nf '  iT®®  ‘^®  ““  is  expected  to  protect 

the  interests  of  the  consignor  with  reference  to  the  inspection 

*v®  terminal  market,  md  to 

call  for  remspection  when  the  same  appears  to  be  desirable 

business  three  competitive  factors 
appear  to  be  of  special  importance;  (1)  The  employment  of  traveling 


O'. 

r  . 

-V 

>T 


1 


1 


SUMMAKY. 


3 


solicitors  to  canvass  the  country  elevators;  (2)  the  advance  of  funds 
on  open  account  to  country  shippers;  and  (3)  the  use  of  private  wire 
systems  which  were  developed  primarily  for  handling  business  m 

^^^Solidtors.— The  primary  business  of  the  commission-house  solicitor 
is  to  procure  the  business  of  country  elevators  and  other  country 
shippers.  In  the  Northwest  this  solicitation  is  largely  based  upon 
offers  to  finance,  and  a  commission  house  that  is  liberal  m  the  amoun 
and  terms  of  its  financing  is  very  likely  to  procure  the  business. 
Where  a  country  elevator  is  financed,  solicitors  are  also  expected  to 
keep  a  check  upon  the  financial  condition  Oif  the  house  that  is,  o 
serve  as  auditors  as  well  as  solicitors.  In  addition,  solicitors  may  ai 
and  assist  in  procuring  country  managers,  advise  as  to  correct 
operating  and  business  methods,  and  sometimes,  financing  is 

involved,  practically  supervise  the  entire  operations  of  the  elevator. 

The  employment  of  solicitors  appears  to  have  been  greatly  over¬ 
done  in  the  Northwest,  entailing  large  items  of  expense.  I  e 
inquiry  showed  that  a  majority  of  the  Minneapolis  commission 
houses  employed  from  two  to  four  solicitors  and  a  few  firms  main¬ 
tained  as  many  as  six  solicitors  in  the  field  at  salaries  rangmg 
$200  to  $350  per  month.  The  employment  of  these  solicitors  in  the 
latter  area  has  been  frequently  criticized,  and  in  many  cases  by  the 
commission  men  themselves,  on  the  ground  of  the  large  expense. 

Owing  to  a  variety  of  factors  the  financing  of  country  shippers 
has  become  in  a  high  degree  a  function  of  the  commission  houses  m  a 
great  part  of  the  territory  tributary  to  Minneapolis  and  Dulutfi.  i  e 
proportion  of  open  account  shippers,  i.  e.,  elevators  given  a  drawing 
account  against  the  commission  house  up  to  a  certain  amount,  as 
reported  by  firms  in  that  area,-  has  run  from  about  75  per  cent  to  90 
per  cent  of  the  customers  of  each  commission  house,  though  Ih®!*® 
have  been  a  few  large  receivers  in  the  Northwest  who  have 
to  finance  country  elevator  consignors.  I^^^^asj3een  estimated  that 
credit  extensions  by  commission  men  in  the  Northwest  have  frequently 
aggregated  over  $100,000,000  for  a  single  crop  year.  Some  idea 
of  the  extent  of  these  advances  can  be  gained  from  the  fact  that  tfie 
commission  merchants’  association  in  1917  at  Minneapolis  and 
Duluth  proposed  to  restrict  loans  to  a  maximum  of  $45,000  to  eacfi 

^^loommission  men  usually  have  figured  on  a  spread  of  about  1  per 
cent  between  country  and  terminal  rates  of  inter^t,  though  m  the 
last  year  or  two  the  spread  has  been  higher.  Thus  m  1920  , 

according  to  the  best  available  information,  the  commission  Rouses 
were  borrowing  at  about  7i  and  loaning  at  about  9  per  cent.  In 
practice  a  formal  agreement  as  to  the  interest  rates  has  been 
Lch  year  by  the  commission  merchants’  associations  at  mnneapolis 
and  Duluth,  and  deviations  from  the  rate  have  been  subject  to  action 

by  these  associations.  „  ,  cAaxra 

Personal  notes  signed  by  the  directors  and  managers  of  the  eleva¬ 
tors  have  been  required  from  a  varymg  proportion  of  the  ^anced 
elpvators  as  secuntv  for  the  loans.  In  many  cases,  however,  no 

security  at  all  is  reqbred.  This  lack  f  a®  ^ 

largety  due  to  the  severity  of  competition  which  leads  ^ 
liberal  advances  of  funds  than  would  be  made  by  a  bank.  Ihe  tact 


4 


TERMINAL  GRAIN  MARKETING. 


that  the  financing  is  carried  on  as  a  part  of  the  commission  business 
and  not  solely  as  a  banking  function,  however,  reduces  the  liability 
to  loss.  Ihe  financed  shippers  consign  and  ship  the  bulk  of  then- 
gram  to  the  houses  extending  the  credit,  and  the  money  is  practically 
always  loaned  with  the  assurance  of  receiving  the  actual  gram. 

cases  contracts  to  consign  and  ship  to  the  financing  house  are 
made,  but  this  is  often  regarded  as  unnecessary,  since,  as  a  rule  it 
sidCTatkm  ^  understood  that  the  advances  are  made  upon  this  con- 

The  supervision  which  is  exercised  by  the  commission  houses  over 
financed  elevators  through  their  traveling  solicitors,  as  stated  above, 
tends  to  reduce  the  commission  house’s  possibility  of  loss,  and  many 
such  firms  also  require  that  grain  shall  be  hedged  as  soon  as  pur¬ 
chased.  Financing  has  apparently  added  undue  elements  of  risk  to 
the  commission  business,  and  probably  tends  to  keep  out  of  it  men 
of  small  capital  and  credit  facilities  in  this  area.  It  is  also  due  largely 

to  unancmg  that  so  many  solicitors  are  employed. 

Minneapolis  and  Duluth  commission  merchants’  associations  haye 
at  various  times  considered  the  matter  of  financing  and  passed 
resolutions  advocating  its  restriction  or  elimination.  On  the  other 
hand,  there  are  certain  arguments  advanced  in  favor  of  the  practice. 

any  of  the  country  elevators  in  the  Northwest  have  reported  that 
they  can  obtam  funds  cheaper  and  in  larger  amounts  through  the 
commission  men  than  through  the  local  banks.  The  commission  men 
apparently  agree  that  it  creates  a  steady  volume  of  business  and  thus 
makes  for  economy  Furthermore,  in  order  to  finance  country  ele¬ 
vators,  either  considerable  capital  or  credit  is  required,  so  that  only 
men  of  reliability  and  standing  can  go  into  the  business.  The  system 
also  frequently  result^  as  stated,  in  the  commission  men  supervising 
toe  elevators  in  an  effort  to  prevent  them  from  sustaining  losses^ 
Repidmg  this  form  of  financing  the  Federal  Land  Bank  of  St.  Paul 
Mates  that  it  was  about  the  only  way  the  elevators  could  secure 
mopy,  and  the  commission  houses  have  really  made  it  possible  for 
them  to  run  their  farmers  elevators  m  many  cases  where  they  would 

otherwise  not  have  been  able  to  operate  at  all.” 

Financing  hy  terminal  elevator  companies  at  Dnluth. — The  Duluth 
commission  firms  have  frequently  been  financed  to  a  large  extent  by 
loans  from  terminal  elevator  companies  rather  than  by  banks.  Two 
of  the  large  terminal  elevator  companies  have  regularly  loaned  huge 

tem^whom^tL^'fi^  ^  secured  by  grain  paper,  to  commission  houses 
d  commission  firms  so  financed  have 

nrobol^lt^n®^  the  large  commission  houses  in  the  market,  handling 
probably  60  per  cent  of  the  gram  received  at  that  market  during  the 
period  19ipi3  to  1^6-17.  An  officer  of  one  of  the  elevator  lorn- 
panies  deckred  that  there  was  no  written  contract  of  any  kind 
between  a  financing  elevator  and  the  commission  house,  but  Added: 
We  re  not  going  to  loan,  unless  he  gives  us  his  business.^^ 

Conclusvons  onfiTiancing.— Improved  banking  facilities  are  needed 
m  the  producmg  peas  of  the  Northwest,  so  that  country  shippers 
need  not  be  depndent  upon  t^minal  market  commission  louses^ for 
their  working  funds  While  in  other  sections  of  the  country  the 
gram  movement  is  financed  through  regular  banking  channels  the 
country  dealer  m  the  Northwest  frequently  draws  upon  a  commisskn 


SUMMARY. 


5 


house  for  operating  funds  and  thereby  becomes  obligated  to  ship  to 
it  This  results  in  competition  in  financing  as  well  as  in  the  handling 
of  grain.  This  competition  in  turn  results  in  the  assumption  ot  heavy 
financial  risks  by  the  commission  houses,  dnd  sometimes  in  the  ac¬ 
ceptance  of  inadequate  security  for  the  funds  advanced,  it  also 
probably  tends  to  keep  out  of  the  commission  business  men  with 

small  capital  and  lines  of  credit.  i  .  t  x-  i*  r  u 

Moreover,  the  practice  leads  to  a  multiplication  of  solicitors  and 
to  expenses  for  solicitation  greatly  in  excess  of  those  incurred  by 
commission  houses  operating  in  the  territory  outside  the  Northwest, 
and  thus  has  a  tendency  to  create  high  commission  rates,  ihis  is 
due  not  only  to  the  fact  that  such  financing  requires  extensive  solici¬ 
tation  to  secure  the  business  in  the  first  place,  but  also  to  the  necessity 
of  maintaining  some  check  upon  the  subsequent  operations  ot  the 

financed  elevators.  .  i.  j  i  ^ 

As  pointed  out  in  Volume  I,  however,  there  is  a  great  deal  ot 

evidence  to  indicate  that  in  a  large  portion  of  the  Northwest  the 
elevators  can  borrow  more  cheaply  from  the  commission  houses  than 
from  the  local  banks.  As  long  as  this  is  the  case,  it  is  doubtful  if  a,ny 
material  improvement  with  reference  to  commission-house  financing 

can  be  expected.  ,  ,  ^  i  i  + 

The  financing  of  Duluth  commission  houses  by  terminal  elevator 

operators  tends  to  have  a  restrictive  effect  upon  competition,  and 
the  practice  should  be  abolished.  Commission  houses  are  the  agents 
of  country  elevators  for  the  sale  of  their  gram  and  as  such  it  is  their 
duty  to  obtain  the  best  possible  price  for  that  gram.  Arrangements 
under  which  they  turn  over  gram  consigned  to  them  to  certain 
terminal  elevators  because  of  financing  is  not  conducive  to  free 
competition  in  the  sale  of  grain  nor  presumably  to  the  consignees 
procuring  the  best  obtainable  price  therefor. 

^  Purchasinq  direct.— D'woct  purchases  of  gram  may  be  made  on  the 
basis  of  “net,  your  station,”  i.  e.,  f.  o.  b.  cars  country  station  track, 
or  “delivered  at  the  terminal  market.”  In  the  former  case  the 
buying  is  commonly  known  as  “on-track”  purchasing,  aM  m  the 
latter  case  as  “to-arrive”  purchasing.  These  direct  purchases  are 
more  often  on  a  grade  than  a  sample  basis,  though  in  some  cases 
samples  are  used.  Such  transactions  most  often  originate  Jh® 
terminal  market,  though  they  may  originate  in  the  country. 
exchange  hours  direct  bids  are  sometimes  made  to  country  points 
by  wire  for  immediate  acceptance.  After  exchange  hours  it  is  cus¬ 
tomary  for  many  firms  at  the  primary  markets  to  send  out  over¬ 
night  bids,  usually  on  postal  cards,  for  acceptance  prior  to  the  open¬ 
ing  of  the  exchange  on  the  next  business  day.  Private  wire  systems 
out  of  Chicago  are  employed  for  making  direct  bids  at  all  times.  At 
several  markets  the  practice  of  “  bidding  the  country  after  exchange 
hours  has  been  sufficiently  extensive  to  lead  to  the  adoption  of  rules 
for  its  regulation,  particularly  in  connection  with  maintenance  of 
uniform  rates  of  commission  and  the  uniform  commission  rule. 
Grain  both  on-track’’  and  ‘  To-arrive”  is  usually  bought  to  be  shipped 

or  to  arrive  within  a  specified  period  of  time.  •  •  +i  ^ 

The  most  conspicuous  effect  of  the  direct  marketing  of  gram  is  the 
increase  in  cash  trading  off  the  exchange  floor,  which  naturally  tends 
^narrow  the  trading^  the  floor.  Opposition  to  its  increase  has 


6 


termustal  grain  marketing. 


pnerally  come  from  commission  men  and  their  customers  and  oth^r 
traders  who  are  especially  interested  in  the  StTnTnce  of  thp 

Direct  buying  is  favored,  on  the  other  hand  bv 
„  X  1  such  as  terminal  elevator  operators  who  are  inter 

be  bouSt  and  sold 

satisfactorily  on  a  grade  basis  and  more  or  less  irresnef tivp  nf 
premium  qualities  in  particular  cars.  It  has  been  ar^nied  in  nnr. 
tion  to  purchasing  d/ect  that  it  results  rn  concentrftTi 

.feSi  “  - »  ‘Vis 

ES: S= 

ci,i‘S  fcSJr'' 

-i,7.S it,*  Sv£“ro:' 

Jnd‘^!hif  Is  involved  as  i?tiieTa“^of7uLre  ope?a\fon^^ 

elevators.  Wldle  *^tLrIfore°h*^mav*^bf  "tf  country 

^eS  f'i^°??ngTseh  SfSre\u\Vri“l 

jie  ex^ftr  t  ra^„^?xTs  tferw^bthSlfe 

wires  were  employed  for  the  transaction  of  only  the 
cientl  V  This  would  necesiril^involye 

woulXrolmbfrt^nTt’o  expense  of  the  facility  and 

ness.  P  ^®"'*  *0  ^'gh  concentration  of  the  commission  busi- 

TERMINAL  ELEVATOR  FACILITIES. 

vessel  to  another,  either  directly  or  bf  transfereiny  to  thehT^*'’i°'' 
storage  tanks  and  subsequently  loading  out  elevator 

itioning,  which  processes  inyolvrs^enint’  0001^^-1 

drying  wet  grmn,  Smutting,  bleaching,  :trfnd  (4)  "rfixbg^ 


SUM  MAE  Y. 


7 


260  000  000  bushels.  Fully  80  per  cent  of  this  capacity  is  operated 
by  nrivate  dealers  in  grain.  Nearly  half  of  the  total  capacity  is 
included  in  privately  operated  houses,  i.  c.,not  licensed  nor  operated 
as  public  warehouses.  Over  30  per  cent  of  the  total  is  operated  under 
State  license,  but  largely  for  account  of  the  operators  Possib  y  20 
per  cent  of  the  total  is  operated  on  a  public  utility  basis,  and  this 
includes  all  the  houses  operated  by  railroads,  public  agencies,  and 
public  warehousemen  not  dealing  in  grain,  hrom  a  commercia 
standpoint,  therefore,  the  aggregate  elevator  capacity  controlled  by 
private  dealers  includes  the  bulk  of  storage  in  elevatom  licensed  as 
public  warehouses  by  the  States.  This  is  true  of  most  of  the  licensed 
public  elevators  at  Minneapolis,  Chicago,  and  Kansas  City,  and  is  m 
marked  contrast  to  the  situation  in  Canada.  Except  perhaps  at 
seaboard  points,  it  appears  to  be  generally  true  that  terminal  eieva- 
ator  companies  can  obtain  a  higher  rate  of  profit  by  combmmg  mer¬ 
chandising  with  storage  and  other  functions,  and  that  therem  lies  in 
part  the  reason  for  the  existing  situation  m  the  United  States. 

Leasirn/.— Grain  elevators  at  terminal  points  have  always  been 
largely  owned  by  the  railroads  as  a  part  of  their  terminal  facilities. 
To-day  approximately  35  per  cent  of  the  commercial  terminal 
elevator  capacity  of  the  country  is  owned  by  railroads.  At  interior 
terminal  points  most  of  these  railroad-owned  elevators  are  leased  to 
private  dealers.  At  the  seaboard  points  the  railroads,  on  the  other 
hand,  own  about  69  per  cent  of  the  total  storage  capacity  and  retain 

in  most  instances  operating  control.  ,  p 

There  are  various  reasons  for  the  development  of  the  practice 
of  leasing  terminal  elevators  by  the  railroads.  In  the  first  place  the 
railroads  have  found  that  tonnage  can  be  obtained  fully  as  well,  it 
not  more  effectively,  by  leasing  the  house  to  a  large  dealer  who  has 
every  incentive  to  route  the  -gram  over  the  lessor  s  line.  As  the 
interior  markets  are  frequently  the  terminals  of  various  roads,  so 
that -some  lines  have  no  interest  in  the  gram  after  it  reaches  the 
terminal  and  others  no  interest  in  the  gram  except  after  its  arrival, 
there  has  often  been  an  advantage  in  the  railroad  company  leasing  a 
terminal  elevator  to  an  individual  dealer  with  the  specific  agreement 
tLt  the  grain  owned  by  the  lessee  shall  be  brought  m  or  shipped  out 
over  the  lessor’s  railroad  where  possible.  1  he  second  reason  for  leas¬ 
ing  frequently  advanced  is  that  of  operating  cost;  that  at  competi¬ 
tive  points  in  the  interior  a  terminal  elevator  affords  the  railroad  no 
profit^and  may  be  operated  at  a  loss.  To  lease  a  house  at  a  fixed 
rental  may  afford  a  reduction  m  expense  and  may  al^  eliminate  cer- 
tahi  vexatious  operating  problems  at  the  terminal.  But  the  railroad 
carriers  having  constructed  elevator  facilities  at  the  terminal  niarkets, 
have  frequently  leased  such  property  to  large  merchandising  and 
shipping  companies  as  a  means  of  developing  traffic  on  highly  fa vor- 
able^terms  to  the  lessee.  Investigation  of  the  leasing  situation  at 
Kansas  City  in  1918  by  the  Interstate  Commerce  Commission  devel- 
oU  tfie  flct  that  an  the  public  elevators  "^Kansas  City  were 
o^ed  by  the  railroads  (except  two  small  elevators),  and  that  the 
control  of  these  railroad  properties  by  the  six  or  seven  lessees  gave 
them  an  advantage  in  buying  and  selling  gram  and  placed  the  other 
grain  dealers  at  that  market  at  a  disadvantage. 


8 


TERMINAL  GRAIN  MARKETING. 


Elevation  aZZowonces.— Elevation  allowances  by  the  railroads  to 
the  operators  of  terminal  elevators  have  also  given  rise  to  a  great 
deal  oi  criticism.  Contracts  have  been  entered  into  between  rail¬ 
roads  and  gram  merchandising  concerns  in  which  the  railroad  com¬ 
panies  have  agreed  to  pay  certain  allowances  per  bushel  to  concerns 
operating  terminal  elevators  for  providing  elevation  and  storage 
facilities  at  terminal  poin^ts.  In  a  number  of  these  cases  it  was  found 
that  the  gram  handled  by  the  elevator  m  question  at  the  terminal 
point  (for  which  handling  the  railroad  had  agreed  to  pay  the  elevator 
company)  was  chiefly  the  property  of  the  latter,  and  a  number  of  suits 
on  the  ground  that  this  represented  unlawful  discrim¬ 
ination.  Ihe  Interstate  Commerce  Commission  held  that  elevator 
companies  could  not  be  properly  remunerated  for  transportation 
services,  e  g.,  elevation  and  transfer  performed  for  the  railroad 
Without  allowing  them  commercial  benefits  amounting  to  an  unlawful 
iscrimm^ion  against  other  dealers.  The  Supreme  Court,  however 

carriers  were  required  to  provide  elevation 
under  the  interstate  commerce  acts  and  that  regulation  of  the  trade 
advantage  accruing  to  operators  performing  elevation  services  for 
the  carriers  was  without  the  scope  of  the  Commission’s  power 

ha principal  grain-producing  States 
th  Poljce  power,  passed  laws  declaring  that 

the  elev^ion  and  storage  of  gram  under  certain  conditions  is  a  busi¬ 
ness  so  affected  with  a  public  interest  as  to  require  license  and  regula- 

f  but  few  exceptions,  been  upheld  by  the 

courts.  One  of  the  primwy  purposes  of  the  State  regulation  of 
elevators  and  warehouses  is  to  secure  the  validity  and  negotiability 
of  w^ehquse  receipts.  The  warehouse  laws  of  the  grain  States  in¬ 
variably  include  certain  provisions  with  reference  to  the  form  and 
substance  of  such  receipts,  the  manner  of  issuing  and  canceling  them 
and  the  conditions  demanded  of  the  warehouseman.  In  Illinois  a 
perpetual  injunction  was  granted  by  the  courts  against  Chicago  ware¬ 
housemen  enjoining  them  from  storing  their  own  grain  in  the  public  ' 
bins.  Subsequent  to  this  decision  operators  of  the  public  warelmuses 

the  ruling  of  the  courts^has  been  effeX- 
al  y  evaded.  The.  principal  method  has  been  for  an  operator  to  sell 

ftinf elevator  to  another  concern  under  an  agreement 
that  the  gram  is  to  go  to  store”  in  the  public  warehouse  which  the 
^ller  operates,  there  being  deducted  from  the  prevailing  prices  a 

to  cover  the  expenses  for  storage  and  allow  a  small 
brok^age  to  the  purchaser  m  compensation. 

_  Eubhc  warehousing  has  for  a  long  time  been  on  the  decline.  This 

forwarding.markets  such  as  Chicago 
and^uluth.  Various  causes  have  been  assigned  for  this  decline  It 
has  been  attributed  partly  to  the  fact  thaUhe  entrance  of  the  public 

gram  business  has  made  it  impossible 
store  m  the  public  elevator  in  competition  with 
uch  merchandisers  who  either  have  no  storage  to  pay  except  to  them- 

Regular  elevators.  ^At  those  markets  where  members  of  the  ex¬ 
changes  conduct  trading  in  futures  the  exchanges  declare  certain 
houses  to  be  “regular”  for  the  storage  and  delivery  of  grab  on 


SUMMARY. 


9 


future  contracts.  Grain  in  such  houses  is  registered  and  subjected 
to  inspection  by  exchange  officials.  l.he  practice  seems  to  have  origi¬ 
nated  in  Chicago  in  the  decade  1870-1880.  The  requirements  gen¬ 
erally  made  of  regular  elevators  indicate  that  the  term  bears  no 
specific  relation  to  the  elevation  and  storage  of  cash  gram.  In  Chi- 
cat'o  and  Minneapolis  the  regular  warehouse  must  under  the  exchange 
rufes  bo  a  public  warehouse  in  conformity  with  State  laws.  At 
Duluth  and  Kansas  City,  on  the  other  hand,  the  exchanges  do  not 
require  that  a  regular  warehouseman  shall  hold  a  State  license,  and 
houses  operated  wholly  for  private  account  have  been  declared  regular 
and  placed  under  exchange  supervision  for  handling  contract  gram. 

Merchandising  and  shifping.—ThQ  public  or  private  terminal  eleva¬ 
tor  companies  operating  as  grain  dealers  are  the  largest  merchandisers 
and  distributors  in  the  trade.  Several  of  the  larger  elevatorcom- 
panies  combine  with  merchandising  and  warehousing  a  cash  and 
future  commission  business  and  the  operation  of  country  elevators. 

The  chief  profit  of  terminal  elevator  merchandisers  is  ol  course 
derived  from  the  purchase  and  sale  of  grain.  The  indications  are, 
particularly  at  Chicago,  that  a  substantial  proportion  ol  this  profit 
IS  often  realized  by  the  mixing  of  different  grades  of  gram  to  raise  the 


commercial  value.  •  i  i  i. 

In  addition  to  the  foregoing  sources  of  profit  terminal  elevator 

companies  operating  as  merchandisers  derive  a  considerable  revenue 
from  various  auxiliary  operations,  such  as  the  sale  ol  screenings 
obtained  from  cleaning  operations,  transactions  in  the  futures  mar¬ 
ket,  and  from  the  storage,  transfer,  cleaning,  and  conditioning  ol 

grain  for  others  in  return  for  a  fee.  . 

A  considerable  part  of  terminal  elevator  merchandising  m  certain 
markets  is  for  local  delivery,  but  the  elevators  as  a  class  are  predomi- 
nantlv  shippers.  The  wheat  flour  millers  at  Mmneapohs  and  the 
corn  millers  at  Indianapolis  furnish  perhaps  the  most  conspicuous 
examples  of  local  absorption  of  elevator  stocks.  Certain  elevator 
companies  specialize  in  selling  to  flour  millers,  m  some  instances,  on 

a  type  sample  basis.  , 

Private  elevator  companies  with  houses  that  are  regular  under 
exchange  rules  are  often  in  a  position  to  influence  the  course  of  tfie 
futures  market  by  having  control  of  a  large  quantity  of  deliverable 
grain.  A  large  elevator  or  a  group  of  elevators  may  make  deliveries 
on  the  first  day  of  a  delivery  month  with  a  view  to  such  manipulation. 
Long  buyers  of  futures  who  do  not  wish  to  bother  with  the  cash  gram 
will  be  impelled  to  sell  hastily,  thus  depressing  the  current  delivery 
future  price  relative  to  the  price  for  the  next  future  delivery.  e 
elevators  will  then  be  able  to  transfer  their  open  hedges  to  th^e  next 
delivery  month  on  a  basis  of  a  profitable  spread  between  the  two 
operations,  buying-in  the  current  option  and  selling  the  next  option, 
or  they  may  buy  back  the  ca^  grain  at  a  sufficiently  depressed  price 

to  give  them  a  larger  carrying  charge.  .  ,  ,  ^ 

Practically  every  private  terminal  elevator  company 
engaged  in  merchandising  makes  a  practice  of  mixing,  cleaning,  and 
conditioning,  either  to  secure  screenings,  to  improve  the  quality  ot 
the  grain,  or  to  take  advantage  of  the  latitude  withm  the  require¬ 
ments  of  each  standard  grade  by  mixing  to  the  bottom  level  of  such 
requirements.  Different  grades  are  frequently  mixed  also  m  railroad 


10 


TERMINAL  GRAIN  MARKETING. 


operated  elevators  under  the  supervision  of  local  inspection  depart- 
ments  with  a  view  to  releasing  additional  bin  space.  Comlfined 
results  of  wheat-mixing  operations  in  Chicago  in  six  private  elevators 

l^coSarS  wKo  f  ^o.  2  winter 

^  compared  with  42  6  per  cent  received,  and  an  outturn  of  90  ner 

Milt  No.  1  spring  wheat  as  against  38,9  per  cent  received,  ^he 

mixing  operations  at  Minneapolis  during  approximately  the  same 

period  were  of  comparatively  little  significance  There  is  a  consid^ 

able  volum^e  of  selling  by  type  sample  to  the  mills  in  this  market 

TvelP^th  '®®s  mixing  to  thTlower 

level  of  the  grade  reciuirements  than  is  the  case  in  Chicago.  A  com¬ 
parison  of  the  mixing  results  for  terminal  elevators  ^in  Chicago 
Minneapolis,  Duluth,  and  Kansas  City  on  all  contract  grades  (No”  1 
and  No.  2  of  both  spring  and  winter  wheat)  specified  by  rule  on  each 
exchange  for  four  years  was  as  follows:  At  Clucago,  45  7  per  centTn 

TV®]'  Minneapolis,  31.4  per  cent  in,  34.4  per  cent  out- 

at  Duluth  36.9  per  cent  in,  72.4  per  cent  out;  at  Kansas  Shy  36  1  per  ■ 
cent  111,  51.6  per  cent  out.  An  attempt  to  determine  statistieallv 
‘  mixing  operations  at  Minne- 

To  ^9’’  g»^e  a  range  of  from  about  one-fourth 

to  33  cents  p®r  bushel  at  Minneapolis  amffrom  about  two-thirds  of 
^  about  cents  per  bushel  at  Duluth. 

th«T  has  provoked  considerable  criticism  on  a  variety  of  grounds- 
that  it  leads  to  a  discrimination  m  favor  of  country  run  OTain  as  com  ’ 
pared  with  terminal  elevator  grain,  since  terminal  elevftor  grain“s 
always  expected  to  be  “skin”  grade;  that  such  mixW  giferthe 
e  evator  meichandisers  who  operate  regular  warehouses  m  undue 
advantage  in  the  futures  market  and  that  it  leads  to  manipulation 
of  that  inarket.  It  is  defended  by  the  elevator  men  on  the  ground 
that  mixing  makes  a  market  for  low-grade  grains  and  permits  a  reali¬ 
zation  by  the  producers  of  higher  prices  for  these  grains  through 
creating  a  competitive  demand  for  them  for  mixing  purposes.  •  ^ 

'  ►  ^ 

REMEDIES  FOR  TERMINAL  ELEVATOR  SITUATION. 

From  what  has  just  been  said,  it  would  seem  that  grain  merchandis 
mg  on  the  part  of  operators  of  licensed  public  elelatoiTcontra^Y 
to  sound  principles  of  public  warehousing.  The  possible  remedy 
for  this  situation  suggested  by  the  circumstances  is  to  make  it  prac- 
ticable  for  pam  dealers  not  operating  eleyators  to  store  gram  in 
public  elevators  in  competition  with  the  big  elevator  merchandisers 
To  accomplish  this  would  require  a  reduction  in  storage  charges.  But 
the  mdications  are  that,  even  at  present  storage  rates,  a  purely  storage 

termbMpoTntf®^  profitabTy  operate^d  a/inter4 

The  problem  in  question  can  bo  met  in  either  one  of  two  ways 
The  railroads  might  be  required  to  operate  eleyators  for  the  c^- 
venience  of  their  shippers;  or  the  Government,  presumably  the 
State  government,  might  operate  storage  elevators  at  rates  suffi- 

Sevator  merchaiXers  ®  ®®“P®‘®  ‘he 

roU*  objected  that  the  operation  of  public  warehouses  by  the 

railroads  m  such  manner  or  at  such  storage  rates  as  would  restore  the 


SUMMARY. 


11 


possibility  of  the  utilization  of  public  storage  by  cash  grain  handlers 
generally  would  involve  a  loss  to  the  railroads.  This  is  not  a  conclu¬ 
sive  objection  and  the  implied  premise  is  not  necessarily  true.  Rail¬ 
road  elevators  are  at  present  and  have  in  the  past  been  leased  to 
operators  at  rentals  often  nominal  and  frequently  insufficient  to  afford 
an  adequate  return  on  the  investment.  There  are  collateral  advan- 
tao'es  to  the  railroads  from  these  facilities,  due  to  their  assistance  m 
attracting  and  holding  traffic,  which  are  largely  compensatory  for  the 
direct  losses  in  question.  As  regards  terminal  facilities  m  general  the 
charge  for  the  specific  terminal  service  need  not  cover,  and  perhaps  can 
not  be  made  to  cover,  all  the  costs  incurred.  There  is  no  reason  why 
the  same  principle  should  not  be  applied  in  the  public  interest  to  the 
terminal  storage  of  grain,  especially  as  the  railroads  are  already  not 
obtaining  any  appreciable  profits  from  this  part  of  their  property. 
The  charge  made  for  public  storage  should  of  course  cover  necessary 
operating  expenses,  but  in  addition  need  include  only  a  mmimum 
contribution  to  fixed  charges  instead  of  attempting  to  insure  the 

covering  of  that  element,  in  cost. 

Furthermore,  it  is  not  at  all  impossible  that  railroad  elevators 
could  be  operated  profitably  at  interior  terminals,  if  the  storage 
rates  were  made  sufficiently  low  to  enable  cash  handlers  gener 
ally  to  employ  these  facilities  in  competition  with  elevator  mer¬ 
chandisers.  Adequate  profit  from  a  purely  storage  and  transler 
elevator  is  chiefly  a  question  of  volume  of  business,  If  rates  were 
sufficiently  low  to  enable  dealers  without  elevators  to  use  th^e 
facilities,  there  should  be  a  vast  increase  in  the  quantity  stored  by 
such  dealers  and  a  great  increase  in  the  degree  of  utilization  ot 
capacity,  such  as  to  mean  possibly  a  direct  profit  as  well  as  an 
indirect  advantage  to  the  railroads  owning  the  elevators. 

It  is  worth  noting  that  30  years  ago  or  so  there  was  less  tendency 
to  a  concentrated  and  possibly  monopolistic  exploitation  of  termma 
storage  facilities  than  at  present  and  no  economic  obstacle  to  the 
utilization  of  public  storage  by  cash  gram  handlers  generally.  I  he 
public  storing  of  grain  owned  by  producers  and  handlers  ha^ng  no 
devators  was  then  a  regular  incident  of  the  gram  business.  At  that 
time  the  relation  (or  spread)  between  cash  and  future  prices  at 
Chicago  was  much  more  in  conformity  with  economic  requirements 
than  has  recently  been  the  case.  The  existing  situation  tends  to 
choke  the  normal  channel  of  connection  between  the  cash  and 
futures  markets,  to  foster  in  the  latter  market  technical  condi¬ 
tions  and  price  movements  not  related  to  the  demand  and  supply 
situation  for  actual  grain,  to  give  to  powerful  integrated  concerns 
additional  opportunity  for  manipulation,  and  to  impair  the  uselul- 
ness  of  the  futures  market  for  hedging  purposes. 

All  the  incidents  of  terminal  handling  should  be  arranged  so  as 
to  eliminate  incentives  to  unduly  prompt  selling  and  premature 
removal  from  storage  at  the  terminal  elevator  of  the  railroad  on 
which  the  grain  originates,  and  so  as  to  facilitate  the  continue 
ownership  of  the  grain  hy  the  country  shipper,  if  his  judgment  of 
economic  conditions  suggests  such  a  policy. 

elevation  and  storage  charge  should  uniformly  be  included  m  the 
freight  charge,  so  that  only  through-billed  gram  would  escape  con- 
tributing  something  toward  the  cost  of  storage  facilities  at  the 


12 


TERMINAL  GRAIN  MARKETING. 


railroad  elevator.  Such  a  measure  would  tend  to  prevent  holding 
grain  in  cars  and  the  tying  up  of  railroad  equipment,  as  well  as  the 
diversion  of  grain  to  private  elevators  for  speculative  purposes. 

The  restoration  of  a  more  normal  situation  as  regards  the  use  of 
public  storage  in  the  grain  trade  would  be  so  generally  beneficial  to 
the  trade  and  to  the  public  as  to  warrant  necessary  legal  reforms  and 
financial  expenditures  in  the  directions  suggested,  or  whatever  other 
steps  might  be  necessary  to  accomplish  the  object  in  view. 

SHIPPING  AND  BROKERAGE. 

The  business  of  shipping  on  a  commission  basis  is  carried  on  to  a 
small  extent  generally  in  the  terminal  markets.  This  class  of  trade 
includes  a  considerable  nuinber  of  independent  shippers  not  operating 
elevators,  as  well  as  terminal  elevator  operators.  The  number  of 
firms  not  operating  elevators  which  are  engaged  exclusively  in 
shipping  is  almost  negligible,  since  most  of  these  dealers  carry  on  a 
cominission  business  in  addition  to  their  trading  operations.  The 
shipping  function  in  the  grain  market  at  Duluth  has  been  performed 
largely  by  concerns  not  operating  elevators. 

The  business  of  a  cash  grain  broker  is  to  bring  together  the  buyer 
and  seller.  The  broker  does  not  handle  the  commodity  on  his  own 
account  and  assumes  no  risk  for  shipment,  storage,  or  delivery  of,  or 
payment  for  the  grain.  He  is  primarily  concerned  with  obtaining 
a  brokexage  for  bringing  about  the  transaction.  The  bona  fide  broker 
IS  a  middleman,  acting  as  an  agent  in  certain  transactions,  and  dis¬ 
closes  the  name  of  the  principal  whenever  he  arranges  a  trade.  The 
broker  is  distinct  from  the  commission  man  chiefly  in  point  of  risk 
and  responsibility  for  the  movement  of  grain.  The  commission  man 
assumes  risks  of  shipment,  delivery,  and  payment.  The  broker  has 
none  ot  these  hazards,  but  is  merely  an  agent  handling  no  funds  and 
taking  no  responsibility.  His  fee  is  usually  not  over  one-fourth  cent 
per  bushel.  In  the  larger  central  markets  the  cash  grain  broker’s 
business  is  very  restricted.  It  is  a  small  part  of  the  business  done  at 
Minneapolis  and  the  number  of  strictly  cash  brokers  in  Chicago 
would  embrace  only  a  comparatively  few  specialists.  Strictly  broker¬ 
age  concerns  are  most  frequently  found  in  the  smaller  markets  or  at 
points  where  there  is  no  active  exchange.  The  larger  primary  dealers 
often  operate  through  brokers  in  a  territory  where  they  have  no 
branch  offices.  Thus  sales  to  local  distributors  in  the  Southeast  are 
requently  handled  through  brokers  in  that  area.  Exchange  privi¬ 
leges  are  not  sought  by  some  brokers,  either  because  their  business 
IS  too  small,  or  because  they  are  located  at  small  secondary  markets 
where  there  is  no  highly  organized  exchange.  The  eastern  seaport 
brokers  operate  between  the  great  shipping  and  selling  markets  of  the 
productive  areas  and  the  consumption  and  export  trade  of  the  East. 

I  heir  business  differs  from  that  of  the  inland  brokers  chiefly  in  vol- 
ume,  in  more  elaborate  selling  organization,  and  in  technical  under¬ 
standing  of  export  and  transshipment  matters. 

THE  GRAIN  BULLETIN. 

The  most  important  country  price  information  service  is  the  Grain 
Bulletin  of  Minneapolis,  operated  by  F.  R.  Durant.  The  Grain 
JjUlietin  lurnishes  each  country  elevator,  shipper,  or  buying  agent 


SUMMARY. 


13 


subscribing  to  its  price  card  service  with  a  daily  country  price  list,  or 
card,  giving  a  price  at  the  subscriber’s  local  station,  based  on  the 
market  at  Minneapolis  or  Duluth.  It  also  furnishes  a  wire  service  to 
those  subscribing  for  it,  transmitting  market  changes  immediately 
after  the  close  of  the  market,  and  (during  the  day)  notification  by 
wire  of  any  important  market  fluctuations.  In  addition  there  is 
furnished  to  the  head  ofiice  manager  of  each  line  company  a  daily 
abstract  of  cards  issued  to  its  local  elevators.  For  the  purpose  of 
distributing  the  cards  Mr.  Durant  has  divided  the  territory  covered 
by  the  Bulletin  into  two  zones,  which  are  further  divided  into  groups 
based  on  freight  rates.  The  prices  sent  to  the  individual  stations  by 
the  Grain  Bulletin  ofiice  are  computed  from  a  basing  sheet,  which 
sets  forth  the  estimated  values  for  given  varieties  and  grades  of  grain 
less  a  handling  margin,  which  purports  to  include  the  country  eleva¬ 
tor’s  expenses  and  profit.  The  daily  price  cards  are  computed  by 
subtracting  the  freight  charges  for  each  station  from  the  correspond¬ 
ing  group  figures  on  the  basing  sheet.  The  card  represents  in^  Mr. 
Durant’s  theory  a  minimum  price  list  for  buyers  at  country  stations. 

The  normal  handling  margins  off  terminal  market  prices  used  m 
making  up  the  cards  vary,  not  only  as  between  different  grains,  dif¬ 
ferent  grades  of  the  same  grain,  and  different  crop  years,  but  also 
with  various  local  conditions  and  other  special  factors,  such  as  car 

shortages  and  severity  of  weather.  ,  .  p 

The  question  of  the  use  made  of  the  card  as  a  basis  for  price  agree¬ 
ments  among  its  suscribers  is  entirely  separate  from  the  question  * 
of  whether  in  recent  years  Mr.  Durant  in  issuing  the  card  prices  has 
been  in  collusion  with  the  line-elevator  interests.  ^  j*  • 

On  the  score  of  the  use  of  the  card  by  subscribers  to  it,  as  distm- 
guished  from  Mr.  Durant’s  preparation  of  it,  it  may  be  said  that 
the  card  is  used  by  a  very  large  proportion  of  country  elevators  m 
the  Northwest,  and  that  the  statistical  evidence  indicates  that  it  is 
employed  chiefly  as  a  basis  for  buying,  and  that  the  prices  listed  by  it 
do  not  coincide  with  the  prices  actually  paid  by  a  majority  of  the  eleva¬ 
tors.  That  is  to  say,  a  minority  of  the  elevators  (43  per  cent  out  ol 
about  2,500),  chiefly  line,  report  that  they  follow  the  card,  but  the 
replies  of  the  balance  indicate  deviations  from  the  prices  on  the  card 
based  on  competitive  conditions  and  other  factors.  A  detailed  study 
of  actual  prices  paid  by  a  representative  group  of  country  elevators 
scattered  through  the  Northwest  over  a  five-year  period  showed  that 
the  prices  actually  paid  did  not  coincide  with  the  prices  ol  the  card 

except  in  a  negligible  proportion  of  cases.  ,  ,  i  . 

As  appears  from  Volume  I  of  the  report,  the  card  has  been  lepeat- 
edly  and  continuously  employed  as  a  basis  for  price  agreements  and 
similar  arrangements  entered  into  on  the  initiative  of  elevator  rnan- 
agers  in  the  country  markets  or  through  line  officials  at  the  terminal 
markets.  The  Commission  is  in  possession  of  hundreds  of  letters 
from  the  files  of  line  companies,  covering  the  period  1912-1920, 
which  clearly  evidence  either  agreements  as  to  country  prices,  grades, 
dockages,  etc.,  or  else  such  harmonious  and  cooperative  action  with 
reference  to  these  matters  as  would  bring  about  practically  the  same 
elimination  of  competition  as  could  be  secured  by  more  specific 
agreements.  Cooperative  or  farmers’  elevators,  and  independent 

56976°— 22 - 3 


14 


TERMINAL  GRAIN  MARKETING. 


and  mill  elevators  are  rIso  involved  frequently  in  these  agreements 
and  practices. 

Repeatedly  it  has  been  either  agreed  or  mutually  understood  that 
card  prices  only  should  be  paid  by  the  elevators  at  a  station,  and 
certain  technicalities  of  the  service  facilitate  the  card’s  employment 
in  connection  with  such  price  agreements.  This  use  of  the  card  for 
price-fixing  purposes,  however,  is  attributable  chiefly  to  the  price 
policies  of  the  various  country  elevators,  particularly  the  lines.  It 
is  probably  safe  to  infer  that  many  of  the  elevators  reporting  to  the 
Commission  that  they  followed  the  card  were  doing  so  as  the  result 
of  such  agreements.  In  this  connection  it  is  perhaps  worth  noting 
that  the  lines  which  are  most  frequently  the  instigators  and  partici¬ 
pants  in  the  agreements  and  understandings  regarding  prices  are  also 
the  most  consistent  according  to  their  returns  in  following  the  card. 
In  meeting  competition  there  are  numerous  indications  that  the  line 
companies  not  infrequently  have  worked  together  in  endeavoring 
not  only  to  prevent  competition  among  themselves,  but  also  to  take 
business  from  their  competitors  of  other  types. 

On  the  score  of  the  preparation  of  the  card  itself,  as  distinguished 
from  the  iise  of  it  by  subscribers,  it  may  be  said  that  the  Grain  Bulle- 
tm  was  originally  organized  and  financed  by  Minneapolis  line-elevator 
companies  but  was  assurned  as  a  personal  enterprise  by  Mr.  Durant 
in  1907 ;  that  Mr.  Durant  in  the  early  years  acted  for  the  line-elevator 
,  companies  in  pooling  arrangements;  and  until  a  comparatively  recent 
date  handled  for  them  matters  pertaining  to  the  closing  and  leasing 
of  country  elevators,  as  well  as  receiving  and  disbursing  funds  for 
political  and  legislative  purposes  on  behalf  of  these  concerns.  It 
seems  fairly  certain  that  prior  to  1913  the  line-elevator  companies, 
some  of  which  originated  the  service,  largely  influenced  the  policy 
of  the  card,  and  tliat  it  was  operated  to  a  greater  or  less  extent  in 
their  interest. 

Prior  to  1912,  according  to  Mr.  Durant,  opinions  were  obtained 
Rom  the  attorneys  general  of  three  of  the  States  served  by  the 
Bulletin  to  the  effect  that  the  cards  were  on  a  legal  basis  if  they 
indicated  the  highest  price  which  any  dealer  was  willing  to  pay  at  a 
mven  station.  As  a  result  of  this  ruling,  up  to  about  1913  Mr. 
Durant  placed  certain  stations  on  a  special  basis,  the  prices  at  those 
stations  being  based  not  on  the  normal  handling  margin  but  on  the 
highest  price  at  which  any  elevator,  line  or  nonline,  at  such  station 
was  willing  to  buy  grain.  It  thus  became  possible  for  the  line  to 
have  the  card  price  raised  to  a  point  which  would  allow  no  profit  at 
any  station  where  it  might  wish  to  destroy  competition,  and  there 
are  numerous  indications  that  the  card  thus  became,  during  that 
period,  an  instrument  which  was  employed  by  the  line  companies  in 
local  price-raising  wars  of  this  character.  By  implication,  at  least, 
Mr.  Durant  has  admitted  the  influence  of  the  line  companies  prior  to 
1913,  as  appears  in  the  following  extract  from  a  letter  of  August  28, 
1916,  signed  by  the  Grain  Bulletin  and  addressed  to  D.  B.  Johns:- 

•  1913  "wliat  you  say  about  our  being  influenced  by  line  elevator  companies 

might  have  been  true,  but  since  that  time  it  has  not  been. 

The  passage  of  the  State  antidiscrimination  laws  in  1913  marked 
a  change  in  the  policy  of  the  Grain  Bulletin.  From  that  time  till 
1917  Mr.  Durant  took  the  position  that  he  would  adjust  the  card 


SUMMARY. 


15 


basis  at  the  request  of  local  nonline  elevator  managers  but  not  at 
the  request  of  a  lino  company  (unless  for  the  line  ap  a  whole).  So 
far  as  can  be  judged  by  his  correspondence,  this  policy  was  adhered 
to  during  this  period.  As  shown  elsewhere,  the  lines  were  able  from 
1913  to  1917  to  obtain  adjustments  at  local  stations  through  procuring 
nonline  competitors  to  request  the  change  in  the  card.  Since  this 
involved  the  consent  and  cooperation  of  the  latter,  it  is  probably  safe 
to  conclude  that  adjustments  thus  procured  were  indicative  of  agree¬ 
ments  and  cooperation  at  the  stations  affected.  That  Mr.  Durant 
was  privy  to  this  situation  is  certain. 

With  the  closing  out  of  the  guarantor’s  fund  in  1914  the  Gram 
Bulletin  may  be  said  to  have  become  financially  independent  of-  the 
line  elevators. 

In  1917,  under  war  conditions,  Mr.  Durant  dropped  the  policy  ol 
adjusting  prices  upon  request  (special  cards)  and  has  not  resumed 
this  plan  so  far  as  any  evidence  has  been  obtained. 

In  conclusion,  it  may  be  said  that,  so  far  as  evidence  has  been 
found,  Mr.  Durant  does  not  appear  to  be  operating  the  card  at  the 
present  time  in  the  interest  of  any  particular  class  of  subscribers  nor 
as  a  price-fixing  mechanism,  whatever  he  may  have  done  in  the  past 
and  whatever  his  present  relations  with  the  line  companies  may  be  in 

political  and  other  activities.  , 

■  Chapter  VIII  and  Appendix  A  of  the  report  contain  a  record  ol  an 
examination  of  Mr.  Durant  regarding  the  items  of  political  expendi¬ 
tures  in  the  ^^FRDS”  (F.  R.  Durant  Special)  account  in  which  such 
disbursements  were  recorded  by  him.  In  a  letter  of  March  12,  1915, 
by  J.  L.  McCaull,  president  of  the  McCaull-Webster  Elevator  C^, 
addressed  to  Messrs.  F.  C.  Vp  Dusen,  C.  M.  Harrington,  and  G.  I . 
Ewe,  and  referring  to  legislative  matters  in  South  Dakota  so  lar  as 
they  related  to  the  grain  trade,”  Mr.  McCaull  said: 

In  this  connection  it  is  appropriate  to  say  that  the  watchful  eye  and  the  ceaseless 
activity  of  Mr.  F.  R.  Durant  in  connection  with  legislative  matters  has  been  ot  tne 
greatest  value  to  the  grain  trade  of  the  Northwest,  and  I  know  of  no  one  who  could 
surpass,  if,  indeed,  they  could  equal,  his  vigilance  and  valuable  achievements  in  this 

connection. 

Mr.  Durant’s  political  and  other  miscellaneous  activities  in  behalf 
of  the  line  companies,  such  as  are  above  indicated,  have  naturally 
caused  suspicion  as  to  the  independence  of  the  Grain  Bulletm. 

In  view  of  all  the  facts  it  would  seem  that  some  form  m 
ernment  regulation  or  supervision  of  the  card.  State  or  Federal, 
is  probably  desirable.  Just  what  form  this  regulation  should  take 
the  Commission  is  not  prepared  to  suggest  without  making  a  much 
more  detailed  and  careful  canvass  of  the  situation.  So  far  as  present 
information  goes,  however,  it  is  believed  that  such  regulation  and 
supervision  should  not  be  too  detailed,  but  at  least  regular  repor  s 
to  some  governmental  agency  should  be  required.  These  repoits 
might  be,  for  example,  a  continuous  daily  record- of  the  terinmal 
market  base  prices  employed,  whether  “to-arrive,”  ‘^spot,  or  fu¬ 
ture  ”  the  handling  margins  allowed  and  methods  of  ascertaining  and 
computing  them,  with  explanations  of  any  differences  between  dinw- 
ent  grains.  Records  of  any  special  adjustments  made  shmii^ 
supplied,  together  with  reasons.  Another  method  would  be  to  re¬ 
quire  that  a  full  report  of  this  character  should  be  made  at  the  begin¬ 
ning  of  each  crop  year,  any  subsequent  report  to  be  made  only 


16 


TERMINAL  GRAIN  MARKETING. 


when  there  are  any  changes  or  deviations  in  the  handling  margins 
base  prices,  etc.  ^ 

All  such  reports  should  be  made  matters  of  public  record,  and  the 
governmental  agency  should,  of  course,  be  directed  to  confer  with 
Mr.  Durant  in  regard  to  any  changes  made  and  to  raise  objections 
and  discuss  the  changes  with  him. 

Lest  there  be  misinterpretation,  it  should  be  clearly  understood 
that  these  tentative  suggestions  are  not  advanced  upon  the  theory 
that  there  are  irregularities  in  the  operation  of  the  Grain  Bulletin 
service  to-day,  but  because  of  the  important  influence  of  the  card  on 
buying  prices  and  of  the  large  uncontrolled  and  unsupervised  dis¬ 
cretion  vested  in  a  single  individual  who  is  responsible  for  computing 
and  sending  out  these  prices. 

To  adopt  the  foregoing  recommendations  proposed  by  the  Commis¬ 
sion  should  tend,  it  is  believed,  to  insure  not  only  that  the  card  prices 
will  be  at  all  times  fair  and  just  country  prices,  but  also  that  the  card 
will  not  m  the  future  be  influenced  by  any  particular  class  of  sub¬ 
scribers,  as  it  apparently  has  been  in  the  past. 

PRICES  OF  CASH  GRAIN  AND  CLOSING  PRICE  COMMITTEES. 

% 

The  rules  of  many  of  the  exchanges  require  that  some  record  be 
kept  of  actual  transactions  in  cash  grain,  and  even  where  there  is  no 
specific  requirement  by  rule  it  is  usually  customary  to  do  so.  More 
or  less  detailed  records  of  the  prices  at  which  cash  grain  sales  are  made 
are  kept  at  all  the  principal  markets.  At  several  of  the  markets,  as 
Chicago,  Minneapolis,  Duluth,  and  Kansas  City,  there  is  published  a 
daily  market  bulletin  or  price  current,  which  gives  a  daily  record  of 
the  prices  at  which  numerous  individual  cars  of  grain  are  sold.  The 
sources  of  these  price  lists  are  the  exchanges  or  members  thereof,  but 
the  methods  of  collecting  them  vary  with  the  different  markets. 

hor  the  exchanges  at  Minneapolis  and  Duluth,  committees  com¬ 
posed  01  exchange  members  make  up  each  day  cash  closing  prices  for 
the  vanous  grains.  At  Minneapolis  there  are  two  of  su5i  commit¬ 
tees  one  for  wheat  and  the  other  for  coarse  grains,  each  usually 
composed  of  tmee  or  four  members.  The  method  of  making  up  such 
closing  prices  is  by  determining  the  premiums  and  discounts  over  or 
under  the  future  at  which  cash  grain  is  being  sold  and  then  to  add 
these  premiums  to  or  to  deduct  these  discounts  from  the  future 
closing  price.  The  result  is  the  cash  close  for  the  day. 

A  study  of  the  closing  prices  on  specified  grades  of  grain  in  com- 
with  both  the  mean  of  the  high  and  low  prices  paid  during 
the  day  and  the  prices  at  which  the  greatest  number  of  cars  of  each 
grade  were  sold,  reveals  the  fact  that  the  closing  prices  tend  much 
more  frequently  to  be  under  the  mean  of  the  high  and  low  for  the 
•  modal  price  for  the  day  than  they  do  to  be  over;  and 
that  the  minus  deviations  are  on  the  whole  much  wider  than  the  plus 
deviations.  Several  possible  explanations  of  this  phenomenon  may 
be  given,  but  the  fact  that  the  determinations  of  the  premiums  and 
discounts  which  are  employed  in  arriving  at  the  close  are  so  largely 
a  matter  of  personal  opinion  suggests  that  the  foregoing  variations 
are  probably  due  to  the  defects  in  human  judgment  involved  rather 
P9  flfher  factors,  and  that  the  psychology  of  the  market  is  such 


summaky. 


17 


that  the  committee-made  close  tends  to  be  In  a  downward  rather 

than  in  an  upward  direction.  .  •  j  • 

Terminal  market  prices  serve  as  a  basis  of  the  prices  paid  m  me 
country  and  it  is  therefore  of  vital  importance  to  the  grower  that 
records  of  prices  actually  paid  should  be  as  complete  and  accurate 
as  possible,  and  that  any  prices  compiled  or  selected  from  them  lor 
circularizing  should  be  determined  as  objectively  and  impersonally  as 


rei 

less  01  wiieiner  utiiei  oa,ico  xiavc  - - - -  _  ^  ^  • 

or  not  As  grain  from  country  points  may  be  resold  several  m 

the  same  market  before  reaching  the  ultimate  consuiner  (as  at  Minne¬ 
apolis),  it  should  also  be  required  that  all  resales  of  cars  should  be 
reported  in  exactly  the  same  fashion  m  order  jiarticularly  that  the 
hidier  prices  paid  to  scalpers  will  have  their  due  influence  on  the  gen¬ 
eral  price  level.  Under  present  methods  the  lower  original  prices 
figure  in  the  records  of  the  day^s  transactions,  but  the  higher  prices 
paid  the  same  day  to  scalpers  for  the  same  cars  do  not  appear  m  the 
record.  Perhaps  such  resale  prices  should  be  specially  designated  as 
such  but  in  any  case  the  complete  record  of  these  cash  gram  transac¬ 
tions,  together  with  the  time,  should  be  available  to  country  elevators 

and  to  the  public.  .  i  .1  .  •  xi,  • 

Secondly,  it  would  seem  to  be  fundamental  that  m  the  issuance  ot 

prices,  such  as  opening,  high,  low,  and  closing,  the  element  of  human 
ludgment  should,  so  far  as  practicable,  be  elunmated.  These  prices 
ought  to  represent  actual  purchases  and  sales  so  far  as  possible,  and, 
in  the  case  of  opening  and  closing  quotations,  prices  on  transa^ions 
within  a  definite  period  after  the  opening  or  before  the  close.  Highs 
and  lows  should  likewise  represent  m  all  cases  actual  transactions  it 
it  is  found  necessary  to  use  bid  or  asked  prices  or  nominal  prices  they 
should  be  so  labeled  and  any  necessary  explanations  inade.  Where 
actual  transactions  are  not  available  at  the  close  the  prices  may  b^ye 
to  be  based  upon  actual  transactions  earlier  m  the  day.  Possibly 
there  is  no  objection  to  the  method  used  at  Minneapolis  and  Philuth 
of  applying  premiums  and  discounts  over  and  under  the  future  to  the 
future  close,  but  if  this  is  done  the  method  should  be  sharply  defined 
and  should  be  more  objective  and  impersonal  than  that  at  present 
emploved.  It  is  important  for  the  proper  application  ol  any  satis¬ 
factory  method  that,  as  already  stated,  there  be  a  complete  record 
of  all  cash  sales,  including  resales,  together  with  the  time  at  wbich 
each  transaction  was  effected.  With  this  record  before  them  and  the 
complete  record  of  continuous  quotations  of  futures,  it  would  be 
possible  for  the  committees  in  making  the  close  to  determine  with  a 
good  deal  of  accuracy  the  exact  premiums  and  discounts  prevailing 
instead  of  employing  more  or  less  of  a  '‘snap  judgment.  ,  •  .  1 
Whether  this  particular  method  is  emploj^ed  or  not,  it  is  7 
important  that  the  procedure  of  closing  price  committees  should  be 

"^Ftoafly^twould  appear  desirable  that  all  the  exchanges  should 
publish  quotations  on  a  uniform  basis,  each  kind  of  quotation  to  be 
made  up  by  as  nearly  uniform  methods  and  principles  as  Pi’^cticable. 
It  would  doubtless  be  necessary  to  recognize  the  fact  that  on  the 


18 


TERMINAL  GRAIN  MARKETING. 


smaller  exchanges  only  a  small  number  of  actual  transactions  may 
be  available.  If  practicable,  it  mi^ht  be  desirable  that  a  representa¬ 
tive  of  the  Federal  Department  of  Agriculture  or  other  governmental 

agency  should  sit  with  all  committees  having  supervision  over  price 
quotations.  ^ 

Cash  prices,  as  at  present  reported  for  the  various  exchanges,  and 
the  methods  of  recording  and  computing  such  prices,  taking  the 
exchanges  as  a  whole,  leave  a  good  deal  to  be  desired.  The  exchanges 
have  apparently  devoted  less  attention  to.  such  matters  than  their 
importance  demands.  It  is  believed  that  they  would  perform  a  con¬ 
siderable  public  service  if  they  would  undertake  a  careful  study  of 
the  situation,  with  a  view  to  attempting  the  establishment  of  a  system 
oi  cash  price  quotations  along  the  lines  already  indicated,  or  along 
such  other  lines  as  might  seem  likely  to  improve  the  situation. 

DULUTH  INSURANCE  CHARGES. 

^  fh®  Duluth  market  it  has  been  the  practice  to  charge  shippers 
insurance  ^on  their  grain  after  delivery  but  before  unloading  at  the 
elevators.  It  appears  that  a  majority  of  the  receivers  at  that  market 
have  lor  several  years  billed  shippers  for  insurance  at  the  rate  of  5 
cents  per  hundred  dollars  ‘^selling  price,’’  and  that  in  many  instances 
the  charges  billed  as  recorded  on  the  books  are  far  in  excess  of  any 
insurance  expenses  actually  incurred.  Two  questions  arise  out  of 
this  practice.  The  first  is  as  to  whether  or  not  there  is  actually  any 
liability  lor  loss  on  the  .grain  which  it  is  necessary  to  insure  against. 

1  he  second  is  as  to  the  amount  charged  for  such  insurance. 

As  regards  the  first  point,  opinions  at  Duluth  are  divided  The 
commi^ion  men  as  a  rule  claim  that  there  is  such  a  liability.  Respon- 
sible  officers  of  insurance  agencies  and  elevator  operators,  however 
assert  that  the  liability  alleged  by  the  commission  men  is  nonexistent’ 
and  that  either  the  railroad  or  the  elevator  company  on  whose  tracks 
the  gram  is  delivered  is  in  reality  responsible  for  any  loss. 

ven  supposing  that  there  is  such  a  liability  for  loss,  however,  the 

1  i  I  ■]  ,  tes  charged.  According  to  the  card  fol¬ 

lowed  by  the  agency  at  Duluth,  through  whom  the  bulk  of  this  grain 
insurance  was  placed,  the  5-cent  rate  billed  to  the  consignor  for  the 
alleged  insurance  was  greatly  in  excess  of  the  actual  premium  cost  of 
such  insurance.  Accounts  of  some  of  the  commission  houses  examined 
showed  that  in  certain  years  no  money  was  actually  expended  for 

one  organization  showed  a  total  of  over 
^24,UUU  collected  lor  gram  insurance  over  a  period  of  12  years,  while 
the  amount  actually  expended  for  such  insurance  amounted  to  $1  000 
leaving  a  credit  balance  to  insurance  account  for  this  period  of  $23  000.’ 

urmg  the  five  years  ending  with  1917,  Duluth  receivers  collected  for 
such  insurance  charges  more  than  $69,000  in  excess  of  any  expendi¬ 
tures  made  by  them  for  such  insurance,  but  these  insurance  tolls  were 
never  questioned  by  the  exchange  authorities.  The  rates  at  which 
the  insurance  was  billed  to  shippers  were  (on  the  basis  of  1917  rate 
car  )  conside^bly  m  excess  of  the  rates  charged  by  regular  insurance 
companies.  This  income,  therefore,  was  secured  through  an  over¬ 
charge  where  the  commission  houses  insured  through  insurance  com¬ 
panies;  where  the  commission  men  carried  their  own  risks  (i.  e  did 
not  purchase  insurance  from  insurance  companies)  this  income  theo- 


summary. 


19 


retically  represented  excess  of  charges  billed  over  ^ 

losses  apparently  occurred,  the  income  was  presumably  the  total 
amount^of  charges  billed.  Even  granting  that  the  liability  for  loss 
is  actually  existent,  there  is  no  justification  for  billmg  shippeis  a 
charge  in^excess  of  regular  premium  rates  for  insurance  m  the  case 
of  cLpanies  purchasing  insurance  from  insurance  ,  companies  or  m 
excess  of  loss  ratios  in  the  case  of  those  companies  which  do  not 
purchase  regular  insurance  but  prefer  to  carry  their  own  ns  . 

CAR-I.OT  SCALPING. 

I 

For  the  purpose  of  the  study  of  scalping,  a  car  of  gi’ain  was  con¬ 
sidered  to  have  been  scalped  when  it  passed  through  the  hands  of  on 
or  more  middlemen,  other  than  the  consignee,  m  the  same  market, 
nriOT  to  delivery  on  either  a  “to-arrive”  or  future  contract,  or  prior  to 
delivery  to  a  concern  or  its  agent  engaged  m  storing,  conditionmg 
converting  or  shipping  grain.  The  practice  of  scalping  appears  to 
be  prevalent  only  in  the  Minneapolis  market,  and  little  or  none  oi  it 
was^  found  by  the  investigation  at  either  Chicago  or  Kansas  City. 
tS  bulk  of  scalping  at  Minneapolis  is  done  on  a  joint  venture  between 
various  commission  houses  and  their  employees,  the  ioriner  financing 
the  transaction  and  the  latter  actually  transacting  the  harness,  the 
profits  and  losses  being  split  m  a  certain  agreed  ratio.  The  results 
of  tests  by  the  Commission  indicate  that  the  percentage  of  cars 
scalped  in^e  Minneapolis  market  in  1916-17  was  between  5i  per 
cent  and  per  cent  of  the  total  cars  received.  This  result,  how 

ever  should  probably  be  regarded  as  the  proportion  likely  to  be 
scalped  in  a  g^d  scalping  year,  1916-17  bemg,  accordmg  to  avadaUe 

information,  a  year  favorable  to  the  practice. 

Out  of  180  cars  originally  scalped  in  the  Minneapolis  market  which 
were  traced  through  to  ultimate  destination,  65  were  scalped  the 
second  time,  10  a  third  time,  and  2  a  fourth  time.  Average  net  scalp¬ 
ing  profits  per  bushel  (losses  having  been  deducted)  at  Minneapolis  in 
amounted  to  about  5§  cents  per  bushel.  The  most  profitable 
soalpino'  was  in  lower  grade  wheat.  Wheat  grading  No.  3  or  better 
vlffl'a  net  profit  of  only  5.42  cents;  wheat  poorer  than  No.  3 
^.11  1  o  _ jL.  nn « Gsifi p.H  ou  which  thc  sfadc  couM  not 


so  prSle^  BarlS  gave  a  profit  of  only  2i  cents  and 

rye^li  cents  per  bushel;  corn  scalping  yielded  only  about  one^K 
of  a  cent  per  bushel  and  oats  about  two-thirds  ol  a  cent.  These 
nrofits  beino*  in  a  year  of  rising  prices  are  presumably  considerably 
Eetfer  t&hey  wLld  have  beln  in  a  year  less  favorable  to  scalping, 
when  the  prices  were  more  nearly  stationary  or  declining. 

By  tracing  through  the  various  scalped  cars  certain  facts  were 
clearly  established:  (1)  That  the  consignments  of  certain  large 
Sers  arrmuch  more  heavily  scalped  than  the  consignments  of 
other  receivers;  (2)  that  the  two  largest  scalpers  in  Minneapolis 
SeSLt  vely  71  and  81  per  cent  of  the  cars  which  they  pur- 
chaswl  Cm  the  other;  (3)  that  a  substantial  proportion  of  the  scalped 
cars  were  bought  back  by  the  original  consignees ;  (4)  that  a  con¬ 
siderable  proportion  of  the  scalped  cars  were  resold  on  the  same  day 

as  purchased. 


20 


TERMINAL  GRAIN  MARKETING. 


The  foregoing  points  would  seem  to  raise  the  question  whether 
scalping  as  it  has  been  conducted  at  Minneapolis  does  not  result  less 
m  serving  to  myntain  cash  prices  than  in  causing  scalping  commission 
Wes  to  fail  to  procure  the  best  obtainable  prices  for  consignors 
While  positive  statements  can  not  be  made  on  this  point,  it  Is  be- 
1  eyed  that  the  statistics  presented  point  to  an  affirmative  answer  to 
this  question;  that  m  some  cases  there  is  collusion  and  logrollins 
among  scalping  operatives,  who  tip  one  another  off  as  to  good  ‘‘  buys" 

bu V  Wt  of  the  firm  employing  them,  or  else  agree  to 

buy  back  cars  consigned  to  them  or  their  employing  houses  which 
may  be  purchased  by  the  scalpers  of  another  firm;  and  that  there  is  a 

**^®  highest  possible  prices  obtainable  on  the  floor  at 
tlie  time  of  the  sale,  owing  both  to  a  comparative  lack  of  skill  in  selling 
on  the  part  of  certain  consignees  which  allows  a  scalper  to  pick  up  cam 
at  prices  lower  than  those  being  offered  on  other  parts  of  the  floor  at 
le  same  time,  and  to  the  fact  that  heads  of  consignee  houses  or  their 

^^®  “°“'®  interested  in  possible  scalping 
profits  than  m  realizing  the  best  results  for  their  shippers.  ^ 

In  so  tar  as  scalping  may  be  due  to  lack  of  skill  on  the  part  of  the 
consignee  seller  it  necessarily  implies  that  the  field  for  the  scalper’s 
operations  IS  to  be  found  in  this  lack  of  ability  on  the  part  of  the  con¬ 
signee  rather  than  in  any  economic  considerations  relating  to  the 
maintenance  of  market  prices  for  the  seller.  Moreover,  there  is  presum¬ 
ably  no  excuse  for  lack  of  skill  on  the  part  of  some  of  the  larger  scalpers 
whose  consigned  gram  is,  as  indicated,  most  heavily  scalped.  ¥he 
mere  tact  that  an  organization  is  a  large  scalper  would  indicate  that  it 
as  m  its  employ  men  who  are  either  highly  competent  judges  of  grain 
or  who  have  great  familiarity  with  the  requirements  of  various  buyers 
or  both.  The  proper  protection  of  the  interest  of  the  consignor  oimht 
to  require  that  the  best  talents  of  a  commission  house  organiza¬ 
tion  should  be  empW'ed  for  the  purpose  of  selling  its  consignments. 
Scalping,  however,  affords  an  outside  profit  over  and  above  the  com- 
mission  obtained  by  a  receiver  for  selling  grain  and  in  addition,  in  the 
case  of  a  salaried  employee  working  on  joint  account  for  such  a  house 

wouid*n*^nrhp°'^  revenue.  So  long  as  this  is  the  case  it  certainly 
would  not  be  surprising  if  many  scalping  operators  were  somewhat 
more  interested  in  the  possibilities  of  extra  profit  from  such  operations 

than  in  procuring  the  best  possible  prices  obtainable  for  consigH 
gram  which  they  are  supposed  to  sell  onsigiiea 

The  foregoing  propositions  lead  the  Commission  to  the  conclusion 
that  scalping  as  conducted  at  Minneapolis  has  been  to  a  large  degree 
at  the  expense  of  the  consignment  business  and  the  consignors  of  the 
gram  m  at  least  a  considerable  proportion  of  cases.  The  Commission 
IS  further  of  the  opinion  that  commission  houses  devoting  their  entire 
time  and  attention  solely  to  the  sale  of  grain  should  be  able  to  absorb 
a  very  considerable  proportion  of  the  profits  now  obtained  by  the 
scalpers,  and  thus  to  procure  a  higher  price  for  consigned  cars  which 
are  scalped.  It  may  be  argued  that  the  scalping  of  grain  can  be 
theoretically  justified  on  the  ground  that  otherwise  the  prices  real¬ 
ized  might  be  lower  than  they  are.  On  the  other  hanI  Tt  is  be¬ 
lieved  that  the  actual  and  potential  results  of  the  practice _ collu¬ 

sion,  ogrolhng,  lack  of  attention  to  selling  on  the  part  of  con¬ 
signees,  and  the  great  possibility  that  the  lack  of  skfll  of  certain 


SUMMARY. 


21 


of  the  latter  may  lead  to  sales  to  scalpers  wnen  oetter  prices  could  be 
realized  in  the  absence  of  such  transactions — all  lead  to  the  conclusion 
that  these  factors  more  than  offset  the  possible  theoretical  considera¬ 
tion  mentioned.  Whatever  benefits  to  the  market  scalping  may 
afford  can  be  obtained  through  the  purchases  of  scalpers  who  are  not 
permitted  to  act  as  or  for  consignees  or  who  are  not  connected  with 
other  grain  concerns  affiliated  with  such  consignees. 

For  these  reasons,  therefore,  the  Coniniission  is  of  the  opinion  that 
cash  grain  scalping  by  concerns  or  individuals  in  any  way  connected 
with  the  cash  grain  commission  business,  either  directly  or  indirectly, 
should  be  forbidden. 


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VI* 


..  •  ■-.'S' 


TERMINAL  GRAIN  MARKETING. 


Chapter  I. 

THE  CAR-LOT  MOVEMENT  OF  GRAIN. 


Section  1.  Wheat  production  and  the  marketing  movement. 

Importance  of  wheat  in  the  grain  trade. — A  very  large  pro¬ 
portion  of  the  annual  wheat  crop  of  the  United  States,  as  compared 
with  that  of  either  corn  or  oats,  enters  the  car-lot  grain  movement. 
A  much  larger  part  of  both  the  corn  and  oats  crops  is  consumed  m 
the  county  where  grown  than  in  the  case  of  wheat.  As  pointed  out 
in  Volume  II  (p.  31)  of  this  report,  Minneapolis  and  Duluth  are  the 
principal  markets  for  the  initial  car-lot  movement  in  the  spring  wheat 
area,  while  Kansas  City,  Chicago,  St.  Louis,  and  Omaha  handle  the 
bulk  of  this  movement  from  the  areas  farther  south.^ 

Quantity  and  characteristics  of  the  wheat  crop.  I  he 
average  wheat  crop  of  the  United  States  during  the  10  years  1911— 
1920  was  795,000,000  bushels.  It  ranged  from  621,000,000  bushels 

in  1911  to  1,026,000,000  in  lOlS.^  •  .  .  •  i  i 

Wheat  is  characterized  by  a  difference  m  variety  which  largely 
determines  its  marketing  movement.  Flour  from  hard  wheat, 
because  of  its  gluten  content,  is  always  in  demand  where  yeast  breads 
are  largely  used.  Soft  wheat  flours  dominate  the  market  where 
soda  and  other  baking  powders  are  substituted  for  yea^.  ^ott 
spring  wheat  and  durum  are  of  subordinate  significance  in  the  liour- 
milling  industry,  although  these  varieties  as  well  as  the  mixed  wheat 
can  be  used  as  a  minor  element  in  blending  wheats,  and  durum  con¬ 
tributes  largely  to  the  export  movement.  .  T  ^  ^  +1. 

Estimates  of  the  Department  of  Agriculture  indicate  that  the 
wheat  crop  of  the  United  States  in  1918,  amounting  to  921,000,000 
bushels,  was  distributed  among  the  more  important  varieties 
approximately  as  follows:  ^ 


Variety. 


Bushels. 


Soft  winter. . 
Hard  spring. 
Hard  winter 


Miscellaneous  varieties. . . . 
Unclassified . 


355,000,000 

248,000,000 

216,000,000 

95,000,000 

7,000,000 


predominance  of  the  thr  e  important  classes  of  wheat.  . 


23 


24 


TERMINAL  GRAIN  MARKETING. 


i  • 


! 

:  : 


The  marketing  movement  of  wheat  is  also  affected  from  year  to 
year  by  the  great  variation  in  yield  of  wheat  per  acre.  The  estimated  I 
yield  of  spring  wheat  for  the  entire  United  States  in  1918  was  16.2 
bushels  per  acre  and  in  1919  only  8.8  bushels.  In  Kansas,  which  is 
the  source  of  so  large  a  part  of  the  marketing  movement  of  hard 
winter  wheat,  the  yield  fell  from  20.5  bushels  in  1914  to  12.5  in  1915. 

Climatic  conditions  also  greatly  affect  the  acreage  harvested  from 
year  to  year.  The  combined  effect  of  variation  in  acreage  and  in 
yield  IS  remarkable.  There  was  a  decrease  in  the  Kansas  crop  from 
177  000,000  bushels  in  1914,  to  45,000,000  in  1917.  A  similar 
striking  instance  was  the  drop  in  the  North  Dakota  crop  from  152,- 
000,000  bushels  in  1915  to  39,000,000  in  1916.  The  effect  on  the 
marketing  movement  is  probably  better  illustrated,  however,  by  the 
fact  that  in  1914  the  Kansas  crop  was  over  twice  as  large  as  that  of 
North  Dakota,  while  in  1915  the  crop  of  North  Dakota  was  more 
than  40  per  cent  larger  than  that  of  Kansas. 

Location  of  car-lot  wheat  supplies. — The  areas  from  which  the 
marketing  movement  of  wheat  in  the  United  States  originates  are 
not  to  be  delimited  easily  or  exactly.  This  is  due  not  only  to  the 
eccentricities  in  the  crop  already  noted,  but  also  to  the  great  distance 
frorn  each  other  of  the  somewhat  restricted  localities  which  seem  i; 
particularly  adapted  to  wheat  farming,  and  above  all  to  the  lack  of  | 
data  of  the  convincing  character  that  might  be  expected  on  so  |i 
important  a  subject.  f! 

Isolated  facts  enable  one  to  get  some  grasp  of  the  situation.  For  ||) 
example,  in  1914  the  three  great  hard  winter  wheat  States — Kansas,  ■ 

Nebraska,  and  Oklahoma — with  about  5  per  cent  of  the  country's 
population,  produced  33  per  cent  of  its  entire  wheat  crop.  The 
next  year,  1915,  the  four  great  hard  wheat  States  of  the  North — 
Minnesota,  North  Dakota,  South  Dakota,  and  Montana — with  about 
4  per  cent  of  the  total  population,  produced  32  per  cent  of  the  largest 
crop  the  country  has  ever  grown.  Not  so  striking,  but  still  worth 
noting,  is  the  production  of  8^  per  cent  of  the  entire  crop  of  1919  by 
the  wheat  States  of  the  Pacific  Northwest — Washington,  Oregon, 

and  Idaho,  with  their  population  considerably  less  than  3  per  cent 
of  the  total. 

The  situation  is  probably  more  forcefully  presented,  however,  in 
the  statement  that,  according  to  the  best  available  information, 
about  80  per  cent  of  the  hard  spring  wheat  grown  in  the  United 
States  is  produced  in  the  three  States— Minnesota,  North  Dakota, 
and  South  Dakota.  The  concentration  in  hard  winter  wheat  is  not 
so  great,  although  probably  over  two-thirds  of  the  entire  crop  is 
grown  in  Kansas,  Nebraska,  and  Oklahoma.  The  estimated  dis- 
tribution  of  the  wheat  crop  of  1918  upon  which  the  above  statements 
are  based  also  shows  over  half  of  the  soft  winter  wheat  crop  to  have 
been  grown  m  four  States— Missouri,  Illinois,  Indiana,  and  Ohio." 

^  The  foUowing  table  gives  the  estimated  distribution  of  the  1918  wheat  crop  (in  thousand  bushels): « 


Soft  winter  wheat: 

^ssopri .  49  965 

Illinois . 617 

ktdiana.. . 46  461 

Ohio .  40  934 

Pennsylvania . 25, 29^ 


Soft  winter  wheat— Continued. 

Kansas . 15,301 

Virginia . 12  600 

Kentucky .  12,129 

Maryland . 11,346 

Miclngan .  9  223 


Commercial  Wheat  Flour  Milling,  p.  108). 


V 


CAR-LOT  MOVEMENT  OF  GRAIN. 


25 


It  is  evident  of  course  that  the  size  of  the  crop  grown  within  a 
State  does  not  measure  its  contribution  to  the  car-lot  movement  ol 
wheat.  Because  the  local  demand  for  flour  is  greater  m  some  States 
than  in  others,  and  also  on  account  of  peculiar  advantages  in  regard 
to  manufacture,  transportation,  or  marketing,  local  mills  grind  a  much 
larger  proportion  of  the  crop  in  some  States  than  in  others,  ine 
surplus  of  wheat  grown  in  excess  of  consumption  within  a  given  State, 
from  some  points  of  view,  affords  a  fairly  satisfactory  measure  ot 
wheat  going  into  the  car-lot  grain  trade  from  that  State. 

It  is  at  least,  of  interest  in  this  connection  to  note  the  estimates 
made  by  the  Department  of  Agriculture  on  this  basis  for  the  five  years 
1911-1915  ^  These  estimates  give  a  fairly  accurate  idea  ol  ^ndi- 
tions  prevailing  just  prior  to  and  including  the  first  year  of  the  Euro¬ 
pean  War.  The  figures,  obtained  by  deducting  from  the  crop  ot  a 
given  area  the  requirements  for  food  and  seed,  show  a  net  average 
Innual  surplus  for  the  United  States  of  208,000,000  bushels.  Since 


Soft  winter  wheat — Continued. 

Oregon .  8,6^ 

Texas . 

WasMngton . Mg 

Idaho .  r  no. A 

Oklahoma . 

West  Virginia . 

California . 

Arkansas . 

. 2:^ 

South  Carolina . 

NewJersey . - . ; 

Iowa .  I  000 

Wisconsin . 

Montana . 

Nebraska .  2.0 

Minnesota . 

Colorado .  c. 

Nevada . _ 

Total . 355,006 

Hard  spring  wheat: 

North  Dakota .  75,0/7 

Minnesota . 

South  Dakota .  48,485 

Montana .  ii  aqi 

Iowa.... . 

Wisconsm . 

Nebraska . 

Colorado .  ",08/ 

Wyoming . 

Idaho .  FT2X 

Washington . 

Michigan . 

Ohio .  48b 

Nevada .  "h 

Pennsylvania . 

Utah . 


Texas - 

California. 


Total .  247,933 


Hard  winter  wheat: 

Kansas .  86,707 

Nebraska .  32, 970 

Oklahoma . 

Illinois .  14,073 

Montana .  o’l^ 

Colorado .  2’ 

Iowa .  7,015 

Idaho .  4,^0 

Missouri . 

Indiana .  w^a 

Minnesota . 

Texas .  2,2M 

Ohio . 

Washington .  2,0« 

Wyoming... .  1»6M 

South  Dakota .  L243 

Wisconsin .  ' 

MicMgan . 

Utah . 

Nevada . 

Arkansas . . 

Total . 216,382 

Miscellaneous  varieties:  & 

North  Dakota .  30,^5 

Washington . 

South  Dakota .  ,’om 

Iowa . 3,278 

Minnesota . 

California .  2, 8U» 

Utah., . 

Neoraska .  f, 

Colorado .  1>  ^ 

Nevada .  492 

Wisconsin . 


905 

193 

30 


Texas. 


90 


Total .  66,382 


Grand  total. 


. 914,703 


Unclassified . 

United  States  total. 


..  c6,735 
....  921,438 


^  Alabama,  Arizona,  Maine,  Mississippi, 

^6  B^leto°ko^594, ^Geography  of  Wheat  Prices,  pp.  8  and  9. 


26 


TERMINAL  GRAIN  MARKETING. 


the  average  export  during  these  years  was  only  189,000,000  bushels, 
it  appears  probable  that  the  movement  into  the  grain  trade  from  the 
different  States  estimated  by  this  method  will  be  somewhat  exagger¬ 
ated.  Nevertheless,  it  is  worth  while  to  note  the  surplus  allotted  by 
these  estimates  to  different  groups  of  States  as  follows  : 


Minnesota,  North  Dakota,  South  Dakota,  and  Montana 

Kansas,  Nebraska,  and  Oklahoma . 

Washington,  Oregon,  and  Idaho . 

Missouri,  Illinois,  and  Indiana . 


Bushels. 
174, 000, 000 
142,  000,  000 
63,  000,  000 
32,  000, 000 


As  further  emphasizing  the  degree  of  localization  these  estimates 
show  that  the  combined  surplus  of  the  three  States  of  North  Dakota, 
South  Dakota,  and  Kansas  nearly  equals  the  net  surplus  for  the  entire 
country,  and  that  if  Nebraska  is  substituted  for  South  Dakota  the 
combined  surplus  of  three  States  is  considerably  in  excess  of  the 
country’s  net  total. 

The  above  comparison  unquestionably  fails  to  show  the  real  rela¬ 
tive  importance  of  the  soft  winter  wheat  States  in  the  car-lot  wheat 
movement.  A  large  part  of  the  wheat  requirement  of  the  large  cities 
m  these  States  is  satisfied  by  the  use  of  hard  winter  wheat  shipped  in 
as  grain  or  flour  from  other  States. 


Section  2.  Milling  demand  for  wheat. 

Total  demand. — The  total  reported  consumption  of  wheat  by 
merchant  mills  in  the  United  States  in  recent  census  years  has  been 
as  follows : 


Year. 

Bushels.  1 

1899 . 

471,  306,  986 
*494, 095, 083 
496,  480, 314 
545,  728,  431 
613, 094,  420 

1904 . 

1909 . 

1914 . 

1919 . 

1  Statistics  for  1919,  preliminary  figures  published  by  the  Bureau  of  the  Census:  figures  for  1914  taken 
from  Census  of  Manufactures,  1914,  Flour-Mill  and  Gristmill  Products,  p.  12;  other  figures  from  Census 
Bulletin,  Manufactures,  1909,  Statistics  for  the  Flour-Mill  and  Gristmill  Industry,  p.  13  'census 


These  figures  show  but  little  change  from  1899  to  1909,  and  a  con¬ 
siderable  increase  from  1909  to  1919. 

Domestic  mill  requirements  in  recent  years  (in  millions  of  bushels)  - 
according  to  the  best  available  data  are  shown  below: 


Crop  years  ending 
June  30. 

Ground  by 
domestic 
mills.  1 

Available 
imports  .2 

Require¬ 
ments  from 
domestic 
crop. 

1917-18 . 

523 

27 

496 

191g-19 . 

539 

11 

528 

1919-20 . 

600 

5 

595 

1920-21 . 

479 

51 

428 

for  192^21  from  Supplement  to  Grain  and  Flour  Statistics  During  the  War,  United 

Cnr^fnrS^inlf  1920-21,  estimate  of  former  chief  statistician  of  the  Grain 

Corporation,  publisjied  in  Modern  Miller,  July  9, 1921,  p.  23. 

Figures  furnished  by  the  Bureau  of  Foreign  and  Domestic  Commerce. 


The  above  figures  suggest  several  important  conclusions.  First, 
under  most  favorable  circumstances,  the  wheat  farmers  apparently 
should  not  expect  the  demand  from  domestic  mills  to  go  far  above 


CAR-LOT  MOVEMENT  OF  GRAIN. 


27 


600,000,000  bushels  in  the  near  future.  Second,  under  the  most 
unfavorable  circumstances  conceivable  (including  free  trade  in  wheat) , 
this  demand  might  apparently  drop  nearly  to  400,000,000  bushels, 
but  there  appears  to  be  hardly  a  chance  of  its  going  appreciably 
below  that  figure.  Third,  mill  requirements  of  domestic  wheat  in  a 
single  year  may  fall  below  the  level  of  consumption  20  years  earlier, 
as  IS  shown  by  the  figures  for  1899  and  1920-21,  given  above. 

Demand  for  hard  spring  wheat. — In  1870  the  nailling  industry 
of  Minnesota  was  of  no  importance  except  to  immediately  adjacent 
territory.  Twenty  years  later  its  surplus  flour  output  amounted  to 
over  10,000,000  barrels  and  foreign  exports  from  Minneapolis  alone  had 
already  exceeded  2,500,000  barrels  in  a  single  year.  The  peculiar 
excellence  of  the  hard  spring  wheat  flour  produced  in  Minnesota  and 
the  States  immediately  west  has  enabled  their  millers  to  increase 
these  shipments  of  flour  to  outside  points  until  they  approach  (if  they 
do  not  exceed)  30,000,000  barrels  in  some  years. 

The  hard  spring  wheat  flour  business  of  the  country  is  by  no  means 
confined  to  shipments  from  the  States  referred  to  above,  for  mills 
all  along  the  line  of  transportation  to  the  consumer  in  the  East  use 
more  or  less  hard  spring  wheat  whenever  its  price  will  allow  them  to 
do  so.  Its  use,  favored  by  lake  transportation,  is  in  part  responsible 
for  the  increase  in  the  flour  output  of  Buffalo  from  2,000,000  barrels 
in  the  calendar  year  1904  to  7,000,000  barrels  in  1916.  Indeed,  in 
1916  the  combined  output  of  just  the  two  cities — Minneapolis  and 
Buffalo— exceeded  25,000,000  barrels,  amounting  to  practically  25  per 
cent  of  the  total  quantity  consumed  in  the  entire  country.®  ^ 

The  two  important  facts  in  this  situation  are  the Jbj3flited.  extent  of 
good  hard  spring  wheat  territory  in  the  United  Sta.tes,  and  the 
d^anff'fof  The  maximum  crop  of  that  territory  from  near-by  mills, 
of  "ihills  located  on  the  most  economical  line  of  transportation  to  the 
ultimate  consumer.  It  must  be  remembered  that  the  ^eat  bulk  of 
the  hard  spring  wheat  is  grown  in  Minnesota,  North  Dakota,  and 
South  Dakota.  In  good  years,  such  as  1915  and  1918,  for  example, 
these  three  States  have  produced  200,000,000  to  225,000,000  bushels 
of  this  hard  spring  wheat;  but  in  poor  years,  such  as  1916  and  1919, 
for  example,  they  may  harvest  less  than  100,000,000  bushels.^ 
Keeping  in  mind  that  even  in  the  maximum  crop  years  demand 
from  domestic  mills  leaves  only  a  negligible  quantity  of  this  high 
grade  hard  spring  wheat  for  e:^ort,  it  is  easy  to  understand  why  the 
output  of  Minneapolis  and  Buffalo  in  the  calendar  years  following  the 
two  good  crops  noted  above,  averaged  practically  25,000,000;  while 
following  the  two  poor  crops  in  1916  and  1917  their  output  in  the 
calendar  year  1918  was  only  20,400,000  barrels.® 

Montana  affords  an  even  more  striking  exaniple  of  how  a  shortage 
in  the -local  crop  reduces  flour  production  by  mills  depending  on  it  for 
their  supplies.  From  the  large  crop  of  nearly  30,000,000  bushels 
raised  in  that  State  in  1918,  Montana  mills,  according  to  reports  of 
the  Grain  Corporation,  produced  1,934,000  barrels  of  flour  in  1918-19; 
but  apparently  because  of  the  short  crop  of  less  than  11,000,000 
bushels  in  the  following  year,  their  output  in  the  year  1919—20 

8 The  Miller’s  Almanack,  1920-21,  pp.  176  and  177;  Report  of  the  Federal  Trade  Commission  on  Com¬ 
mercial  Wheat  Flour  MilUngpp.  1-4  and  20. 

T  Monthly  Crop  Reporter,  December,  1917,  p.  122,  and  December,  1920,  p.  136. 

*The  MUler’s  Almanack,  1920-21,  pp.  176,  177. 


28 


TERMINAL  GRAIN  MARKETING. 


dropped  to  827,000  barrels.®  Minneapolis  and  other  large  milling 
centers  farther  east  are  able  to  substitute  winter  wheat  for  spring 
wheat  to  a  considerable  extent,  as  is  shown  in  the  following  para¬ 
graph  j  consequently  their  output  of  flour  shows  no  such  violent 
fluctuations  as  that  of  Montana. 

Inspection  figures  reported  to  the  Department  of  Agriculture  for 
the  first  six  months  of  the  crop  years  1918-19  and  1919-20,  re¬ 
spectively,  illustrate  the  depenaence  of  Minneapolis  on  hard  and 
soft  winter  wheat  in  years  when  the  hard  spring  wheat  crop  is  short. 
The  total  estimated  wheat  crop  of  the  United  States  increased  from 
921,000,000  bushels  in  1918  to  941,000,000  in  1919.  Nevertheless, 
according  to  data  on  inspections,  hard  red  spring  wheat  marketed 
in  the  year  ending  with  June,  1920,  was  less  than  40  per  cent  of  that 
marketed  in  the  preceding  12  months.^®  As  was  to  be  expected 
under  such  circumstances,  net  receipts  of  hard  red  spring  wheat  in 
Minneapolis  fell  from  47,000,000  bushels  in  the  first  six  months 
of  the  crop  year  1918-19  to  26,000,000  in  the  first  six  months  of  the 
crop  year  1919-20.  This,  however,  did  not  result  in  a  reduction 
of  4,000,000  to  5,000,000  barrels  in  the  State’s  output  of  flour,  for 
during  the  same  period  net  receipts  of  hard  red  winter  wheat  in¬ 
creased  from  7,000  to  16,000  cars,  and  those  of  soft  red  winter 
wheat  from  1,000  to  4,000  cars.  Ability  to  supplement  its  supply 
of  hard  spring  wheat  by  the  use  of  the  high-grade  winter  wheat 
produced  in  1919  enabled  Minneapolis  to  respond  to  the  extraordi¬ 
nary  demand  for  flour  from  that  crop  by  increasing  its  output  from 
16,543,630  barrels  in  the  mill  year  ending  August  31,  1919,  To 
17,117,610  barrels  in  the  mill  year  1919-20,  despite  the  greatly  de¬ 
creased  supply  of  hard  spring  wheat  in  the  latter  year  referred  to 
above.  In  contrast  to  this  increase,  the  output  of  other  northwest¬ 
ern  mills  fell  off  about  20  per  cent.^^  Neither  the  decrease  in  the 
wheat  crop  nor  in  flour  output  was  as  great  for  North  and  South 
Dakota,  however,  as  that  for  Montana,  which  has  already  been 
noted. 

Demand  for  hard  winter  and  hard  spring  wheat  com¬ 
pared. — Wheat  inspections  reported  to  the  Department  of  Agri¬ 
culture  show  that  the  market  for  hard  spring  wheat  is  much  more 
restricted  than  that  for  hard  winter  wheat. In  1919— 20,  inspections 
of  hard  spring  wheat  in  the  four  largest  markets  amounted  to  82 
per  cent  of  the  75,774  cars  inspected  that  year.  In  contrast  to  this, 
hard  winter  wheat  inspections  in  the  four  largest  markets  were  only 
52  per  cent  of  a  total  amounting  to  232,490  cars.  On  the  other 
hand,  among  the  smaller  markets  hard  spring  wheat  inspections 
exceeded  1,000  cars  in  only  three  markets,  while  in  five  different 
markets  hard  winter  wheat  inspections  exceeded  4,000  cars.  Total 
hard  spring  wheat  inspections  in  the  smaller  markets  amounted  to 
I  only  13,238  cars,  while  corresponding  hard  winter  wheat  inspections 
were  over  eight  times  as  great  (110,999  cars). 


*  fibres  from  Statistical  Abstract  of  the  United  States,  1920,  p.  154;  statistics  of  flour  production 
pp^O  an?!?^^^^  Statistics  during  the  War,  United  States  Grain  Corporation  (1920), 

1?  Pepartment  of  Agriculture  Market  Reporter,  July  31, 1920,  p.  78. 

Shown  by  total  production  figures  for  the  period, 
n  Northwestern  Miller,  vol.  123,  pp.  1076  and  1316. 

1®  Statistics  of  inspections  pubhshed  in  the  weekly  Market  Reporter  of  the  Department  of  Agriculture. 


CAR-LOT  MOVEMENT  OF  GRAIN. 


29 


The  showing  for  1920-21  is  quite  similar.  In  the  four  largest 
markets  hard  spring  wheat  inspections  amounted  to  77  per  cent  of 
a  total  of  133,234  cars,  and  hard  winter  wheat  inspections  to  only 
55  per  cent  of  299,050  cars.  Among  the  smaller  markets  only  three 
showed  hard  spring  wheat  inspections  exceeding  2,000  cars,  while 
six  showed  hard  winter  wheat  inspections  exceeding  4,000  cars. 
Total  hard  spring  wheat  inspections  in  the  smaller  markets  amounted 
to  30,174  cars,  while  hard  winter  wheat  inspections  were  over  four 
times  that  quantity  (135,163  cars). 

Localization  of  milling  demand  as  indicated  by  capacity 
AND  OUTPUT  OF  FLOUR. — The  daily  capacity  of  all  the  mills  in  the 
United  States  on  January  1,  1920,  as  reported  by  the  Northwestern 
Miller,  was  1,085,875  barrels  of  wheat  flour.^^  These  figures  are  the 
best  available  for  capacity  by  States.  They  indicate  that  the  flour 
output  of  the  country  has  in  no  recent  year  approached  50  per  cent 
of  the  total  rated  capacity  of  the  mills.  Stating  the  situation  in 
another  way,  the  mills  of  the  United  States  are  capable  of  grinding 
a  much  larger  quantity  of  wheat  than  the  farms  have  ever  produced. 

Almost  24  per  cent  of  this  milling  capacity,  260,050  barrels,  was 
located  in  the  four  soft  winter  wheat  States — Missouri,  Illinois,  Indi¬ 
ana,  and  Ohio;  about  20  per  cent,  219,940  barrels,  in  the  four  hard 
spring  wheat  States — Minnesota,  North  Dakota,  South  Dakota,  and 
Montana;  only  12  per  cent,  132,500  barrels,  in  the  hard  winter  wheat 
States — Kansas,  Nebraska,  and  Oklahoma;  and  7  per  cent,  72,200 
barrels,  in  Washington,  Oregon,  and  Idaho. 

The  groups  of  mills  referred  to  in  the  preceding  paragraph  produce 
by  far  the  larger  part  of  the  wheat  flour  entering  the  commercial 
flour  markets  of  the  United  States.  Nevertheless,  flour  produced  in 
Iowa,  Wisconsin,  Michigan,  Kentucky,  and  Tennessee,  with  a  capacity 
apparently  somewhat  larger  than  that  of  the  three  hard  winter  wheat 
States,  unquestionably  has  some  influence  on  prices  in  favorably 
located  markets,  and  indirectly  on  the  movement  of  wheat  from 
surplus  product  States.  Mills  located  in  the  Atlantic  Coast  States 
report  only  about  15  per  cent  of  the  capacity  of  the  entire  country. 
Though  there  are  a  few  flour  mills  of  considerable  commercial  impor¬ 
tance  located  in  the  cotton  States,  their  entire  capacity  is  rated  at  less 
than  5  per  cent.^®  About  4  per  cent  of  the  total  capacity  is  scattered 
tl  rough  California  and  the  mountain  States  lying  between  it  and  the 
hard  wheat  belt. 

Bearing  in  mind  the  purely  approximate  character  of  the  data 
available  on  wheat  flour  production,  it  may  be  noted  that  the  four 
hard  spring  wheat  States,  having  only  20  per  cent  of  the  total  capacity 
of  the  country,  were  credited  with  27  per  cent  of  its  total  flour,  output 
in  1918-19,  and  nearly  33  per  cent  for  the  three  calendar  years  1914, 
1915,  and  1916,  taken  together.  Yet,  in  1919-20  the  mills ^of  this 
group  were  credited  with  only  23  per  cent  of  the  country  s  total 
output.  On  the  other  hand,  the  tWe  hard  winter  wheat  States 
(with  only  12  per  cent  of  the  capacity  and  showing  in  recent  years 
only  from  13  to  154  per  cent  of  the  grind)  were  reported  to  have 

H  The  Miller’s  Almanack,  1920-21,  p.  156.  That  the  total  capacity  given  above  is  overrated  is  indicated 
by  a  statement  in  the  Northwestern  Miller  of  Mar.  16,  1921,  that  these  figures  include  “150,000  barrels  not 
at  present  available  for  wheat-flour  production.” 

win  t^e  grouping  used  above,  the  Atlantic  Coast  States  include  West  Virginia  and  North  Carolina, 
the  cotton  States,  with  the  exception  of  South  Carolina  and  Arkansas,  are  limited  to  Gulf  States. 

56976°— 22 - 4 


30 


TERMINAL  GRAIN  MARKETING. 


increased  their  flour  production  to  nearly  17  per  cent  of  the  total  for 
1919-20.  The  four  soft  winter  wheat  States  with  about  24  per 
cent  of  the  country’s  total  milling  capacity,  and  probably  making  in 
most  years  less  than  20  per  cent  of  the  output,  are  reported  to  have 
made  that  proportion  of  the  total  in  1919-20.^^ 

Sources  of  mill  purchases. — miller  can  depend  entirely  on 
terminal  markets  for  his  supply  of  wheat;  or,  if  favorably  located,  he 
can  secure  his  entire  supply  from  the  near-by  country  markets. 
Frequently  he  will  make  use  of  both  these  sources  of  supply. 

Analysis  was  made  of  the  purchases  of  198  milling  companies  during 
the  mill  year  1915-16  (Appendix  Table  43).  These  companies, 
operating  299  mills,  bought  an  aggregate  of  295,573  carloads,  or  about 
300,000,000  bushels  of  wheat.  They  probably  made  over  40  per  cent 
of  the  flour  ground  from  the  1915  crop.  ' 

The  reports  of  these  milling  concerns  showed  generally  that  millers 
at  or  near  the  terminal  markets  bought  the  larger  part  of  their  sup¬ 
plies  from  those  centers  and  that  the  proportion  of  purchases  from 
country  points  increased  in  accordance  with  the  distance  of  the  mill 
location  from  the  nearest  terminal. 

Although  the  representative  character  of  these  figures  is  in  some 
respects  open  to  question,  owing  to  the  fact  that  the  sample  is  not 
larger,  certain  figures  are  of  interest.  In  Minnesota,  for  example, 
where  flour  production  is  highly  concentrated  at  Minneapolis  and  the 
mills  prefer  to  buy  country-run  grain  (Vol.  I,  Chap.  IV,  sec.  5), 
above  60  per  cent  of  the  total  mill  purchases  reported  were  bought 
on  the  exchange  floor  through  their  own  organizations  and  above  80 
per  cent  of  the  total  purchases  reported  were  made  in  the  terminal 
markets.  On  the  other  hand,  in  Kansas  the  reporting  mills  bought 
barely  20  per  cent  of  their  wheat  purchases  on  the  exchange  floor 
through  their  oAvn  organization  and  only  30  per  cent  in  total  at 
the  terminal  markets.  The  commercial  mills  in  Kansas  are  largely 
scattered  through  the  State  and  the  production  is  relatively  much 
less  concentrated  at  Kansas  City  than  the  production  of  Minnesota 
is  at  Minneapolis.  The  result  is  that  Kansas  shows  a  relatively  high 
proportion  of  purchases  in  the  country  and  Minnesota  a  relatively  high 
proportion  at  the  terminal  markets  (Appendix  Table  43) .  The  figures 
for  the  three  mills  reporting  from  Montana,  which  show  more  than 
half  the  purchases  made  through  their  own  elevators,  and  the  balance 
‘‘on-track”  in  the  country,  or  through  interior  brokers,  is  indicative' 
of  the  great  distance  to  the  terminal  markets  eastward. 

The  high  proportions  both  of  terminal  purchases  and  of  purchases 
on  the  exchange  floor  made  by  the  Missouri  mills  are  the  result  of 
heavy  buying  at  the  terminal  markets  by  Kansas  City  and  St. 
Louis  concerns,  most  of  which  are  comparatively  large  mills.  Several 
of  the  mills  outside  these  terminals,  however,  at  St.  Joseph,  Inde¬ 
pendence,  and  Sweet  Springs,  also  bought  heavily  in  the  terminal 
markets  by  one  or  another  of  the  methods  classified. 


17  Statistics  of  flour  production  from  Grain  and  Flour  Statistics  During  the  War,  United  States  Grain 
Corporation  (1919),  p.  8,  and  Supplement  (1920),  pp.  10  and  19. 

18  Although  less  than  20  miUs  reported  for  this  State,  their  combined  purchases  totaled  above  17,000,000 
bushels,  or  the  equivalent  of  around  4,000,000  barrels  of  flour.  As  the  production  of  flour  in  Missouri  in 
1914  was  only  above  five  and  one-third  million  barrels  and  was  apparently  declining  (Report  of  the  Federal 
Trade  Commission  on  Commercial  Wheat  Flour  Milling,  p.  16),  it  is  probable  that  the  methods  of  purchase 
shown  are  fairly  representative  of  the  methods  of  purchase  for  about  75  per  cent  of  the  flour  production  of 
that  State  (probably  the  greater  part  of  the  commercial  production),  though  they  can  not  be  regarded  as 
representative  of  the  methods  of  the  Missouri  mills  as  a  whole,  since  there  are  some  300  or  400  of  these  estab¬ 
lishments  in  that  State. 


CAR-LOT  MOVEMENT  OF  GRAIN. 


31 


The  Illinois  and  Oklahoma  figures  reflect  respectively  proximity  to 
and  distance  from  the  terminal  markets.  Of  nearly  16,000,000 
bushels  reported  as  purchased  by  Illinois  mills  83  per  cent  was  bought 
at  the  terminal  markets.  About  59  per  cent  of  the  total  purchases 
were  made  on  the  exchange  floor  through  their  own  organizations, 
and  above  15  per  cent  from  terminal  dealers  and  shippers.  In  Okla¬ 
homa,  on  the  other  hand,  nearly  95  per  cent  of  the  reported  purchases 
was  bought  in  the  country,  60  per  cent  through  their  own  country 
elevators  and  32  per  cent  on-track''  from  country  elevators. 

Two  Colorado  companies,  operating  26  mills  in  Colorado  and 
adjacent  States,  bought  all  their  wheat  (over  9,000,000  bushels)  in 
the  country,  chiefly  through  their  own  elevators  and  ‘^on-track 
from  farmers.  Reporting  mills  in  New  York  State,  on  the  other 
hand,  make  practically  all  their  purchases  in  the  terminal  markets, 
either  through  terminal  dealers  or  brokers.  Presumably  these  pur¬ 
chases  were  chiefly  of  western  grain  moving  East  via  Duluth  and 


tliG  Is/kcs 

The  absence  of  a  highly  developed  terminal  market  in  W ashington 
and  Oregon,  and  the  considerable  development  of  mill  warehouses  in 
this  area,  is  indicated  by  the  fact  that  out  of  19,000,000  bushels  pur¬ 
chased  by  the  mills  in  these  States  28  per  cent  was  bought  through 
mill  elevators  and  20  per  cent  more  on-track"  from  country  houses, 
no  purchases  on  exchange  floors  being  reported.  In  total  63  per  cent 
of  the  purchases  of  reporting  mills  in  this  area  were  made  in  the 
country.  The  most  of  the  grain  purchased  in  terminal  markets  by 
reporting  mills  in  these  two  States  was  bought  from  dealers  and 

shippers. 

Preference  for  country-run  wheat. — The  flour  mills,  par¬ 
ticularly  in  the  Northwest,  have  generally  preferred  to  buy  country- 
run"  wheat,  i.  e.,  wheaf  as  received  directly  from  the  country,  rather 
than  grain  deliver^  from  terminal  elevator  storage. 

The  miller,  particularly  in  the  Northwest,  makes  his  purchases 
with  the  view  to  obtaining  wheat  which  will  meet  the  requirenaents  ol 
his  standard  brands  of  flour.  By  purchasing  ^Yountry-run  gram 
he  is  able  to  secure  both  high  and  low  grade  wheat  which  he  can  mix 
himself  to  as  good,  if  not  better,  advantage  than  the  terminal  elevator. 
Mills  can,  and  do,  in  this  way  use  large  quantities  of  low-grade  wheat. 
These  low  grades  of  wheat  can  not  be  purchased  from  the  terminal 
elevators  to  as  good  advantage,  since  the  latter  buy  such  wheat  lor 
mixing  purposes.  It  should  be  noted,  however,  that  the  Minne¬ 
apolis  mills  do  buy  considerable  terminal  elevator  wheat,  largely 

on  type  sample.  (Ch.  V,  sec.  2.)  t  ^  i  ^  » 

It  was  stated  by  grain  men  at  Minneapolis  that  elevator  gram 
was  always  discriminated  against  by  the  mills  to  the  extent  ol  about 
2  cents  per  bushel  even  when  the  country  run  of  grain  was  poor  in 
quality.  One  operator  said:  ‘‘You  can't  tell  what  proportion  of 
stronger  wheat  is  in  the  mixture,  and  it  is  hard  to  determine  le 

One^  Minneapolis  company  has  established  a  rigid 
taking  any  deliveries  on  future  contracts.  Others  reported  that  the^ 
took  delivery  on  futures  “only  as  a  last  resort  to  get  f^e  gram. 
They  reported  that  this  policy  was  necessary  because  of  deteriora¬ 
tion  in  gi’ades  deliverable  on  contract  wheat,  stating  that  they 


32 


TEEMINAL  GEAIIT  MAEKETING. 


preferred  to  pay  a  premium  to  obtain  the  grain  needed  for  their 
brand  of  flour.  It  was  noted,  however,  that  during  the  crop  years 
1912-13  and  1913-14  approximately  half  the  grain  consumed  by^this 
concern  was  low-grade  stuff,  not  within  the  contract  grades.  This 
suggests  an  additional  reason  for  avoiding  actual  delivery,  namely, 
that  the  niills  can  profitably  use  low-grade  wheats  before  they  have 
been  conditioned  or  mixed  with  higher  grades,  and  that  the  desire 
to  secure  the  best  wheat  within  the  grade  is  frequently  no  more 
prominent  than  the  desire  to  avoid  the  cost  of  purchasing  higher 
grades.  The  millers  take  the  position,  however,  that  they  must 
make  elaborate  tests  of  the  available  supplies  of  wheat  in  order  to, 
make  the  blend  for  a  special  brand  of  flour,  and  must  assign  the  cars 
purchased  to  a  far  greater  variety  of  lots  than  can  be  attempted  in 
grading  for  sale.  Consequently,  for  satisfactory  blending  they  are. 
reluctant  to  buy  a  mixture  of  the  various  varieties,  such  as  may  be 
made  in  a  terminal  elevator,  since  such  a  mixture  is  often  ill-adapted 
to  nailling  blends,  notwithstanding  the  fact  that  it  may  grade  as 
relatively  high-grade  wheat. 

To  cite  further  examples,  an  Illinois  miller  stated  that  he  pre¬ 
ferred  the  country  run  because  then  he  could  ‘'grade  and  mix  it 
properly.’’  One  Milwaukee  milling  company  reported  that  they 
preferred  the  country  run  of  grain  because  “the  terminals  doctor  it 
and  skin  the  grade.”  A  grain  man  at  Duluth  admitted  that  the 
“millers  prefer  to  buy  on  sample,”  but  asserted  that  it  was  because 
they  wanted  the  mixing  profit  for  themselves,  and  that  their  flour 
sales  were  based  on  the  assumption  of  a  top  price  paid  for  “elevator 
one  northern.” 

An  interview  with  officers  of  a  large  northwestern  mill  developed 
the  following  statement : 

The  problem  resolves  itself  into  the  rnethod  of  mixing  the  available  wheat  so  that 
at  all  times  there  will  be  plenty  of  the  different  varieties  in  stock  to  maintain  an  even 
blend  of  flour.  As  the  visible  and  available  supplies  of  different  kinds  of  wheat 
become  greater  or  smaller,  it  is  necessary  to  change  the  proportions  going  to  the  rolls 
to  maintain  the  uniform  run  of  the  flour.  To  do  this,  the  proportions  must  be  changed  ‘ 
many  times  a  year.  In  arriving  at  the  milling  value  of  wheat,  the  baking  test  or' 
bread  produced  is  the  criterion.  The  first  consideration  is  the  quantity  of  flour  that 
is  produced.  Of  second  consideration  is  the  quality  of  flour,  which  depends  on  good 
rising  properties,  good  color,  and  good  texture.  Our  Lot  Number  One  is  good  hard 
wheat  that  has  considerable  gluten,  is  nice  and  dry,  weighing  58  pounds. 

Other  lots  are  made  up  by  this  company  to  distinguish  grain  of 
any  special  character.  The  entire  daily  grind  may  be  drawn  from 
a  number  of  lots  or  it  may  be  drawn  from  only  a  few.  The  miller 
may  run  50  per  cent  of  a  particular  run  from  lot  1,  20  per  cent  from 
lot  3,  and  so  on.  This  concern  prefers  to  buy  in  the  terminal  sample 
markets,  and  to  do  its  own  mixing. 

The  reason  most  frequently  given  by  flour  millers  for  recent 
increases  in  mill  storage  capacity  is  the  increase  in  merchandising  by 
private  elevator  companies.  The  millers  state  that  they  must 
maintain  stocks  of  wheat  adapted  to  their  particular  blends  and  that 
this  is  impossible  where  supplies  are  obtained  from  private  terminal 
elevators  which  make  a  practice  of  mixing  and  conditioning  the 
grain.  The  Minneapolis  millers  assert  that  oecause  of  the  increase 
E^nd  grades  of  wheat  they  can  not  keep  up  their  grades 
of  flour  unless  they  are  able  to  control  the  quality  of  their  surplus 
stocks.  The  miller,  they  say,  is  not  interested  in  the  commercial 


CAR-LOT  MOVEMENT  OF  GRAIN. 


33 


grades  except  as  they  represent  uniform  qualities  of  millable  wheat. 
It  should  not  be  inferred,  however,  that  millers,  even  in  the  primary 
markets  of  the  Northwest,  carry  stocks  adequate  to  their  require¬ 
ments  throughout  the  season,  for  such  is  by  no  means  the  case. 

In  certain  instances  millers  have  made  arrangements  with  terminal 
elevator  operators  for  the  use  of  storage  space  and  in  other  cases 
the  elevator  men  have  specialized  their  operations  so  as  to  supply 
the  milling  trade.  For  example,  one  Minneapolis  elevator  operator, 
in  stating  that  most  of  the  grain  stored  at  his  plant  was  sold  to 
mills  on  sample,  explained  the  policy  as  follows : 

We  have  aimed  in  what  we  have  done  in  filling  onr  elevator  to  get  a  mixtnre  that 
would  make  a  high  level  of  No.  1  northern.  We  want  above  an  average  No.  1  northern 
because  we  have  found  that  there  is  no  money — we  can  get  more  money  out  of  the 
millers  than  by  mixing  it  down  at  the  lowest  level  of  No.  1  northern.  In  other  words, 
the  miller  gives  a  premium  for  quality.  We  won’t  put  any  velvet  chaff  in  our  stock 
of  wheat  in  the  elevator. 

Such  a  policy  appears  to  be  followed  by  but  a  few  elevator  merchan¬ 
disers  in  the  United  States.  However,  all  millers  in  terminal  markets 
are  dependent  to  some  extent  upon  terminal  stocks  at  times  when 
receipts  fall  off  from  the  country,  and  many  concerns  occasionally 

take  deliveries  on  future  contracts. 

Export  demand. — The  outstanding  facts  in  the  export  wheat 
market  of  the  United  States  in  recent  years  are  these:  (1)  During 
the  10  fiscal  years  prior  to  1914  United  States  exports  of  wheat,  in 
the  grain,  averaged  only  52,000,000  bushels.  Relatively  large  ship¬ 
ments  from  the  Pacific  coast  and  very  small  exports  to  Europe 
marked  the  years  of  minimum  movement.  The  flour  millers  of  the 
United  States  used  a  larger  proportion  of  the  country’s  hard  wheat 
crop  during  this  period  than  they  have  in  later  years.  (2)  During 
the  6-year  period  ending  with  1919-20  wheat  exports  averaged 
153,000,000  bushels;  this  period  included  the  short  crop  of  1917-18, 
when  only  34,000,000  bushels  were  exported.  With  the  elimination 
of  Russian  and  Rumanian  supplies  during  the  war,  the  world  looked 
to  the  United  States  for  over  40  per  cent  of  its  wheat  importations,^ 
whereas  in  the  preceding  period  we  had  supplied  less  than  25 
cent  of  this  movement.  There  was  an  increase  in  the  export  demand 
amounting  to  about  130,000,000  bushels,  on  the  average,  spd  con¬ 
sequently  an  increased  movement  from  the  Atlantic  and  Gulf  ports. 
(3)  This  increased  export  demand  for  wheat  was  met  by  a  correspond¬ 
ing  increase  in  domestic  production.  The  average  crop  for  the 
6-year  period  1915-1920  was  about  165,000,000  bushels  greater  than 
the  average  for  the  10-year  period  1904—1913,  despite  the  short  crops 
of  1916  and  1917.  Wheat  cultivation  was  increased  in  American 
producing  regions  even  in  the  face  of  higher  costs.  (4)  The  export 
movement  continued  in  increasing  volume  after  the  armistice  and 
through  the  shipping  period  of  1920—21,  there  being  little  substantial 
improvement  in  the  European  situation.  Foreign  governmental 
agencies — especially  the  British  Royal  Commission  purchased 
heavily  of  private  dealers  in  the  United  States  after  the  restrictions 
upon  exports  were  removed  on  December  15,  1919.  (5)  This  in¬ 

creased  export  movement  has  included  substantial  quantities  of  haid 
wheats,  especially  from  the  region  west  and  southwest  of  Kansas 
City.  (6)  The  percentage  increases  in  export  rail  rates  in  connection 


19  Including  flour. 


34 


TERMINAL  GRAIN  MARKETING. 


with  substantial  decreases  in  ocean  rates  influenced  for  some  months 
the  direction  of  exports  as  between  the  Atlantic  and  Gulf  ports. 
This  is  evidenced  by  the  fact  that  from  the  last  half  of  1919  to  the 
last  half  of  1920  exports  of  wheat  from  Galveston  and  New  Orleans 
increased -61,000,000  bushels,  while  exports  from  New  York,  Phila¬ 
delphia,  and  Baltimore  increased  only  13,000,000  bushels.  The 
increase  for  the  Gulf  ports  was  from  19,000,000  to  80,000,000  bushels, 
or  over  300  per  cent,  while  the  increase  from  the  Atlantic  ports  was 
from  47,000,000  to  60,000,000  bushels,  or  less  than  30  per  cent. 
(7)  Due  to  the  removal  of  the  import  tariff  on  Canadian  wheat  in  1917 
the  Canadian  crop  for  a  time  competed,  either  directly  or  poten¬ 
tially,  with  that  of  the  United  States  in  the  American  market.  The 
resulting  importation  of  free  wheat  released  considerable  quantities 
of  domestic  wheat  for  export. 

The  export  demand  for  wheat  has  thus  become  a  very  important 
though  variable  factor  in  most  of  the  primary  markets  of  the  United 
States.  Minneapolis  is  exceptional  in  that  the  local  milling  demand 
dominates  all  other  influences  in  the  wheat  market.  Duluth  is 
primarily  a  water-shipping  point,  and  during  the  close  of  navigation — 
December  1  to  April  1— it  is  practically  eliminated  from  participation 
in  the  export  movement.  The  export  demand  is  frequently  a  strong 
factor  in  the  cash  markets  at  Chicago,  Kansas  City,  Omaha,  Bt. 
Louis,  and  smaller  shipping  points  nearer  the  seaboard."  The  markets 
last  named  draw  primarily  upon  winter-wheat  areas.  No.  2  red  and 
No.  2  hard,  both  of  them  winter  wheats,  are  the  graffes  most  fre- 
quehfly^uoted  in  the  export  markets. 

Section  3.  Corn  production  and  the  marketing  movement. 

Production  and  distribution. — The  heaviest  production  of  corn 
centers  in  Iowa  and  Illinois, although  the  crop  area  extends  through¬ 
out  all  the  agricultural  regions  east  of  the  Rocky  Mountains.  As  is 
well  known,  Chicago  is  the  greatest  distribution  center  for  corn  in 
America.22  For  the  1920-21  crop  the  primary  markets  next  in  impor¬ 
tance  were  St.  Louis,  Kansas  City,  Milwaukee,  Omaha,  Indianapolis, 
Minneapolis,  and  Peoria.  The  leading  secondary  markets  in  order 
of  importance  were  Baltimore,  New  York,  Buffalo,  Philadelphia, 
and  New  Orleans.  It  should  be  noted  that  the  local  car-lot  trade  in 
corn  is  very  extensive  because  of  the  numerous  smaller  markets. 

Consumption  of  corn. — It  is  estimated  that  about  90  per  cent  of 
the  corn  crop  is  regularly  consumed  by  hogs,  cattle,  horses,  mules, 
and  other  animals,  and  80  per  cent  of  it  on  the  farm  where  grown. 
In  any  case  corn  marketings  comprise  but  a  small  proportion  of 
the  entire  crop.  Yet  the  crops  are  so  large — varying  roughly  from 
2,500,000,000  to  3,000,000,000  bushels — that  the  supplies  available' 
for  the  purposes  of  manufacture  and  conversion  are  always  large, 
and  the  movement  of  corn  is  second  in  volume  to  that  of  wheat. 

The  uses  of  the  crop  for  human  consumptive  purposes  may  be 
summarized  as  follows : 


21  See  Vol.  II,  p.  32. 

22  For  the  1920  crop  the  inspected  receipts  at  Chicago  have  averaged  five  times  as  large  as  those  at  St. 
Louis,  which  ranks  second  on  this  basis.  See  also  Vol.  II,  p.  32. 


CAR-LOT  MOVEMENT  OF  GRAIN. 


35 


*  *  *  When  ground  into  meal  it  produces  degerminated  corn  meal;  when 
crushed  it  produces  hominy  grits;  when  subjected  to  certain  chemical  changes  it 
produces  whisky,  alcohol,  and  beer.  When  the  starchy  part  is  separated  from  the 
gluten  and  ground  it  produces  starch.  The  remaining  gluten  is  used  for  cattle  teed 
and  is  called  gluten  feed.  The  starch  may  be  subjected  to  certain  chemical  processes 
to  produce  glucose  or  corn  sirup 

Approximately  3  per  cent  of  the  corn  crop  (85,000,000  bushels) 
has  been,  normally  used  in  the  manufacture  of  corn  meal;^^  about  1 
per  cent_  (28,000,000  bushels)  in  the  production  of  grits;  and  about 
2jehjifiii£_in.  tlie  manufacture  of  cornstarch  and  glucose.^^  These 
^Hgm'es  serve  to  indicate  that  the  supply  of  American  corn  has  been 
enormously  in  excess  of  the  ordinary  demands  of  manufactuiers 
and  converters. 

Export  demand. — The  export  demand  for  American  corn  has 
never  been  large.  While  exports  averaged  nearly  43,000,000  bushels 
for  the  six  calendar  years  1913-1918,  they  amounted  to  only  11,000,- 
000  and  18,000,000  for  1919  and  1920,  respectively.  The  largest 
export  movement  for  a  single  year  took  place  in  1916-17,  when 
about  65,000,000  bushels  were  sent  abroad  to  meet  war-time  de¬ 
mands.  In  view  of  the  size  of  the  crop,  export  demand  is  an  incon¬ 
siderable  factor  in  the  corn  markets. 


Section  4.  Oats  production  and  the  marketing  movement. 

Localization  of  production. — The  area  of  surplus  oats  produc¬ 
tion  in  the  United  States  conforms  largely  to  that  of  corn  production, 
except  that  oats  can  be  produced  farther  north.  While  Iowa  and 
Illinois  are  the  leading  States  for  both  oats  and  corn,  the  area  of 
heavy  oats  production  extends  into  Minnesota,  Wisconsin,  and  other 
States  on  the  Canadian  border  north  of  the  corn  belt.  Fully  JQ.  per 
cent  of  the  crop  is  consumed  on  the  fm'ms.  Probably  80  per  cent  of 
the  remainder  (the  so-called  commercial  oats)  comes  from  the  North 
Central  States.^®  Chicago  is  the  largest  outlet  for  oats  as  well  as  corn 
in  this  area,  and  receives  and  ships  yearly  a  far  greater  quantity  of 
oats  than  any  other  market. Minneapolis,  Milwaukee,  and  St. 
Louis,  in  the  order  named,  are  the  next  most  important  primary 
outlets. 

Consumptive  demand. — ^^The  census  figures  for  1909  and  1914 
indicate  a  consumption  of  oats  in  flour  mills  of  only  bush¬ 

els  of  which  36  million  bushels  were  manufactured  '  chiefly  for  human 
food’  and  14  million  bushels  '  chiefly  for  live  stock.’  This  consump¬ 
tion  for  human  food — oatmeal,  rolled  oats,  and  ‘breakfast  foods 
constitutes  about  ^er  cent  of  a  crop  of  li  billion  bushels.  An  addi¬ 
tional  7.6  per  cent  of  the  crop  is  used  for  seed,  while  exports  and 
imports  are  usually  unimportant.  This  would  indicate  a  consumption 
by  live  stock  of  between  85  and  90  per  cent  of  the  crop.  Apparently 
about  15  per  cent  of  the  production  is  consumed  by  horses  and  other 
live  stock  in  urban  centers.”^® 

The  oats  movement,  like  that  of  corn,  depends  largely  upon  tne 
price  relation.  The  grower  can  sometimes  feed  his  oats  with  profit 


S  ‘^he^p^e^enrteMencyTs^to^pro^luL  degerminated  meal,  i.  e.,  the  is  extracted  aM  is  t^  avail¬ 
able  for  the  nroduction  of  corn  oil  and  oil  meal.”  (War  Industries  Board,  Price  Bulletin  No.  10,  p.  12.) 

^  25  In  the  past  nearly  1  per  cent  was  used  in  the  manufacture  of  grain  alcohol  and  bourbon  whisky,  and 
about  1  per  cent  in  the  manufacture  of  beer. 


26  U.  S.  Department  of  Agriculture,  Bulletin  755.- 

27  See  Table  4,  p.  21,  Vol.  II.  .  r,  .  xt  on  ox  ok 

28  U.  S.  Tariff  Commission,  Tariff  Information  Series  No.  20,  pp.  84,  85. 


36 


TERMINAL  GRAIN  MARKETING. 


when  it  would  be  unprofitable  to  ship  to  market.  On  the  other  hand 
m  case  oi  a  short  crop,  or  conditions  of  demand  tending  to  increase 
the  price,  shipments  in  large  quantities  may  be  readily  attracted  to 
the  terminal  markets. 

.  demand  for  feeding  purposes  is  the  most  important 

mtluence  in  the  commercial  oats  movement.  This  demand  fixes  the 
general  level  of  prices  for  cash  oats  and  renders  the  marketing  problem 
less  complicated  than  in  the  case  of  wheat. 

The  doniestic  trade  in  oats  in  the  United  States  exceeds  in  volume 
the  entire  mternatiimal  trade  in  this  cereal.^®  The  main  movements 
are  from  the  North  Central  area  to  the  East  and  Southeast,  yet  there 
are  lesser  outlets  for  the  country  shipper  in  various  directions,  because 
ol  the  extensive  demand  and  the  diversity  in  character  of  the  markets. 
4.1.  ®fPo^t^"^c>vement  of  oats  is  usually  small,  despite  the  fact  that 
^ates  crop  has  always  been  more  than  twice  as  large  as 
that  of  any  European  country.^o  Exports  increased,  however,  under 
war  prices  to  about  99,000,000  bushels  in  1917  and  114,000  000  bush¬ 
els  in  1918.  Exports  for  the  10  months  ending  with  April  1921 
were  less  than  4,000,000  bushels.  ^  ’ 


Section  5.  Barley  production  and  the  marketing  movement. 

Localization  OF  production. — ^As  compared  with  wheat,  corn, 
and  oats  the  barley  crop  has  always  been  small,  223,000,000  bushels 
being  the  record  crop  prior  to  1915.31  - 

The  two  chief  barley-producing  sections  of  the  United  States  are 
n  the  extreme  West,  especially  California,  and  the  upper  Mississippi 
Valley  States— Minnesota,  the  Dakotas,  and  Wisconsin.  In  each  of 
these  sections  a  predominant  commercial  type  is  grown:  and  these 
types  enter  into  a  distinct  trade.  The  market  price  depends  in  part 
on  their  suitability  to  the  use  to  which  they  are  put.  The  six-rowed 
Cahiornia  feed  or  bay  brewing  barley  is  known  as  an  export  type, 
being  preferred  by  European  brewers.  The  brewers  of  the  Central 
and  Eastern  States  used  chiefly  the  Manchuria  and  Oderbrucker 
varieties  grown  in  the  northern  Great  Plains.  Pearled  barley  is  pro¬ 
duced  Irom  a  large-grained,  two-rowed  variety  known  as  Chevalier. 

of  Gih^ornTa^”°'^"  irrigation  in  Montana  and  in  the  delta  lands 


in?n  the  57,705,000  bushels  shipped  out  of  producing  counties  in 
1919,  California  contributed  16,500,000  bushels  and  the  States  in  the 
upper  Mississippi  Valley  about  34,000,000  bushels. 

,  Consumption.— To-day  feeding  on  the  farm  accounts  for  more  than 
half  of  the  disappearance  of  the  barley  cfopr~TE5re  is  a  relatively 
small  demand  for  barley  malt  by  manufacturers  of  malt  preparations 
and  extracts,  nonintoxicating  malt  beverages,  sirups,  yeast,  vinegar, 
r  other  products.  The  Tariff  Commission  has  estimated  that 
all  of  these  processes  combined  do  not  as  yet  absorb  more  than  one- 

!i^*m  bushels  formerly  used  in  fermented  and 

^stiUed  liquors.^  The  manufacture  of  pearl  or  pot  barley,  barley 
nour,  and  breakfast  foods  also  takes  up  a  small  percentage  of 

Idem,  p.  75. 

592,000,000  bushels  and  in  France  310,000,000 
31  The  largest  war  crop,  that  of  1918,  was  256,225.000  bushels. 

•»  fSwomaUou  SteNo.%"  07.“  Inlormation  Series,  No.  20,  p.  111. 


CAR-LOT  MOVEMENT  OF  GRAIN. 


37 


the  crop.  During  four  of  the  war  years  barley  exports  ex¬ 
ceeded  20,000,000  Whels.  A  record  was  established  in  1919  when 
about  38,000,000  bushels  were  exported.  Exports  during  1920  were 
about  18,000,000  bushels.  Minn^eapolis,  Chicago,  Milwaukee,  and 
Duluth  are  the  leading  primary  markets  for  barley. 

Section  6.  Rye  production  and  the  marketing  movement. 

Production. — While  rye  constitutes  in  point  of  production  the 
smallest  of  the  five  cereal  crops  considered  in  this  report,  it  never¬ 
theless  merits  careful  consideration  because  of  the  recent  increases  in 
production  and  important  changes  in  its  use  as  a  food  grain.  The 
cron  harvested  in  1918 — 91,000,000  bushels — was  mpxe  than  double 
thakuL-tha-  laid^cjop.  The  average  production  for  the  5-year  period 
1915-1919,  however,  was  only  69,000,000  bushels,^^  owing  to  the 
short  crops  of  1916  and  1917.  The  final  estimate  of  the  1920  crop 
was  69,318,000  bushels,  being  close  to  the  .average  for  the  preceding 
five  years.  Wisconsin  has  been  the  leading  rye  State,  with  Minne¬ 
sota,  Michigan,  Pennsylvania,  North  Dakota,  and  New  York  follow¬ 
ing  in  order i  i  i  • 

Consumption — With  the  adoption  of  prohibition  and  the  closing  ol 

distilleries,  there  has  been  a  marked  increase  in  the  consumption  of  rye 
byJLauu-mills,  as  well  as  an  unprecedented  export  movement  of  this 
cSealto  Europe.  Although  the  production  is  still  relatively  small, 
rye  is  of  importance  as  a  substitute  for  wheat  in  supplying  the  world’s 
requirements  for  breadstuffs.  The  production  of  rye  in  increased 
quantities  has  been  advocated  in  recent  years  for  the  reasons  (1) 
that  it  is  a  hardier  plant  than  wheat,  and  therefore  involves  fewer 
risks  to  the  grower;  (2rtharit  will  givu-bnUer., .yields  and  more  food 
per  acre  than  wheat;  (3)  that  it  will  often  produce  profitable  crops 
f>p  soils  whirh  are  poorly  adapted -to  wheat;  and  (4)  that  it  can  be 
sowp  m  the  fall  and,.harvi3ted  before  tj^ wheat  is  ripe,  thus  saving 
and  distributing  farm  labor. 

Among  the  primary  markets  Minneapolis,  Chicago,  Milwaukee,  and 
Duluth  have  shown  the  heaviest  receipts  of  rye.  About  one- third  of 
the  receipts  at  Minneapolis  has  been  consumed  by  the  local  mills. 
Milling  consumption  elsewhere  in  the  producing  area  has  been  much 
less  concentrated.  There  is  a  general  shipping  movement  eastward 
and  southeastward,  as  in  the  case  of  spring  wheat. 

Rye  exports  were  generally  smaller  than  those  of  any  of  the  other 
four  grains  prior  to  the  adoption  of  prohibition.  In  1919  (calendar 
year)  rye  exports  jumped  to  about  33,000,000  bushels  and  in  1920  to 
57,000,000  bushels. 

Section  7.  Summary  as  to  the  trading  centers. 

The  bulk  of  the  wheat,  corn,  oats,  barley,  and  rye  marketed  in  car- 
lots  moves  from  country  shipping  stations  to  large  primary  markets 
which  have  grown  up  at  centers  convenient  to  the  producing  areas, 
viz,  Minneapolis  and  Duluth  in  the  spring-wheat  region,  Omaha  and 
Kansas  City  on  the  Missouri  River,  St.  Louis  at  the  juncture  of  the 
Missouri  and  Mississippi,  Chicago  and  Milwaukee  on  the  lower  ex¬ 
tremity  of  Lake  Michigan,  Peoria  and  Indianapolis  in  the  prairie 
region,  and  Louisville  and  Cincinnati  on  the  Ohio  River. 


Price  Current  Grain  Reporter  Year  Book,  1920,  p.  24. 
85  Vol.  II,  p.  37. 


38 


TERMINAL  GRAIN  MARKETING. 


Certain  secondary  outlets  have  also  developed,  such  as  Detroit, 
Toledo,  and  Buffalo  on  Lake  Erie  and  New  York,  Philadelphia,  Bah 
timore,  Galyeston,  New  Orleans,  Portland,  and  Seattle  on  the  sea¬ 
board.  These  secondary  points  in  the  scheme  of  distribution  are 
generally  more  conspicuous  for  physical  handhn^  facilities  and  as 
shipping  points  than  as  markets  supporting  active  organized  ex¬ 
changes  or  organized' trading  associations.  The  grain  traffic  through 
these  markets,  especially  at  the  export  points,  is  influenced  largely 
by  transportation  conditions  and  facilities  for  transshipment  from 
rail  to  water  carriers,  rather  than  by  the  attractive  force  of  open- 
market  trading.  An  exporter  located  at  one  port  may  find  tonnage 
for  a  particular  shipment  at  other  points  on  the  seaboard,  and  often 
the  tonnage  factor  deterhaines  the  route  to  be  followed.  Transship- 
ment  inay  be  arranged  through  the  employment  of  brokers  at  the 
point  of  loading. 

The  primary  markets— many  of  them  more  than  1,000  miles  from 
^e  seaboard-^  constitute  the  most  important  centers  of  trading. 
Highly  organized  exchanges  have  been  conducted  in  the  primary 
markets  for  many  years,  including  in  their  membership  commission 
merchants,  elevator  companies,  shippers,  buyers  for  milling  and 
converting  companies,  as  well  as  various  traders  and  brokers  in  the 
futures  business. 

It  should  be  noted  that  there  are  numerous  interior  markets  in 
addition  to  those  enumerated  which  handle  grain  in  car  lots.  Amnno- 
these  mention  should  be  made  especially  of  Des  Moines,  Sioux  City"" 
St.  Joseph,  Wichita,  Oklahoma  City,  Fort  Worth,  Cairo,  and  Memphis. 


Chapter  II. 

RECEIVING  AND  PURCHASING  FROM  COUNTRY  POINTS. 

Section  1.  Comparison  of  methods. 

The  business  of  buying  and  shipping  grain  in  producing  areas  was 
described  in  detail  in  Volume  I  of  the  report.  It  was  shown  there  (p. 
144)  that  there  are  two  distinct  methods  of  sale  to  terminal  market 
buyers,  (1)  by  shipment  on  consignment  to  a  commission  house  to  be 
disposed  of  for  a  commission  upon  its  sale,  and  (2)  by  direct  sale 
‘^on-track’’  at  the  cormtry  station  or  ^Ho-arrive’’  at  a  terminal 
destination.  By  the  first  method  the  shipper  employs  a  commis¬ 
sion  man  as  agent  to  dispose  of  his  grain  at  point  of  destination, 
the  commission  man  usually  accepting  a  sight  draft  against  the 
bill  of  lading.  By  the  second  method— which  includes  several  possi¬ 
ble  variations  in  the  terms  of  contract — the  grain  is  sold  prior  to 
delivery  and  is  shipped  directly  to  a  buyer  (or  to  his  order).  By 
whatever  method  the  grain  is  sold— whether  consigned  or  sold 
direct — it  is  usually  shipped  on  order  bills  of  lading,  so  that  bank 
loans  may  be  negotiated  to  finance  the  comrnodity  thioughout  its 
progress;  and  payment^  is  usually  by  seller’s  sight  draft  on  the  con¬ 
signee,  with  bill  of  lading  attached,  although  arrival  drafts  are  some¬ 
times  used. 

Sales  on  consignment  usually  apply  to  grain  placed  “on-track”  at 
the  terminal,  officially  inspected  and  graded,  and  m  position  lor 

immediate  delivery.  ^  i  ^  ,  •  i.  -uu. 

A  direct  purchase,  as  the  term  is  used  here,  relates  to  gram  bougUt 

prior  to  arrival  at  the  terminal  or  other  destination.  Direct  purchases 
may  be  on  the  basis  of  delivery  at  destination  or  may  be  f.  o.  b. 
shipping  station.  That  is,  there  is  a  commercial  distinction  as  to 
whether  the  commodity  is  bought  f.  o.  b.  country  station,  subject  to 
billing  instructions,  or  bought  on  the  basis  of  delivery  at  a  designated 
terminal  or  other  point.  The  former  is  known  to  the  trade  as  a 
purchase  on-track”  and  the  latter  as  a  purchase  to-arriye.  _ 

Commission  merchants  often  handle  sales  ‘Ho-arnve  lor  their 
customers,  and,  by  agreement,  it  may  be  left  to  the  discretion  ol  the 
commission  merchant  to  determine  whether  a  shipment  is  to  be  sold 
as  a  consignment  or  applied  upon  a  contract  for  gram  to-arrive. 
The  commission  merchant  usually  takes  title  to  gram  applied  on  a 
“to-arrive”  contract  and  thereby  becomes  technically  a  dealer,  al¬ 
though  the  distinction  often  does  not  appear  in  his  accounts. 

The  terms  “on-track”  and  “to-arrive”  are  applied 
the  business  of  buying  directly  from  country  shippers,  although  the 
same  distinction  in  contract  terms  appears  in  the  gram-shippmg 
business  generally.  Grain  originating  from  country  points  has  not 
usually  been  officially  inspected  and  weighed,  and  such  transactions 
are  usually  contingent  upon  terminal  market  grades  and  weights. 


1  Allowing  3.  customary  margin  for  the  protection  of  the  consignee. 


39 


40 


TERMINAL  GRAIN  MARKETING. 


It  should  be  noted  that  direct  purchases  are  usually  on  a  ffrade 
basis  and  that  the  volume  of  this  class  of  purchases  is  larger  for  corn 
and  oats  than  for  wheat,  rye,  or  barley.  For  example,  corn  and  oats 
are  very  frequently  accumulated  in  this  way  at  Chicago.  The  vol¬ 
ume  ol  direct  buying  at  Minneapolis,  which  is  the  largest  of  the  wheat 
rye,  and  bailey  markets,  is  relatively  small.  The  explanation  of 
these  variations  may  be  found  in  Volume  I,  Chapter  VI,  sections 

Several  of  the  larger  primary  market  exchanges  ^  make  some  effort 
to  maintain  separate  to-arrive’’  markets,  i.  e.,  trading  spaces,  black¬ 
boards,  and  quotation  services  for  the  convenience  of  traders  bidding 
direct  to  country  shippers;  and  trading  rules  applicable  to  this  specific 
business  have  been  adopted  by  the  larger  exchanges — especially  by 
those  which  have  a  so-called  uniform  commission  rule.^  In  the 
absence  of  such  regulations  the  practice  of  buying  direct  from  the 

country  rnay  enable  dealers  to  avoid  the  payment  of  commissions  in 
whole  or  m  part. 

The  sections  which  follow  will  set  forth  the  methods  employed  in 
handling  consignments  and  in  buying  ^‘on-track’’  and  ^To-arrive”  from 
country  shippers. 


Section  2.  Nature  of  the  consignment  business. 

Introductory.— The  consignment  business  as  carried  on  by  com¬ 
mission  merchants,  or  receivers,  holds  a  prominent  place  in  the  cash 
trading  ol  all  the  larger  primary  grain  markets.  In  the  older  primary 
markets,  such  as  Chicago,  Milwaukee,  Kansas  City,  and  St.  Louis, 
tins  class  ol  business  has  been  carried  on  with  varying  activity  over  a 

Pu  been  especially  important  in  Minneapolis  and 

Duluth.  (Appendix  lable  2  and  note  2.)  After  the  railway  net 
was  extended  into  producing  territories  commission  houses  were 
organized  m  the  terminal  markets  to  represent  country  shippers 
and  other  dealers.  Their  direct  competitors  were  the  line  eleva¬ 
tor  companies  which  were  organized  along  the  railroads,  especially 
m  the  territory  tributary  to  Chicago,  Minneapolis,  and  Omaha. 

ne  consignment  business  has  been  especially  well  supported  in 
consumptive  markets,  such  as  Minneapolis,  where  there  is  continu¬ 
ous  demand  for  premium  grain,  particularly  wheat,  and  conse¬ 
quently  a  preference  for  buying  on  sample.  No  system  of  grading 
gram  can  take  full  cognizance  of  the  milling  qualities  of  wheat.  If 


exchaigTto  rviSnfeften^  Chamber  of  Commerce,  Kansas  City  Board  of  Trade,  and  other 

o/SJl  quRMn  poSv  to-arrive  grain  committee  of  the  Chicago  Board 

has  not  been  considered.  It  was  explained  that  this  tax  on  freight  would  be  chargS  as  an  itfm  of  ex^of^ 

co'^IKaK 

f  f  o  fmaking  drafts  upon  appellees  at  the  time  of  each  eonSgnment  fo^abont  in 


RECEIVING  FROM  COUNTRY  POINTS. 


41 


sales  are  made  on  consignment,  the  transaction  is  most  often  on  a 
sample  basis.  The  buyer  then  has  the  opportunity  of  examining  the 
o-rain,  and  because  of  certain  qualities  may  be  willing  to  pay  a  h^her 
price  than  he  would  pay  if  the  grain  was  sold  direct  on  a  grade  basis 
without  examination  of  the  sample.  Wliile  direct  sales  are  some¬ 
times  on  a  sample  basis,  as  a  rule  consignment  and  sample  selling 
tend  to  go  togetlier  and  direct  and  grade  sales  (sec.  8). 

Grain  is  occasionally  shipped  by  the  growers  themselves,  m 
which  case  a  country  elevator  operator  may  be  paid  a  custorn^y 
rate — say  2  cents  a  bushel — for  loading  the  car.  (Vol.  I,  Chap.  Vii, 
secs.  2—3.)  However,  the  bulk  of  the  shipments  in  all  areas  aie 
from  local  or  line  elevator  companies  who  have  purchased  the  gram 

from  the  growers.  .  . 

Functions  of  the  commission  merchant.— -i  he  commission  mer- 
chant  may  be  defined  ®  as  one  who  acts  as  a  selling^g^t  for  a  Hiipper 
and  who  does  not  take  title  to  the  grain  shipped,  although  he  ire- 
Quently  secures  a  direct  lien  through  advances  made  against  the  corn- 
mo'dity.'Th  practice  many  firms  are  orgpized  to  buy  and  sell  gram 
asTvell  as  to  operate  on  a  commission  basis,  advertising  themsel^s  as 
‘'grain  dealers'’  or  “receivers  and  shippers,"  so  that  it  is  often  dithcuit 
to  distinguish  clearly  the  group  of  commission  merchants  in  a  given 

in9jrk0l;  ^ 

On  the  larger  exchanges  the  number' of  firms  operating  on  an  exclu¬ 
sively  cash  commission  basis,  i.  e.,  not  operating  at  the  same  time  as 
dealers,  is  very  small;  and  in  Kansas  City,  Chicago,  Milwaukee, 
Minneapolis,  and  Duluth  is  almost  negligible.  In  the  St.  Louis  Mer¬ 
chants’  Exchange  there  were  40  memberships  and  m  the  Omaha  Gram 
Exchange  22  memberships  held  in  1918  by  individuals  engaged 
exclusively  in  the  consignment  business,  comprising  10  per  cent  and 
16  per  cent  of  the  total  resident  memberships  of  the  respective  asso¬ 
ciations.  (Appendix  Table  1.)  •  .  . 

As  incidental  to  the  receiving  business  a  commission  merchant  may, 
and  frequently  does,  undertake  numerous  functions  relative  to  market¬ 
ing  the  grain  for  the  country  shipper,  viz ; 

(a)  To  finance  the  operations  of  country  elevator  companies; 

(b)  To  buy  and  sell  futures  for  customers; 

(c)  To  supervise  the  daily  operations  and  accounts  oi  country 
elevators  through  periodic  reports  and  even  procure  managers  tor 
elevator  companies  (although  these  services  are  performed  chieny  by 
houses  advancing  credit  to  the  local  elevators) ; 

(d)  To  supply  country  shippers  with  market  information ; 

(e)  To  assist  in  the  procurement  of  cars  for  shipping  gram; 

(f)  To  protect  the  interests  of  the  consignor  in  the  inspection, 
weighing,  and  grading  of  consigned  grain,  and  call  for  reinspection 

when  desired;  ^  .  .  •  •  .  •  i 

(g)  To  arrange  for  cleaning  and  conditioning  gram  m  terminal 

elevators  whenever  desirable. 


too  inclusive  to  be  usable. 


42 


TERMINAL  GRAIN  MARKETING. 


From  an  examination  of  the  practice  in  the  Northwest,  it  appears 
that  (^mmission.  houses  frequently  receive  samples  of  the  grain  pur- 
chased  by  or  available  to  their  customers  (i.  e.,  consignors)  and  secure 
the  oincial  grade  and  dockage  thereon.  The  country  shipper  is  then 
advised  of  the  grade  dockage  and  the  market  value  of  each  sample, 
ihe  commission  house  may  also  advise  the  shipper  of  the  current 
prices  for  certain  varieties  and  grades  of  wheat,  and  in  turn  send 
type  samples  to  the  shipper  in  connection  with  this  advice.  This 
interchange  of  physical  samples  and  of  market  information  is  designed 
to  keep  the  country  shippers  in  line’’  with  values  in  the  terminal 
market. 

It  is  stated  by  several  commission  men  that  high-grade  service  can 
not  be  rendered  to  consignors  when  merchandising  is  combined  with 
the  consignment  business.  They  insist  that  if  the  commission  mer¬ 
chant  IS  offering  for  sale  two  samples  of  grain  on  his  table,  the  one 
consigned  by  a  country  shipper  and  the  other  bought  outright  by  him- 
^li,  he  will  very  naturally  be  more  solicitous  to  sell  his  own  property, 
h  urthermore,  it  is  said  that  ^Tf  you  buy  and  sell  and  scalp  on  the  side 
soniethmg  will  be  neglected,  and  shippers  will  prefer  to  send  their 
gram  to  the  men  who  give  all  their  time  and  attention  to  getting  best 
prices  for  consignments.”  (Chap.  XI.)  Yet  in  probably  the  great 
majority  oi  instances  the  con^gnment  business  has  been  carried  on 
by  hrms  which  also  merchandise  grain. 

Section  3.  Operating  methods  of  commission  men. 

Shipping  arrangements.  In  trade  terminology  consignors  are 
irequently  classified  as  (1)  open-account  shippers  and  (2)  bill-of- 
mding  (or  closed-account)  shippers.  This  is  especially  true  of  the 
Northwest,  where  consignments  are  far  more  frequent  than  direct 
sales.  Ihe  open-account  shipper  is  extended  credit  by  the  commis- 
uof  ^ account  is  not  closed  for  each  -transaction.  The 
bill-ol-ladmg  shipper  draws  upon  his  commission  house  by  sight 
draft  attached  to  the  bill  of  lading  for  an  agreed  percentage  of  the 
value  of  the  shipment,  the  balance  being  adjusted  for  each  transaction. 

,  ^®^ally,  m  the  case  of  open  accounts,  credit  has  been  extended  to 
the  country  shipper  prior  to  the  shipment  of  grain,  so  that  the  specific 
consignments  received  are  credited  against  a  debit  balance. 

Shippers  on  the  bill-of-lading  basis  are  usually  allowed  to  draw 
from  80  to  90  per  cent  of  the  value  of  the  car,^  according  to  the 
credit  standing  of  the  consignor  and  market  conditions.  It  is 
n^essary  to  leave  a  margin  to  cover  the  terminal  costs,  commission 
differences  m  grades  and  weights,  and  price  fluctuations.  Shippers 
who  habitually  attempt  to  overdraw  are  discredited  and  likelv  to 
have  their  drafts  refused. 

Notice  of  shipment.— The  shipper  usually,  although  not  always, 
notifies  the  commission  house  of  a  shipment.  Form  1  below  shows 
the  form  of  notice  distributed  to  customers  by  a  Minneapolis  concern 


market  of  1920-21,  authorized  shippers  to  draw  upon  them  un  to 
95  per  cent  of  the  value;  but  in  most  instances  a  wider  margin  was  required.  ^  ^ 


RECEIVING  FROM  COUNTRY  POINTS. 


43 


Form  1.— CAR  SHIPMENT  REPORT. 

CAR  SHIPMENT  REPORT. 

Cargill  Commission  Co.  . (Date) 

/Minneapolis,  Minn. 

\Duluth,  Minn. 


Gentlemen: 

We  are  shipping  you  to-day  from . billed  to 

. .  Car  No . ,  Initial, . containing  — bushels 

of  No . .  which  please— sell  on  arrival— sell  to  arrive— 

apply  on  sale  of . 

We  have  drawn  draft  on  you,  with  bill  of  lading  attached,  for  . . . 

This  car  was  loaded  to  a  depth  of . inches,  and  tested 

. pounds  in  the  dirt.  In  my  opinion  this  car 

should  grade  destination . grade . 

dockage. 

Car  seals — side  doors  No . .  doors  No. 

Yours  ti^y. 

Remarks: . 


SCALE  WEIGHTS. 


Drafts 


Pounds 


19 


[Read  instructions  on  other  side.] 

[Form  L — Reverse  side.] 


INSTRUCTIONS  TO  SHIPPERS. 

One  of  these  reports  should  be  made  out  for  every  car  shaped  by  ypu, 
the  “original”  mailed  to  us  at  the  earliest  possible  moment.  The  depth,  in  imhes,  and  the  test  per  bushel 
in  the  dirt,  should  always  be  given,  and  reported  down  as  close  as  i  pound  on  the  test  or  ^inch  on  the  depth. 
The  utmost  care  should  be  taken  that  this  information  be  given  as  accurately  as  possible,  as  its  value 
depends  on  the  correctness  of  your  figures.  In  arriving  at  the  test  in  the  dirt,  gmn  should  be  dropped  into 
the  tester  from  height  of  at  least  18  inches,  so  as  to  give  /he  approi^ate  density  of  par jvhen  loaded. 

Every  car  containing  a  mixture  of  any  kind,  whether  intentional  or  caused  by  ^cident,  should  always 
be  fully  explained,  so  that  we  may  know  just  exactly  how  the  car  should  be  handled  upon  its  arrival  at 

*^I^^^^ing  us  your  idea  of  what  a  car  should  grade  and  dock,  give  us  your  very  best  judgment,  as  tWs 
information,  if  given  correctly,  enables  us  always  to  act  mtelhgently  in  all  cases,  and  ^dl  undoubtedly 
often  save  you  useless  expense.  In  arriving  at  your  dockage,  get  a  good  average  sample  of  the  car  and  sift 

Everv  car  weighed  should  show  the  weight  by  drafts.  i.  „  „  i*- 

To  avoid  paying  excess  freight,  every  railroad  receipt  or  bill  of  lading  should  show  across  the  face  of  it 
whether  car  is  loaded  to  grain  line  or  not . _ _ 


A  printed  post-card  form  is  used  by  some  firms  for  the  notice  of 
shipment.  Freouently,  however,  the  first  notice  received  by  the 
consignee  is  the  hill  of  lading  with  draft  attached  forwarded  through 
banking  channels.  In  some  instances  cars  arrive  without  specific 
notification  other  than  the  railroad  manifest  and  subsequent  delivery 

of  the  inspected  sample.  .  .  i  i  u 

Inspection  and  sampling. — Each  car  of  gram  is  sainpled  by  the 
official  inspection  department  prior  to  arrival  at  the  terminal  market, 
or  immediately  thereafter.  (See  Vol.  II,  Chap.  VI.)  At  Minneapolis 
and  Duluth  the  initial  sampling  frequently  takes  place  outside  the 
city  limits— sometimes  at  points  several  hundred  miles  distant— to 
avoid  congestion  in  the  railroad  yards.  In  Minneapolis  a  separate 
sample  is  usually  obtained  from  a  private  sampling  company  as  an 
independent  check  upon  the  official  inspection  department.  these 
sampling  companies  are  subject  to  exchange  regulation  and  control. 

(See  Vol.  II,  Chap.  VI,  sec.  6.)  .  .  ,  j-  .u 

The  grade  as  determined  by  the  commission  house  Irom  the  sam¬ 
pling  companies’  samples  is  noted  on  a  card,  which  is  used  to  identity 
the  sample  as  placed  in  a  sample  pan  on  the  firm  s  table  (on  the  trad- 


8  See  also  Vol  II  u.  309.  Most  of  the  grain  firms  at  Minneapolis  are  equipped  wth  apparatus  for 
determining  the  grade  and  dockage  of  a  car  of  grain,  and  some  of  them  maintam  private  testmg  laboratories 
which  pass  upon  ail  the  grain  which  they  handle. 


44 


TERMINAL  GRAIN  MARKETING. 


ing  floor) .  When  the  commission  man  has  obtained  from  the  inspec¬ 
tion  department  the  list  showing  the  official  grades  of  the  cars  con- 
s^ned  to  him,  he  compares  the  grades  given  with  those  assigned  to 
the  samples  which  have  been  received  from  the  sampling  company; 
and  II  the  official  grade  is  lower  than  his  own,  reinspection  may  be 
requested.^  From  the  official  list  new  tickets  showing  the  official 
also  prepared  and  are  placed  in  the  sample  pans. 

Where  possible  the  approval  of  the  shipper  is  obtained  before  rein- 
spection  or  appeal  is  called  for.  However,  an  effort  is  made  to 
expedite  the  process  of  inspecting  and  preparing  the  grain  for  sale  in 
order  not  to  incur  demurrage,  which  is  chargeable  to  the  shipper. 

.  A  car  of  grain  may  be  received  in  bad  condition,  as  for  example, 
when  corn  becomes  heated  in  transit.  The  grain  may  be  dirty  or 
contain  excessive  weed  seeds  and  chaff,  so  that  the  shipper  in  the 
judgment  of  the  commission  man  would  receive  a  better  price  if  the 
gram  were  treated  or  cleaned.  In  such  a  case  the  shipper  is  usually 
notified  and  asked  for  instructions.  If  the  shipper  agrees  to  have 
the  car  conditioned  it  is  sent  to  an  elevator  for  that  purpose.  Unless 
gram  is  very  dirty  or  badly  out  of  condition,  it  may  not  pay  to  have 
a  consigmnent  of  grain  cleaned  or  conditioned,  since  the  cost  of  the 
process,  together  with  switching  charges,  may  be  greater  than  the 
increase  m  price  which  might  be  obtained. 

Selling  the  grain .  The  chief  function  of  a  commission  merchant 
IS  to  represent  the  country  shipper  as  a  selling  agent  in  the  terminal 

is  offered  for  sale  usually  on  the  basis  of  samples 
whmh  are  exhibited  on  the  sample  tables  in  the  exchange  hall,  where 
such  exists.  The  salesman  may  wait  for  the  buyers  to  come  to  his 
table,  or  he  may  peddle  the  sample  around  the  floor.  If,  as  fre¬ 
quently  happens,  the  salesman  knows  that  grain  similar  in  quality 

^  certain  buyer,  or  group  of  buyers,  he  will  solicit 
their  bids.  Ihus  a  salesman  rnay,  at  the  opening  of  the  market, 
decide  that  conditions  warrant  his  forcing  the  buyers  to  come  to  him 
and  he  accordingly  does  not  go  about  the  floor  seeking  buyers* 
whereas  several  hours  after  the  opening  an  entirely  new  aspect  of 
the  marlmt  may  cause  him  to  circulate  around  the  floor  offering  his 
gram,  endeavoring  to  secure  as  high  a  price  as  possible,  but  being 
forced,  frequently,  to  accept  an  offer  which  is  much  lower  than  his 
early  id^s  of  values.  Similarly,  buyers  do  not  follow  any  usual 
practice  but  govern  their  actions  upon  the  special  conditions  of  the 
holding  off  or  bidding  freely  as  the  circumstances  warrant. 

When  seller  and  buyer  agree  and  the  sale  is  made  each  makes  a 
notation  on  a  trading  card.^*^ 

foll^^wing  description  was  made  from  a  first-hand  observation 

n  ^  commission  merchant’s  table  on  the  Chicago  Board 

of  Trade :  ^ 

be  one  of  the  best  corn  sellers  on  the  floor.  A  great  many  of  the 
other  sellers  came  to  him  throughout  the  session  and  asked  him  his  opinion  as  to  prices 
on  various  grades.  r 


o  ^  car  is  sold  before  official  inspection  has  been  obtained.  Reinspection  of  a  car  of  erain  bv 

depoVt  upod 


RECEIVING  FROM  COUNTRY  POINTS. 


45 


Whenever  a  new  sample  of  corn  came  to  his  table,  Mr.  C.  examined  it  carefully, 
trying  to  fix  a  figure  in  his  mind  which  would  be  a  fair  selling  price.  As  the  market 
first  opened,  buyers  appeared  on  the  floor  and  began  to  walk  from  one  table  to  another 
looking  at  various  samples  of  corn  displayed.  Until  10  o’clock,  there  was  practically 
no  bidding  by  any  buyer.  The  first  sale  of  corn  was  made  by  Mr.  C.  at  10.15.  This 
was  a  car  of  sample  grade  white  corn,  35  per  cent  damaged.  The  best  bid  that  had 
been  received  up  until  10  was  $1.25.  At  10.15,  a  C.  P.  Co.  buyer  bid  $1.35,  and  the 
sale  was  made  at  that  price. 

Mr.  M.  (another  salesman)  was  selling  his  oats  at  the  same  table.  Five  cars  of 
Standard  oats  were  sold  at  71|<t;.  The  grain  was  sold  at  the  future  price,  that  is,  at 
the  exact  time  the  sale  was  consummated;  the  future  price  as  shown  on  the  black¬ 
board  was  71|<1;. 

Both  men  turned  and  looked  at  the  blackboard  to  see  the  price.  It  should  be  noted 
that  the  price  fixed  was  the  blackboard  price  and  not  the  exact  price  which  was  then 
in  the  pit.  (The  blackboard  futures  quotations  are  usually  one  to  five  minutes  behind 
the  actual  prices  in  the  pit.)  At  the  same  time,  10  cars  of  No.  3  white  oats  were  sold 
at  H  under  the  future,  which  made  the  price  70|(j;.  Mr.  M.  felt  that  it  is  always  best 
to  sell  his  oats  at  the  prevailing  market  price.  Another  car  of  fancy  Standard  oats 
was  sold  to  a  shipper  of  fancy  oats  at  71i(t, — one-eighth  above  the  future.  One  car 
of  No.  3  white  oats  was  sold  to  a  terminal  elevator  buyer  at  Id;  under  September.  All 
of  the  oats  were  sold  at  prices  based  on  the  future,  and  in  these  cases  the  cash  price 
depended  absolutely  on  the  prevailing  future  price.  All  of  Mr.  M.’s  oats  were  sold 
before  10  o’clock. 

After  10.15  the  buyers  began  to  bid  for  grain.  Mr.  C.  had  two  cars  of  yellow  corn, 
one  No.  3  and  the  other  No.  4.  He  placed  the  prices  at  $1.70  for  the  No.  3  and  $1.65 
for  the  No.  4.  His  best  bid  was  H  under  these  prices,  and  was  made  by  a  chicken- 
feed  man.  Mr.  C.  refused  to  sell,  and  told  me  he  was  waiting  for  another  buyer  in 
the  hope  of  selling  to  him  at  a  higher  price.  Another  chicken-feed  man  bid  $1.45 
for  a  car  of  very  good  sample  grade  yellow,  but  Mr.  C.  held  the  car  at  $1.50.  At  10.50 
the  sellers  became  more  eager,  and  began  carrying  their  samples  of  corn  up  and  down 
the  floor  and  crying  their  offers.  However,  no  stated  prices  were  made,  and  they 
seemed  to  use  this  method  to  get  buyers  interested.  Another  car  of  sample  grade 
yellow  corn,  20  per  cent  damaged,  received  a  bid  of  $1.45,  Milwaukee  weights.  The 
sale  was  not  made,  however,  since  Mr.  C.  wanted  to  see  G.’s  buyer,  operating  for  a 
starch  company.  At  11.05  another  buyer,  Mr.  S.,  came  up  to  the  table  and  looked 
at  samples.  He  wanted  No.  5  white,  but  looked  at  all  the  samples  displayed,  and 
bid  $1.68  for  No.  4  yellow;  $1.45  for  the  sample  grade,  and  $1.52  for  No.  6  white. 
These  cars  were  all  sold  at  these  prices  to  Mr.  S.  Mr.  C.  had  a  car  of  No.  3  yellow 
which  he  tried  to  sell,  but  no  buyer  appeared,  so  he  started  to  hawk  it  around  the 
floor.  From  this  time  the  buying  appeared  to  subside  and  the  sellers  were  more 
and  more  eager.  The  No.  3  yellow  corn  was  then  offered  to  B.,  who  carried  away 
the  sample  to  look  at  it,  but  brought  it  back,  saying  that  it  was  too  damaged  for  his 
use.  The  car  was' then  offered  to  a  stock-yard  broker,  but  he  also  turned  it  down. 
At  il.20,  one  car  of  No.  6  white  was  sold  at  $1.53,  and  one  car  of  No.  6  yellow  for  $1.46. 
T.  &  B.  ’had  bid  $1.45  for  both  of  these  cars.  The  sample  grade  yellow,  20  per  cent 
damaged,  was  offered  to  G.  who  bid  $1.40.  The  C.  Co.  bid  $1.37,  and  later  M.  &  R. 
bid  $1.40.  It  is  the  custom  that  if  two  bids  of  the  same  price  are  received,  it  is  sold 
to  the  first  bidder.  In  this  case,  however,  it  was  sold  to  M.  &  R.  because  of  the  fav¬ 
orable  billing.  G.’s  purchases  are  for  local  consumption  while  M.  &  R.  are  shippers. 
As  a  result,  the  proportion  of  billing  in  favor  of  M.  &  R.’s  bid  was  1^(1;  a  hundred, 
which  amounted  to  a  little  more  than  a  bushel,  so  that  in  reality,  M.  &  R.’s  bid 
was  worth  let  more  than  G.’s.  Early  in  the  session  the  M.  &  R.  man  refused  to  buy 
any  corn  at  all,  but  about  10.30,  he  became  active  and  bid  for  a  good  deal  of  corn. 
At  11.32  two  cars  of  sample  yellow  were  sold  to  M.  &  R.  at  $1.35  and  $1.40.  T.  &  B. 
had  bid  $1.38  for  the  better  car.  For  these  two  cars,  G.  had  again  bid  the  same  price 
as  M.  &  R.  but  again  they  were  sold  to  the  latter  because  of  the  favorable  billing. 
The  car  of  No.  3  yellow  corn  was  finally  sold  to  T.  &  B.  at  11.50.  The  best  bid  that 
had  been  previously  made  was  by  A.  D.,  who  bid  $1.65,  but  withdrew  his  bid  and 
then  bid  $1.63.  The  market  by  this  time  appeared  rather  weak,  so  that  C.  was  glad 
to  accept  $1.65.  About  this  time  he  felt  that  the  market  was  weakening  and  regretted 
the  fact  that  he  had  not  pushed  his  sales  earlier  in  the  session.  During  all  this  time 
many  of  the  buyers  and  sellers  were  coming  to  C.  and  asking  his  opinion  of  the  market 
and  what  prices  should  prevail.  Throughout  the  session  he  did  not  even  notice 
the  price  of  futures.  I  asked  him  what  he  thought  the  future  price  was,  at  11.30,  and 
he  stated  that  probably  it  was  about  $1.59.  The  actual  price  at  that  time  was  $1.57. 

At  11.37  he  offered  K.  a  car  of  No.  4  yellow,  but  could  not  get  any  bid.  The  car  was 
also  offered  to  M.  &  R.,  and  was  finally  sold  to  A.  D.  for  $1.58.  One  car  of  No.  6  yellow 


56976°— 22 - 5 


46 


TERMINAL  GRAIN  MARKETING. 


was  offered  at  $1.50  to  K.,  who  refused  to  take  it,  and  did  not  even  make  a  bid.  T.  B. 
bid  $1.46.  The  car  was  sold  for  $1.50  to  H.  &  E.  One  car  sample  grade  yellow,  25 
per  cent  damaged,  was  offered  M.  &  R.  at  $1.38.  The  C.  Co.  bid  $1.35;  G.  bid  $1.40; 
T.  &  B.  bid  $1.38.  The  car  was  finally  sold  to  M.  &  R.  for  $1.40.  The  reason  for  selling 
M.  &  R.  rather  than  G.  was  again  because  of  the  favorable  billing.  One  car  sample 
grade  white,  35  per  cent  damaged,  was  offered  M.  &  R.,  who  bid  $1.35.  C.  Co.  bid 
$1.30.  It  was  sold  to  M.  &  R.  for  $1.35.  At  12  M.  &  R.  buyer  asked  Mr.  C.  his  idea 
on  the  right  price  for  No.  4  yellow.  Mr.  C.  quoted  him  $1.60.  This  was  after  all  his 
corn  had  been  sold.  D.  Bros.’s  seller  came  to  C.  to  ask  his  idea  of  prices.  J.  Bros.’s 
representative  wanted  to  find  a  buyer,  so  C.  sent  him  to  H.  &  E.  because  H.  &  E.  had 
bought  No.  6  yellow  from  him  previously  at  $1.50.  For  one  car  sample  grade  yellow, 
22  per  cent  damaged,  C.  Co.  bid  $1.35;  T.  &  B.  bid  $1.35;  M.  &  R.  bid  $1.33.  Since 
the  C.  Co.  was  the  first  to  bid'  $1.35,  the  car  was  sold  to  them.  About  12.15  all  the 
sellers  seemed  to  be  more  eager  and  began  pushing  sales.  The  buyers  held  off,  how¬ 
ever,  and  prices  seemed  to  sag.  At  12.20  one  car  of  No.  6  white  was  sold  by  C.  to 
C.  Co.  for  $1.45.  One  car  No.  3  yellow,  A.  Co.  bid  $1.60.  S.  refused  to  bid.  T.  &  B. 
bid  $1.65,  N.  &  Co.  $1.65,  and  A.  D.  $1.60.  The  car  was  sold  to  A.  at  12.50  for  $1.66. 

A  car  of  No.  4  yellow  C.  priced  at  $1.65.  T.  &  B.  bid  $1.58.  The  car  was  finally 
sold  to  R.  Bros,  at  $1.60. 

The  future  market  for  the  same  day  was  as  follows; 


August. 

September. 

October. 

$1.  58 
1.58 
1.56J 
1.56i 

1. 60-1. 59f 
1.601 
1.56i 

1.  56f-l.  56i 

1. 62-1. 611 
1. 62 
1.  57- 
1. 581-L  581 

High . 

Low . 

Close . 

From  these  quotations,  it  will  be  seen  that  the  first  trade  was  the  highest  for  to-day, 
and  that  the  market  gradually  sagged,  with  a  slight  recovery  at  the  end.  The  same 
trend  was  typical  of  the  cash  business.  Cash  grain  on  an  average  was  selling  about 
five  cents  lower  at  the  close  than  at  the  opening. 

As  shown  above,  the  cash  price  is  sometimes  quoted  at  a  certain 
premium  over  or  discount  under  the  prevailing  future.  A  close 
observation  of  trading  in  cash  oats  at  Minneapolis  indicated  that 
many  bids  and  offers  were  made  after  reference  to  the  illuminated 
clock,  which  is  used  to  register  prices  of  the  ruling  oats  futures  as 
made  in  the  oats  pit.  The  following  is  an  illustration  of  an  actual 
sale: 

Mr.  S.  had  a  pan  sample  from  a  car  of  oats  on  his  sample  table  and  stood  facing  the 
price  clock.  As  a  buyer  came  along  he  offered  the  car  at  “2i  cents  over.”  This 
was  refused.  Another  buyer  came  along  and  to  him  he  offered  the  car  at  “2  cents 
over.”  The  buyer  weighed  the  oats  in  his  hands,  asked  the  test  weight  per  bushel; 
was  told  ‘‘36  or  37  pounds**’  and  offered  “1^  cents  over,”  after  turning  around  to  look 
at  the  clock.  The  clock  registered  at  that  time  67f ,  thus  making  the  offer  68|.  Mr. 
S.  asked  whether  the  buyer  would  not  make  it  69  (If  cents  over),  and  the  bargain 
was  closed  on  that  basis. 

At  times  the  cash  price  is  based  strictly  on  the  future.  For 
example,  a  trader  at  Minneapolis  had  a  car  of  rye  to  sell.  A  buyer 
was  found  who  wanted  the  car,  but  neither  buyer  nor  seller  was  will¬ 
ing  to  close  the  trade  without  reference  to  the  futures  market,  and 
as  the  rye  futures  market  was  inactive  on  that  day,  no  pit  trades 
had  been  recorded  up  to  that  time.  The  sale  was  therefore  made 
^^at  the  market’’  (future),  the  price  to  be  filled  in  on  the  trading 
cards  at  the  figure  shown  for  the  first  pit  trade. 

Records  of  sale. — When  the  seller  accepts  an  offer  the  sale  is 
made.  On  the  trading  card  (sales  side)  he  notes  the  buyer,  the  car 
number,  grain,  price,  and  terms  of  delivery.  A  part  of  the  sample  of 
gram  IS  given  to  the  buyer,  who  keeps  it  for  comparison  wdth  a 
sample  from  the  car  which  he  secures  after  buying.  The  buyer  also 
makes  a  memorandum  of  the  sale  on  his  own  (purchase)  card.  At 


KECEIVING  FROM  COUNTRY  POINTS. 


47 


frequent  intervals  during  the  day  buyer’s  and  seller’s  cards  are  sent 
to  their  respective  offices  and  confirmations  are  exchanged.  Another 
confirmation  is  sent  by  the  seller  to  the  shipper.  From  the  seller’s 
card  a  disposition  order  is  made  up,  furnishing  instructions  to  the 
railroad  office  to  deliver  the  car  in  accordance  with  the  buyer’s  in¬ 
structions.  This  is  usually  issued  in  triplicate,  two  copies  going  to 
the  railroad  agent  (who  may  be  a  joint  agent  for  several  lines) .  After 
the  disposition  order  is  indorsed  and  returned  by  the  railroad  agent 
it  is  also  indorsed  by  the  commission  house  and  sent  to  the  purchaser. 
A  request  is  also  made  of  the  inspection  department  for  certificates 
of  inspection. 

Hedging. — If  the  grain  has  been  hedged  by  the  shipper,^  as  is  a 
frequent  practice  in  the  Northwest,  the  commission  house  usually  un¬ 
dertakes  to  close  out  the  hedge  on  the  car  of  grain  which  it  has  sold. 
In  the  case  of  line  elevators  the  hedging  is  attended  to  by  the  head 
offices.  The  individual  country  elevator,  however,  instructs  its  com¬ 
mission  house  as  to  the  hedging  or  closing  of  hedges.  The  original 
shipment  notice  sometimes  includes  instructions  to  buy  in  “the 
future”  upon  the  sale  of  the  cash  grain. 

As  a  result  of  long-established  relations  between  country  shippers 
and  a  terminal  commission  merchant  hedges  are  often  taken  out  and 
closed  without  specific  instructions,  particularly  in  the  Northwest.^^ 

The  closing  out  of  a  hedge  is  attended  to  by  the  pit  operator, who 
enters  the  pit  and  makes  the  necessary  trade,  in  this  instance  a  pur¬ 
chase  of  the  future  in  which  the  grain  is  hedged.  Upon  making  the 
purchase  he  notes  the  details  upon  the  buying  side  of  a  card  some¬ 
what  similar  to  the  cash  trading  card.  The  seller  of  the  future  also 
makes  note  of  the  transaction  on  a  similar  card,  using,  of  course,  the 
reverse  side.  These  cards  go  to  the  respective  offices  of  the  buyer 
and  seller.  From  the  seller’s  card  the  office  force  prepares  a  con¬ 
firmation  of  sale,  which  goes  to  the  buyer.  From  the  buyer’s  card 
is  prepared  (1)  a  confirmation  of  purchase,  which  goes  to  the  seller; 
(2)  a  confirmation  which  goes  to  the  country  shipper.^^  This  trans¬ 
action  being  closed,  the  commission  firm  prepares  an  accoimt  of 
purchase  and  sale,  which  is  sent  to  the  country  customer. 

Delivery  and  acceptance. — The  next  step  of  the  commission 
house  is  to  secure  an  official  weight  certificate  upon  which  to  base 
its  invoice.  The  car  is  moved  to  destination  and  the  purchaser  pro¬ 
cures  a  sample  from  the  car  to  check  against  the  grade  and  sample  on 
which  the  sale  was  made.  In  case  the  car  now  proves  to  be  not  up  to 
sample  an  appeal  for  reinspection  may  be  filed, or  if  buyer  and  seller 
can  not  agree  the  matter  may  be  settled  by  a  board  of  arbitration  or 
a  similar  committee.  Under  Minneapolis  practice  the  purchaser  may 
reject  the  grain  even  after  it  has  reached  the  hopper  in  the  elevator. 
In  most  cases,  however,  grain  is  not  rejected  after  confirmation  of 
purchase  except  for  some  serious  discrepancy.  The  costs  of  reinspec¬ 
tion,  appeals,  or  arbitration  must  be  met  by  the  party  found  to  be 
in  error,  whether  buyer  or  seller,  as  the  case  may  be. 


condi- 
is 


n  See  Vol.  I,  Chap.  IX.  ,  .  .  v. 

n  In  the  northwest  grain  States  many  commission  firms  reqime  country  elevators  to  hedge  as  a  con 
tion  precedent  to  extending  them  funds.  In  such  instaiices  it  is  probable  that  much  of  the  hedging 
done  by  the  commission  house  without  specific  instructions.  ,  . 

1*  Most  commission  firms  in  the  Northwest,  and  a  few  line  companies,  employ  pit  operators. 

Except  in  the  case  of  line  companies. 

» See  Vol.  II,  p.  320.  .  .  ^  V.  .  .  1 

”  See  Vol.  II,  p.  255.  The  rules  for  acceptance  or  rejection  of  gram  tendered  on  cash  contracts  vary,  in 

detail,  as  between  the  different  exchanges. 


48 


TERMINAL  GRAIN  MARKETING. 


The  grade  being  accepted,  the  grain  is  weighed  by  an  elevator  em¬ 
ployee  in  the  presence  of  an  official  from  the  weighmaster’s  office  and 
certificates  of  weight  are  procured  from  the  weighmaster  as  soon  as 
possible.  In  case  there  is  a  marked  difference  between  shipper’s 
weights  and  those  of  the  terminal  market  the  commission  merchant 
is  expected  to  prefer  a  claim  for  shortage  against  the  railroad  com¬ 
pany.  In  case  unloading  is  to  take  place  at  a  point  having  no  repre¬ 
sentative  of  the  official  weighmaster  of  the  market  where  sold,  such 
as  a  country  mill  or  an  eastern  market,  the  grain  may  be  transferred 
through  an  elevator  solely  to  procure  a  weight  certificate.^^  In  cases 
where  the  buyer  is  known  to  be  reliable,  either  railroad  or  unloading 
weights  may  be  used  as  a  basis  for  payment. 

The  INVOICE. — On  the  basis  of  the  official  weight  certificate  an 
invoice  setting  forth  the  details  of  the  transaction  is  sent  to  the  pur¬ 
chaser.  Frequently  (as  in  Minneapolis)  tho  commission  house  draws 
upon  the  purchaser  for  90  per  cent  of  the  proceeds  immediately  upon 
receipt  of  the  weight  certificate.  Certain  Chicago  firms  draw  on  the 
purchaser  up  to  80  per  cent  even  before  final  weights  are  obtained. 
This  varies  in  accordance  with  exchange  rules  and  the  credit  relations 
existing  between  the  parties  to  the  contract.^® 

The  account  sales. — ^After  the  purchaser  has  completed  pay¬ 
ment  on  the  sale  the  commission  firm  is  in  position  to  render  an 
account  sales  to  the  shipper.  Freight,  switching,  inspection,  weigh¬ 
ing,  and  other  terminal  charges  as  well  as  the  established  commis¬ 
sion  charge  are  deducted  from  the  proceeds  of  the  sale.  Some  of  the 
larger  houses  employ  traffic  experts  to  check  up  freight  charges  and 
make  adjustments  with  the  railroad  company.  Form  2  following  is 
a  copy  of  the  account  sales  form  used  by  a  large  commission  house: 

Form  2.— ACCOUNT  SALES. 

ACCOUNT  SALES  BY  CARGILL  COMMISSION  CO.,  MINNEAPOLIS,  MINN. 

For  account  of  i. .  No . 

Grain .  . 


Date  of 
sale. 


Station. 


Car  No. 


Weight. 


Insp. 


Minneapolis, . 191... 

Cargill  Commission  Co. 

Per . 


Gross 

bush. 


Dock. 


Freight. . 

Demurrage . 

Switching . 

Inspection . 

Weighing _ 

Rex  and  appeal. 


Commission. 
Interest . . 


Net  proceeds. 
Advance . 


Balance. 


Net  bush. 


Price. 


Amount. 


17  The  charge  for  such  “direct  transfer”  at  Kansas  City,  effective  Sept.  5,  1918,  was  one-half  cent  ner 
bushel,  the  elevator  to  insure  against  fire  loss. 

18  The  following  is  an  extract  from  the  rules  of  the  Kansas  City  Board  of  Trade: 

“  Title  to  grain  sold  on  track  in  carload  lots  shaU  remain  in  the  seller  until  payment  has  been  made  there¬ 
for.  Provided,  however,  that  on  grain  ordered  to  elevators,  mills,  or  warehouses  on  which  the  purchaser 
has  paid  75  per  cent  of  the  contract  price,  the  seller  shall,  upon  receipt  of  said  amount,  immediately  indorse 
the  same  as  a  payment  upon  any  document  showing  title  in  some  other  person,  and  upon  his  failure  so  to 
do  the  title  to  said  grain  shall  be  deemed  to  have  passed  to  the  purchaser  at  the  time  said  payment  is  made  ” 

19  See  Vol.  II,  pp.  268-282,  for  terminal  charges  as  of  Dec.  1, 1919. 


RECEIVING  FROM  COUNTRY  POINTS. 


49 


This  form  is  fairly  typical  of  the  account  sales  statement  used  by  com¬ 
mission  merchants  generally.  The  items  listed  as  possible  charges 
against  the  gross  proceeds  indicate  some  of  the  services  customarily 
performed  by  the  commission  merchant.  It  is  to  the  latter’s  interest 
to  keep  such  charges  as  demurrage,  switching,  reinspection,  and 
appeal  as  low  as  possible  and  to  prosecute  claims  for  shortage,  dam¬ 
age,  leakage,  etc.,  where  necessary.  However,  under  the  commission 
rules  of  the  larger  exchanges,  the  commission  nian  must  make  the 
charges  precisely  as  they  are  incurred.  Interest  is  generally  charged 
the  shipper  from  the  date  a  draft  is  accepted  to  the  date  of  account 

All  supporting  documents,  such  as  duplicates  of  the  inspection  and 
weight  certificates,  the  freight  bill,  and  a  check  for  net  proceeds  are 
attached  to  the  account  sales  and  forwarded  to  the  shipper.  In  case 
the  commission  house  books  show  a  debit  balance  against  the  shipper 
the  net  proceeds  of  each  sale  are  usually  credited  to  his  account. 

There  are  incidental  variations  as  between  markets.  Certain 
Chicago  firms  reported,  for  example,  that  they  were  unable  to  pay 
the  freight  before  making  up  the  account  sales  so  that  this  had  to  be 
adjusted  at  a  later  time.  The  St.  Louis  Merchants  Exchange  has 
ruled  that  where  a  duplicate  inspection  occurs  (i.  e.,  by  Missouri  and 
Illinois  departments)  the  second  inspection  shall  be  paid  by  the  buyer. 

A  most  effective  recapitulation  of  each  transaction  is  kept  by  the 
Cargill  Commission  Co.-,  of  Minneapolis,  as  shown  in  Form  3  following. 


DECEIVING  EROM  COUNTRY  POINTS. 


51 


Commission  charges. — As  pointed  out  in  Volume  II  (Chap.  V, 
sec  10),  the  commission  charges  have  been  reduced  to  a  uniiorm 
schedule  of  rates  in  each  terminal  market,  frequently  on  a  percentage 
basis,  with  maximum  and  minimum  limits  in  cents  per  bushel, 
should  be  noted  that  for  wheat  the  Chicago  commission  rate  l^or 
nonmembers  was  1  per  cent  with  a  minimum  of  1  cent  per  bushel 
in  1918;  whereas  Minneapolis  and  Duluth  had  flat  minimum  rates 
of  14  cents  per  bushel  for  the  same  service  (see  Vol.  ii,  lable  b8). 
On  wheat  selling  at  $2  the  Minneapolis  rate  would  net  $15  on  a 
1  000-bushel  car  as  compared  with  a  return  of  $20  on  the  1  cent 
rate  at  Chicago.  With  wheat  at  $1,  the  Chicago  rate  would  net  $10 

and  the  Minneapolis  rate  $15.  .  .  •  n 

It  is  an  open  question  whether  the  percentage  basis  materially 

affects  competition  or  the  flow  of  shipments  as  compared  with  the 
other  method. 


Section  4.  Employment  of  solicitors. 

A  large  item  of  expense  incurred  in  the  cash  commission  business, 
especially  in  the  Northwest  territory,  is  for  the  employment  of  solici¬ 
tors.  A  majority  of  the  commission  houses  in  Minneapolis  employ 
from  2  to  4,  and  a  few  firms  have  maintained  as  many  as  6  ^licitors 
at  salaries  ranging  from  $200  to  $350  or  more  per  month.  One  firm 
reported  to  the  Commission  that  it  had  at  one  time  10  men  build¬ 
ing  up  its  business  in  the  country  (infra).  ^  V  A 

As  pointed  out  in  Volume  II, the  employment  of  solicitors  and 
their  methods  of  procuring  business  are  closely  supervised  by  the 
exchanges  in  the  larger  primary  markets,  especially  with  reference 
to  the  enforcement  of  the  so-called  uniform  commission  rules. 
At  some  of  the  primary-markets  commission  houses  are  forbidden  to 
employ  solicitors  on  a  brokerage  basis,  regular  salaries  being  required 

((Vol.  ll.  Chap.  V,  sec.  11).  ^  i  r  -4. 

Functions  of  the  solicitor.^^ — The  commission-house  solicitor 

endeavors  to  secure  regular  business  from  country  elevators  and 
may  also  solicit  the  consignment  of  individual  cars  loaded  by  farmers 
in  cases  where  the  local  elevators  are  not  the  solicitor  s  regular  cus¬ 
tomers.  He  is  usually  selected  because  of  an  intimate  knowledp  of 
the  country  grain  business  and  the  operating  problems  of  local  eleva- 
tors.  Frequently  he  has  been  manager  of  a  country  elevator  himself. 
A  knowledge  of  bookkeeping  is  often  necessary,  since  his  duties  may 
include  the  auditing  of  the  accounts  of  shippers  to  whom  the  com¬ 
mission  house  has  advanced  funds.  The  solicitor  must  understand 
grades  and  dockage  and  country  prices,  and  be  able  to  assist  the 
country  elevator  buyer  in  rush  seasons.  Such  attainments  as  the  ability 
to  handle  a  stubborn  gas  engine,  a  knowledge  of  carpentry,  md  infor¬ 
mation  of  the  rights  of  shippers  in  securing  cars,  aid  him  m  obtain¬ 
ing  the  good  wiU  of  the  local  manager.  ^ 

Financing  on  open  account  plays  an  important  part  m  competitive 
activities  in  some  sections.  Where  possible  the  solicitor  obtains 
.direct  contact  with  the  stockholders  or  proprietors  of  country 


52 


TERMINAL  GRAIN  MARKETING. 


elevators  with  a  view  to  securing  their  accounts.^^  Some  firms 
require  regular  reports  on  visits  to  prospects. 

The  work  of  the  solicitor  in  the  Northwest  is  described  in  the  follow¬ 
ing  interview:  iLiiciUllUW 

extent  are  traveling  solicitors  used?— A.  My  business  is 

not^doing  busine>  *  “*  “X  *’'®y 

Q.  In  normal  times  how  many  of  those  men  do  von  liccxm  /-vn+9  a  t  t,  j 

country  elevators  is  characteristic  of  territory 
where  such  shippers  are  financed  by  commission  houses  and  is  not  so 
prevalent  elsewhere.  But  even  in  the  former  area  (tL  NorthwLt) 

noTcfl'rTto^®  country  elevators’  books,  since  they  do 

Quhed  Ono  accounts  where  so  much  supervision  is  re- 

quired  One  commission  merchant  stated  that  he  assured  himself 
that  elevators  which  he  financed  were  fully  insured  and  gave  the 
solicitors  instructions  to  “take  a  peep  at  the  bins”  and  sizi  un  the 
situation  where  a  shipner  had  draAi  heavily  and  Tal  sendZ  ^ 
gram  slowly;  but  that  le  believed  in  leaving  the  eleTSor “free 
manage  his  business  without  commission-house  supervision 
Many  country  elevator  managers  have  not  been  competent  book- 

keepers  and  the  financing  commission  houses  have  frequentlv  felt 
obliged  to  make  “audits’^ in  self  protection.^  Ji-cquenuy  telt 

22  See  Vol.  I,  pp.  235-237.  The  foUowing  letter  also  illustrates  this  practice: 

The  Van  Dusen-Harrington  Co.,  Dewls  Lake,  N.  D.ak.,  July  16,  1916. 

Minnea-polh,  Minn. 

th?tTy  Sd  Smdeblker^Jai^forXh  Grain  and  Elev.  Co.,  and  figure 

to  get  two  more  members  elected  on  the  board*  whieh  wr^i  J  worked  up  a  strong  organization, 

death  knell.  There  are  five  or  six  stocSolders  wlmfiw  nhSrlrT  k  mean  our 

Whenit  rained  sohard  Friday  night  I  found  four  or  five  have  their  lands  out  near  Josephine, 

as  the  roads  were  too  bad  fo^  a  car,  they  t£ught 

agreemg  to  take  them  out  and  bacl^.  I  got  fiT&Sorsfn  ^  ^  after  them’, 

votes,  and  we  elected  our  man,  Mr.  Thomas  who  is  nVht  w  iaio  ^  ^  proxieSj  which  gave  us  14 

now,  2  Equity  and  5  who  are  ri^t.  ’  ^  ^  chamber,  also  for  us;  it  leaves  the  board 

Ihetertthl  Uhly  hiuS  Shiorthev^use  moSfv  f„?  owing  to 

to  give  them  hall  of  the  accoVmt  or  they  Sd  tL?&^  *’*  *““•  “'o™'  “'0^  "ouW  hive 

they  only  asked  for  enough  grain  to  Scrthem  lii  elsewhere.  Last  year 

more  greedy  now,  and  Mr.  Getchell  savs  Mr  4ndrew<j  "  getting 

them  If  they  had  to  have  the  Andrews  elevator  and  had  vo  ^  account.  I  told 

roTSi  J  *0“  for  the  board  to  meet, 

year,  as  five  Of  the  du-ectors  told  mrihev  S J  iA  fator  of  contract  for  the 

they  had  to  give  Andrews  Grain  Co.  The  Equit7membe?s  of  th^a  business  outside  of  what 

Gram  Co.  an^d  tte  other  half  to  the  Equity.^ SSS  St‘° 

sets  of  books  eoverin^alln^^gar^ra^cU^MCome^^^wifhth  ^hvertisement,  have  prepared  uniform 

books  are  distributed  toelevatorsfree  of  post  operation  of  a  country  elevator.  These 

agents  at  a  number  of  and  S^herelLy  ^^S 

In  some  instances  the  books  were  kent  bv  intelligently  used  very  good  results  were  shown, 

similar  to  that  of  a  line  company.  (See  V^.  II  p  230  )  A  Duliifh  fir^  organization  was  maintained 

Of  nmemdependent  elevators  in^r^er  to  deteJ^„XA?at£ 


RECEIVING  FROM  COUNTRY  POINTS. 


53 


Advantages  and  disadvantages  of  employing  solicitors. — 
Data  obtained  from  23  representative  firms  in  Chicago,  Minneapolis, 
and  Duluth  indicate  that  the  monthly  expense  of  maintaining  one 
solicitor  would  absorb  the  commissions  realized  in  handling  over  15 
cars  of  wheat  (1,000  bushels  to  the  car). 

The  following  are  claimed  by  the  trade  as  the  advantages  of  em¬ 
ploying  solicitors : 

(1)  That  they  stimulate  competition  in  the  country  markets, 
thereby  raising  country  prices. 

(2)  That  they  accelerate  the  flow  of  grain  from  the  country. 

(3)  That  they  promote  good  seeds  movements  and  better  operating 
methods. 

(4)  That  they  discourage  farmers  from  speculating  and  save  farmers’ 
elevator  companies  from  losses. 

(5)  That  they  keep  the  receivers  in  the  terminal  market  informed 
as  to  country  conditions,  so  that  they  can  more  ably  represent  country 
interests  on  the  exchange  floor. 

(6)  That  solicitors  are  necessary  as  auditors  under  a  system 
whereby  commission  men  finance  the  farmers’  elevators  (as  in  the 
Northwest). 

(7)  That  they  conduct  advertising  operations  during  the  quiet  sea¬ 
son  and  maintain  a  useful  supervision  over  country  marketing. 

The  commission  men  who  oppose  the  employment  of  solicitors 
cite  the  following  objections: 

(1)  That  employment  of  solicitors  increases  overhead  expense  un¬ 
duly  and  is  only  possible  under  a  high  minimum  commission  rate. 

A  Minneapolis  firm  which  has  always  opposed  such  soliciting  ' 
methods  stated  that  the  practice  constituted  one  of  the  largest  expense 
items  in  the  cash  commission  business  and  was  an  economic  waste. 
They  had  kept  two  men  on  the  road  only  because  others  did  so — to 
meet  this  competition. 

(2)  It  is  argued  that  the  only  function  which  a  solicitor  performs  is 
to  persuade  a  shipper  to  send  his  grain  to  one  house  rather  than  to 
another,  which  may  be  equally  as  good  for  his  (the  shipper’s)  pur¬ 
poses;  and  that  he  performs  no  useful  function  in  directing  the  grain 
into  proper  channels,  sending  it  to  the  best  market,  improving  the 
grade  or  increasing  the  volume  of  grain  raised  or  shipped. 

(3)  It  is  also  maintained  that  some  solicitors  provide  entertainment 
to  shippers  to  such  an  extent  that  their  salesmanship  operations 
offset  any  economies  effected. 

Section  6.  Wire-house  competition. 

The  use  of  private  wires  for  soliciting  consignments  and  shipments 
^Ho-arrive”  is  recognized  by  the  Chicago  Board  of  Trade  as  d  legiti¬ 
mate  method  of  competition,  and  free  telegraphic  communication 
has  been  construed  not  to  be  a  violation  of  the  commission  rule.^^ 
The  reverse  of  this  ruling  obtains  in  Minneapolis,  where  the  practice 

An  Indianapolis  dealer  was  asked  whether  it  paid  to  employ  solicitors.  He  showed  from  his  records 
that  his  average  yearly  receipts  from  1910  to  1915  had  been  about  3,000  cars.  In  1915  he  began  using  traveling 
solicitors,  and  his  consignments  jumped  from  3,000  to  5^000  cars  per  year,  which  he  attributed  to  his  two 
solicitors.  Since  he  averaged  about  $15  a  car  in  commission,  this  indicated  an  increased  revenue  of  approxi¬ 
mately  $30,000.  The  expense  of  maintaining  the  solicitors  was  about  $10,000  a  year,  so  that  the  firm  claimed 
to  have  realized  an  additional  profit  of  about  $20,000. 

25  SeeVol.  II,  p.  231. 


54 


TERMINAL  GRAIN  MARKETING. 


of  soliciting  consignments  through  private  wires  is  not  permitted. 
On  August  2,  1910,  the  board  of  directors  ruled  it  to  be — 

a  direct  violation  of  section  11  of  Rule  VIII  for  members  of  the  chamber  of  commerce 
to  furnish  free  telephone  quotation  service  to  country  shippers  (Circular  No.  192). 

At  a  meeting  of  the  board  of  directors  held  May  9,  1911,  the  fol¬ 
lowing  resolution  was  adopted : 

Resolved,  That  the  board  of  directors  deems  it  a  violation  of  the  Commission  rules 
for  members  to  assume  the  expense  of  telegraph  messages  sent  collect  by  customers, 
or  reversed  telephone  calls  from  customers,  the  assumption  of  these  charges  by  a 
member  of  the  chamber  of  commerce  amounting,  in  the  opinion  of  the  board  of  direc¬ 
tors,  to  a  rebate  of  a  portion  of  the  commission  charge,  making  the  member  subject 
to  the  penalties  provided  in  section  11  of  Rule  VIII  of  the  general  rules  of  this  asso¬ 
ciation. 

This  resolution  applies  to  all  messages  received  by  members,  or  their  agents,  at  any 
of  their  offices  outside  of  Minneapohs  as  well  as  those  received  at  Minneapolis.^® 

The  Milwaukee  rule  is  practically  the  same  as  that  at  Minneapolis.^^ 

In  Kansas  City  the  commission  men  have  been  forbidden  by  the 
board  of  trade  to  send  market  information  to  country  elevators  via 
telephone  or  telegraph  at  the  expense  of  the  sender. 

Grain  receivers  in  Chicago,  St.  Louis, and  Milwaukee  have  com¬ 
plained  against  houses  which  solicit  consignments  by  telephone  and- 
telegraph  furnishing  quotations  and  market  advice  over  the  wires.^* 

A  Chicago  concern,  which  has  been  one  of  the  largest  receivers 
of  cash  grain  at  that  point,  has  branch  offices  in  Iowa  so  located 
as  to  cover  the  territory  and  keep  in  direct  wire  communica¬ 
tion  with  the  main  office.  In  this  way  they  can  reach  practically 
every  grain  shipping  town  in  the  State,  usually  in  less  than  10 
minutes.  They  can  keep  a  shipper  constantly  informed  of  price 
fluctuations  upon  which  to  base  his  purchases  as  well  as  advise 
him  immediately  on  the  sale  of  his  consignments  in  the  terminal. 

On  the  other  hand,  it  is  asserted  that  when  a  country  elevator  re¬ 
ceives  market  news,  market  advice,  baseball  scores,  and  other  in¬ 
formation  over  a  private  wire  it  is  influenced  to  consign  to  the  house 
giving  such  service.  The  receivers  not  equipped  with  j)rivate  wires 
in  Chicago,  St.  Louis,  and  Milwaukee  hola  that  this  is  an  unfair 
competitive  advantage,  and  that  private  wires  restrict  the  general 
wire  facilities  for  other  members  of  the  trade.  It  is  stated  that  the 
private-wire  systems  were  established  primarily  for  future  trading, 
that  they  have  infringed  upon  the  cash  business  in  recent  years,^® 
and  that  a  Arm  carrying  on  a  purely  cash  business  can  not  afford 
such  an  investment.  The  statement  relative  to  cost  of  investment 
is  undoubtedly  true.  A  private-wire  system  of  500  miles  of  line 
extending  into  Iowa,  for  example,  would  be  a  comparatively  small 
system>^i  Assuming  $20  per  mile  as  the  cost  of  the  lease  and  $20 
per  mile  additional  for  operators’  salaries  and  other  additional 
overhead  expense, the  expense  of  this  500-mile  line  would  reach 
at  least  $20,000  a  year.  The  following  illustration  of  private- wire 

26  Circular  No.  249. 

27  Ruling  of  the  board  of  directors  Jan.  4, 1910,  on  rule  32,  sec.  11.  For  text  see  Vol.  11,  p.  232. 

28  It  is  reported  that  a  rule  has  been  considered  by  the  Merchants  Exchange  of  St.  Louis  which  would 
prohibit  private  wire  operators  from  serving  that  exchange  so  long  as  their  wires  were  also  used  to  receive 
orders  from  country  merchants. 

29  The  use  of  private  wires  for  cash  trading  is  discussed  in  Vol.  V,  Chap.  Ill,  sec.  7. 

80  Since  about  1910.  See  I.  C.  C.  Doc.  No.  5421,  Evidence,  p.  1957. 

31  See  Table  16,  Vol.  V.  > 

32  These  are  conservative  figures.  See  Vol.  V,  Chap.  Ill,  sec.  4. 


HECEIVING  EROM  COUNTRY  POINTS. 


55 


cost  appears  in  the  recent  decision  of  the  Interstate  Commerce 
Commission  on  Wire  Contracts 'P 

The  record  shows  the  details  of  two  days’  operations  of  a  broker’s  wire  from  Chicago 
to  Kansas  City,  Mo.,  with  drops  at  Davenport,  Iowa,  and  St.  Joseph,  Mo.  The  ex¬ 
penses  of  this  operation  were  as  follows : 


Rental  of  wire,  including  two  drops,  per  annum . $11, 000. 00 

Salaries  of  four  operators .  5,  720. 00 


Total  allocated  expenses .  16,  720. 00 

Incidental  expenses,  estimated .  5,  720. 00 


Total  expenses,  per  annum .  22, 440.  00 

Total  expenses,  per  day .  71.  90 

Certain  Chicago  receivers  point  to  the  case  of  a  cash  commission 
firm  which  set  up  a  branch  office  at  Pontiac,  Ill.  By  public  tele¬ 
phone  it  took  from  20  to  60  minutes  for  the  main  office  to  call  the 
Pontiac  branch.  There  were  three  private-wire  branches  already 
operating  at  Pontiac  enjoying  practically  continuous  communica¬ 
tion  with  the  head  offices  at  Chicago,  and  it  became  impossible  for 
the  commission  firm  not  so  equipped  to  do  business. 

Because  of  the  network  of  private  wires  extending  out  of  Chi¬ 
cago  the  hedging  orders  of  country  dealers  are  frequently  executed 
by  private-wire  operators  even  when  the  grain  is  to  he  consigned  to 
firms  not  so  equipped.  It  is  alleged  that  this  use  of  wire  houses  by 
country  shippers  lor  hedging  grain  places  strictly  cash  commission 
firms  at  a  further  disadvantage  in  competition,  although  the  hedg¬ 
ing  of  grain  by  country  elevators  is  not  so  extensively  practiced  in 
Chicago  territory  as  in  the  Northwest. 

Apparently  the  fact  that  private-wire  systems  are  already  es- 
tablisned  leads  to  marked  economies  in  using  the  equipment  for  a 
cash  commission  business,  since  the  futures  business  can  be  relied  on 
in  general  to  take  care  of  the  expense. 

At  the  Interstate  Commerce  Commission  hearing  in  1917^^  it  was 
testified  that  the  cash  grain  business  in  Iowa  going  to  Chicago  firms 
had  become  concentrated  in  the  hands  of  six  private-wire  concerns. 
Others  say  that  the  solicitation  of  consignments  by  wire  houses  at 
Chicago  offsets  to  a  certain  extent  the  efforts  of  terminal  elevators 
to  buy  direct  and  thereby  tends  to  sustain  the  volume  of  sample 
selling  on  the  floor. 

So  far  as  the  conduct  of  the  cash  grain  commission  business  is  con¬ 
cerned  the  private  wire  is  necessarily  an  expensive  facility.  Generally 
speaking  there  is  not  in  this  business  any  such  necessity  for  promptness 
and  speed  in  the  transactions  involved  as  in  the  case  of  futures  opera¬ 
tions,  and  this  is  also  true  even  of  the  hedging  transactions  of  country 
elevators.  While,  therefore,  it  may  be  that  this  is  an  economical 
method  of  handling  grain  so  long  as  cash  and  future  business  is  com¬ 
bined  and  the  speculative  futures  business  takes  care  of  the  largest 
share  of  the  expense,  it  by  no  means  follows  that  this  would  be  true 
if  private  wires  were  employed  for  the  transaction  of  only  the  cash 
commission  business,  including  hedges.  This  would  necessarily 
involve  sufficiently  high  commission  rates  to  cover  the  expense  of 


«  Doc.  No.  5421,  decided  Aug.  3, 1918,  pp.  751-752. 
M  See  Vol.  V,  chart  facing  p.  126. 

84  Private  Wire  Contracts,  Docket  5421. 


56 


TERMINAL  GRAIN  MARKETING. 


the  facility  and  would  probably  tend  to  a  high  concentration  of  the 
commission  business. 

Section  6.  Commission  merchants  associations. 

In  four  terminal  markets  (Minneapolis,  Duluth,  Milwaukee,  and 
Chicago)  the  commission  merchants  have  formed  associations  of 
their  own  witlun  the  exchange  bodies.  The  matters  largely  occupy¬ 
ing  the  attention  of  such  associations  have  been:  The  establishment 
of  credit  jpureaus  for  protecting  the  members  against  unreliable 
country  shippers;  agreements  to  limh^he  number  of  country  solicitors 
and  to  require  them  to  be  licensed;  regulation  of  cr^it  advances  to 
country  shippers  as  to  security,  volume,  etc.;  agreements  upon 
unifonn  interest  rates  to  be  charged  shippers  during  the  shipping 
season;  the  elirnination  of, duplication  in  sending  puklParket  informa¬ 
tion;  and  agreements  upon  minimum  commission  rates. 

The  Minneapolis  Graih'Commission  Merchants^  Association,  organ¬ 
ized  in  1909,  grew  from  22  to  about  50  members  in  10  years,  and  now 
includes  most  of  the  commission  houses  in  the  market.  Member¬ 
ship  in  the  association  is  limited  to  exchange  members  who  are 
engaged  in  the  cash  grain  commission  business.  A  majority  of  the 
members  are  also  subscribers  to  the  credit  bureau,  which  is  main¬ 
tained  by  the  association  at  a  fee  of  $2.50  per  month  D918). 

The  Duluth  association  had  a  membership  of  40  in  1918,  with 
dues  of  $10  a  year.  On  March  5,  1917,  this  association  adopted 
a  resolution  pledging  the  membership  to — 

exert  its  best  efforts  from  this  time  on  to  forward  a  campaign  of  education  looking  to 
discontinuance  of  the  burdens  carried  by  the  commission  houses  in  financing  grain 
dealers  in  the  Northwest  by  using  every  effort  and  instructing  traveling  men  to  use 
every  effort  to  have  independent  grain  dealers  and  farmers’  elevator  companies  secure 
their  funds  through  the  local  banks  and  through  these  local  banks  passing  their 
papers  to  a  Federal  reserve  bank. 

Such  a  radical  move  to  eliminate  the  financing  operations  of 
receivers  in  the  Northwest  depended  upon  the  cooperation  of  the 
Minneapolis  association  to  become  effective,  and  there  is  as  yet  only 
slight  evidence  of  a  serious  movement  to  abolish  commission  house 
financing  of  the  crop  movement. 

The  Milwaukee  association  has  comprised  some  16  firms.  The 
personnel  includes  the  branch  offices  of  two  Chicago  concerns,  neither 
of  which  are  receivers.  The  association  is  not  so  large  or  active  a 
group  as  are  those  in  Minneapolis  and  Duluth,  though  its  functions 
are  supposed  to  be  about  the  same.  Its  main  utility  has  been  to 
report  unreliable  shippers  to  the  members. 

The  Grain  Receivers’  Association  of  Chicago  is  an  informal  organiza¬ 
tion  of  48  members.  They  seldom  meet  as  a  body,  keep  no  records 
or  correspondence,  and  have  adopted  no  rules  with  reference  to 
competitive  methods.  They  are  not  recognized  officially,  but  are 
influential  as  a  voting  group. 

The  chief  cause  for  the  union  of  the  receivers  in  Chicago  has  been 
the  increasing  attempt  of  elevator  interests  to  bid  for  grain  at 
country  points  and  absorb  the  receiving  business.  It  is  stated  that 
the  receivers  effected  the  adoption  of  the  ''to-arrive”  rule,^®  de¬ 
signed  to  place  them  competitively  on  an  equality  with  elevator 
buyers. 


36  Vol.  II,  p.  85. 


RECEIVING  EROM  COUNTRY  POINTS. 


57 


The  Kansas  City  Receivers  &  Shippers’  Association  was  organized 
in  an  informal  way  to  secure  an  investigation  into  the  operation  of 
elevators  leased  from  the  railroads  by  private  dealers.  The  associa¬ 
tion  is  now  inactive  and  is  reported  (1921)  to  have  held  no  meetings 

for  over  two  years.  ... 

Credit  bureaus  have  been  established  by  the  associations  in 
Minneapolis,  Duluth,  and  Milwaukee.  In  Minneapolis  in  order  to 
obtain  the  benefits  of  the  credit  bureau  the  members  hpe  been 
required  to  furnish  each  Monday  morning  ^^a  complete  list  of  all 
country  shippers  indebted  to  them  in  excess  of  $500  *  *  * 

together  witn  a  list  of  all  country  shippers  who  have  open  trades 
*  *  These  lists  are  tabulated  by  the  secretary,  and  in  case 

a  shipper’s  name  appears  on  two  lists,  so  that  his  debit  balance  seerns 
to  be  unduly  high,  the  interested  commission  men  are  immediately 


advised.  ,  i  i  i  i«  ^  j 

The  credit  bureau  at  Duluth  was  taken  over  by  the  board  ol  trade 

on  the  request  of  the  commission  men.  Members  of  the  bureau  as 
thus  operated  were  required  to  conform  to  the  following  regulations 

Every  member  of  the  association  shall,  on  Monday  of  each  week,  file  with  the 
manager  a  report,  made  in  duplicate,  giving  the  name  of  every  person,  firm,  or  cor¬ 
poration  not  a  member  of  the  Duluth  Board  of  Trade,  or  of  any  other  gram  ^change, 
with  whom,  at  the  close  of  business  on  Saturday  of  the  week  previous,  he  had  open 
trades  in  grain  or  flaxseed,  either  for  immediate  or  future  delivery,  and  a  ledger 
balance,  including  bills  receivable  of  $500  or  more,  indicating  whether  the  balance 
is  debit  or  credit.  It  is  not  required  that  in  making  the  said  reports  the  amount  of 

the  trades  or  the  balance  shall  be  given.  ,  .  .  ^ 

The  manager  shall  have  authority  to  exchange  the  information  obtained  from  the 
reports  made  by  members  for  similar  information  furnished  by  members  of  the  cham¬ 
ber  of  Commerce  of  Minneapolis.  x  i,  • 

Where  the  same  person,  firm,  or  corporation  appears  from  reports  as  having  open 
trades  with  two  or  more  members,  the  manager  is  authorized  to  commumcate  the 

information  to  those  members.  ,  .  j  j  i,  n 

The  reports  made  to  the  manager  shall  at  all  times  be  in  his  custody  and  shall  not 
be  open  to  inspection  by  anyone  other  than  himself  or  employees  of  the  department. 

Section  7.  State  license  and  regulation  of  commission  merchants. 

Extent  of  legislation. — In  at  least  five  States  the  business  of  the 
commission  merchant  has  been  subjected  to  regulation  and  license 
Under  the  police  power  of  the  State.  The  States  of  Kansas,  Minn^ 
sota.  North  Dakota,  Nebraska,  and  Washington  have  made  .such 
merchants  subject  to  the  supervision  and  licensing  of  administra¬ 
tive  departments.^®  The  Minnesota  law,  which  is  especially  com¬ 
prehensive  on  this  subject,  provides  that; 

*  *  *  A  commission  merchant  is  a  person  who  may  receive  for  sale,  for  account 
of  the  consignor,  any  agricultural  products  or  farm  produce.  No  person  shall  sell 
or  receive  or  solicit  shipments  of  such  commodities  for  sale  without  first  obtaining 
a  license  from  the  railroad  and  warehouse  commission  to  carry  on  the  business  of  a 
commission  merchant  and  executing  and  filing  with  the  secretaty  of  state  a  bond  to 
the  State  for  the  benefit  of  such  consignors;  if  the  license  authorizes  the  sale  of  gram 

the  bond  shall  not  be  less  than  $4,000.  _  ^ 

It  shall  be  unlawful  to  use  the  word  commission,  commission  merchant,  or  com¬ 
mission  company  on  any  advertising  matter,  letter,  or  bill  heads  of  any  persons  not 
having  a  license  from  the  commission.  ^  Any  person  ’^bo  shall  hold  himself  out  ^ 
claim  to  be  a  licensed  or  bonded  commission  merchant,  either  by 
or  verbal  representation  or  by  the  use  of  any  letterhead,  statement,  or  advertisement, 
^thout  ha^ng  a  license  from  the  commission,  shall  be  guilty  of  a  misdemeanor. 


S  declared  unconstitutional, as 

expltin^d S.  ?or  th^  rTghlaUon  of  Commission  nierchants  mak^ 

tion  “to  erains  ana  seeds  which  are  classified  into  grades  by  any  governmental  or  State  d^artment  du  y 
Sted  by  Zy  law  of  thi  State  of  lUiuois  or  of  the  tJnited  States.”  (Illinois  Laws  of  1919, p.  15.) 

»» Minnesota  Laws  1915  ,ch.  370  ,secs.  1  and  7. 


58 


TERMINAL  GRAIN  MARKETING. 


•  required  of  grain  commission  merchants  operating 

in  JMorth  Dakota:  ^ 

merchant  or  other  factor  to  receive  anv 
wheat,  flax,  or  other  gram,  *  *  *  m  this  State  to  be  sold  for  other  persons  or 
to  have  any  agent  or  correspondents  in  this  State  receiving  or  soliciting  any  consi’gn- 

^  ^  without  being  licensel  and  autho?ized^o  t^^ 
It  is  provided  in  Nebraska — 

*  *  *  person,  firm,  or  corporation  pursuing  or  who  shall  pursue  the 

business  of  selhng  farm,  dairy,  orchard  or  garden  produce,  wares  or  merchandise  of 
merchant  consignment  for  a  commission  shaU  be  deemed  to  be  a  commission 

Tr.£^h’  unla^^  for  any  person  engaged  in  the  business  of  commission 

merchant  to  receive  or  sohcit  consignments  of  produce,  wares,  or  merchandise  in  the 
State  of  Nebraska  without  first  obtaining  a  license  from  the  food,  dairy,  and  drug 
commissira  to  conduct  and  carry  on  the  business  of  such  commission  merchant 
q  payable  to  the  State  treasurer. 

bond!  eth  “ 

The  Washington  statute  is  similar  in  substance: 

Sec.  1.  It  shall  be  unlawful  for  any  person,  firm,  or  corporation  to  engage  in  the 
business  of  selling  farm  produce  on  commission,  or  to  receive  or  solicit  consignments 
of  such  produce  on  commission  in  the  State  of  Washington  without  first  obtlininra 
license  from  the  commissioner  of  horticulture  to  conduct  and  carry  on  the  business 

and  giidng  a  bond  to  the  State  of  Washington  in  the 
sum  of  $3,000,  said  bond  to  be  conditioned  for  the  faithful  performance  of  his  duties 
as  such  commission  merchant.  uuuch 

Sec.  10.  For  the  purpose  of  this  act  a  commission  merchant  is  defined  and  declared 
to  be  any  pCTson,  firm,  or  corporation  whose  principal  business  is  the  sale  of  farm 
•dairy,  orchard,  or  garden  produce  on  account  of  the  shipper  or  consignor. ’ 

The  Kansas  law  differs  from  those  already  cited  in  that  the  term 
commission  merchant’’  for  the  purposes  of  the  act  includes  every 
person  licensed  to  receive,  sell,  or  offer  for  sale  on  commission 
within  this  btate  any  kind  of  farm  produce;  except  where  such  farm 
produce  %s  sold  for  consumption  and  not  for  resale:^  The  statute  is 
further  qualified  m  the  following  manner: 

This  article  shall  not  apply  to  the  sale  of  farm  produce  at  public  auction  by  an 
auctioneer,  acting  as  the  agent  of  another  to  whom  such  farm  produce  shall  have 
been  consigned,  nor  shall  this  article  apply  to  seeds  sold  at  retail.^* 

Administrative  regulation. — The  Minnesota  law  provides  that 
the  merchant  licensed  to  receive  and  sell  grain  in  Minnesota  shall 
^  true  statement  in  writing  to  the  consignor  within  24  hours 
of  the  anaount  sold,  price  received,  name  and  address  of  purchaser, 
and  the  day,  hour,  and  minute  of  sale,  and  shall  forward  vouchers 
for  all  charges  and  expenses.'^^  In  addition  it  is  provided  that  the 
railroad  and  warehouse  commission  shall  require  statements  of  his 
business  for  the  exclusive  use  of  the  commissioners,  investigate  com¬ 
plaints  of  consignors  with  regard  to  specific  shipments,  and  give  the 
complainant  a  written  report  of  the  investigation.'‘«  The  power 
delegated  to  such  administrative  commissions  in  North  Dakota 
JNebraska,  and  Washington  includes  similar  powers  to  prescribe  regu-- 

«  Revised  Code  of  North  Dakota,  1905,  2197:  1897.  ch  54  1-  R  C  isqq  i 

«  Laws  of  Nebraska,  1909,  ch.  66.  ’  ’  ' 

Laws  of  Washington,  1907,  ch.  139. 

«  Kansas  General  Statutes,  1915,  ch.  371. 

**  Idem,  sec.  1. 

«  Laws  of  Minnesota,  1915,  ch.  370,  sec.  4. 

Idem,  secs.  3  and  5. 


RECEIVING  FROM  COUNTRY  POINTS. 


59 


lations  and  to  conduct  investigations.  The  general  irtent  of  such 
regulation  is  apparently  to  prevent  fraudulent  practices  on  the  part 

of  representatives  of  country  shippers. i  o  t3  j  ^ 

The  Kansas  law  empowers  the  secretary  of  the  State  Board  of 
Agriculture  to  investigate  formally  the  conaplaints  of  consignors  and 
to  regulate  the  conduct  of  licensed  commission  merchants  under  a 
procedure  similar  to  that  laid  down  for  warehouse  commissions  else¬ 
where.  The  authority  of  this  official  to  grant  and  revoke  licenses  is 
set  forth  as  follows : 

The  secretary  of  the  State  board  of  agriculture  may  decline  to  grant  a  license  or 
may  Woke  a  license  already  granted  where  he  is  satisfied  of  the  existence  ot  the 
following  cases  or  any  of  them:  (a)  Where  a  money  judgment  has  been  entered  against 
such  commission  merchant  and  upon  which  execution  has  been  returned  imsansned. 
(h)  Where  false  charges  have  been  imposed  for  handling  or  services  rendered,  (c) 
Where  there  has  been  a  failure  to  account  promptly  and  properly  or  to  make  settle¬ 
ments  with  intent  to  defraud,  (d)  Where  there  have  been  false  statemente  as  to  con¬ 
ditions,  quality,  or  quantity  of  goods  received  or  held  for  sale  on  commission  when 
the  same  might  be  known  on  reasonable  inspection,  (e)  Where  ^ere  has  b^n  false 
or  misleading  statement  or  statements  as  to  market  conditions  mth  intent  to  deceive. 
(f)  Where  there  has  been  a  combination  or  combinations  to  fix  prices,  (gr)  Wnere 
the  commission  merchant  directly  or  indirectly  purchases  the  goods^  for  own 
account  without  prior  authority  therefor  or  without  notifying  the  consignor  thereoi. 
(h)  Where  the  commission  merchant  is  in  bankruptcy  or  in  insolvency,  or  where  the 
secretary  of  the  State  board  of  agriculture  has  reason  to  beheye  that  bankruptcy  or 
insolvency  may  shortly  occur,  (i)  Where  there  has  been  a  continued  course  of  dealing 
of  such  a  nature  as  to  satisfy  the  secretary  of  the  inability  to  properly  conduct  the 
business  of  commission  merchant  or  of  intent  to  deceive  or  defraud  shippers. 
(j)  Where  a  licensee  has  been  guilty  of  fraud  or  deception  in  obtaimng  his  license. 
{k)  Where  the  licensee  neglects  to  file  a  new  bond  when  notified  by  the  secretary 
tiiat  the  bond  already  filed  is  unsatisfactory.^* 

Constitutionality. — ^Laws  for  licensing  conunission  merchants 
were  adopted  in  both  Minnesota  and  Michigan  in  1899.  They  were 
almost  immediately  attacked  as  unconstitutional  in  the  r^pective 
State  courts  with  quite  opposite  results.  The  Minnesota  Supreme 
Court  reviewed  conditions  in  the  grain  trade  in  the  Northwest  ^^d 
held  that  the  business  of  handling  grain  on  consignment  had 
‘ffiecome  sufficiently  affected  with  public  interests  as  to  be  the  proper 
subject  of  police  regulation.’’  On  the  other  hand,  the  Michi^n 
Supreme  Court  decided  that  such  legislation  was  an  unjustihable 
interference  with  private  rights  and  repugnant  to  the  constitution  ot 

the  State.  , 

The  Minnesota  case  referred  to  was  brought  up  on  habeas  corpus 
proceedings  to  test  the  validity  of  the  act,  and  the  court  based  ^s 
decision  on  existing  evils  in  the  trade  which  were  pointed  out  in  the 
following  opinion: 

It  was  publicly  believed  that  the  business  of  selling  agricultural  products  and  farm 
produce  on  commission  had  become  saturated  with  false  and  fraudulent  methods,  to 
the  great  injury  of  a  large  class  of  our  citizens,  who  were  compelled  to  deal  with  com- 


<7  Thfl  Minnesota  commission  declined  to  revoke  the  licenses  of  19  elevator  companies  on  the  complaint 
ot  MiSjSTerSttSe  licSisees  were  at  the  same  time  buyers, sellers, and  receivers  of  gram.  It 

construed  the  Minnesota  law  as  follows:  ,  ,  „  unt  fUreotlv  orhvim- 

“Thelaw  which  authorizes  the  licensmg  of  coi^ssion  merchants  on  com¬ 

plication  forbid  elevator  companies  from  engagmg  in  the  ^^*“1?** 
mission.  In  practice,  the  commission  has  given  the  same  consideration  to  elevato^^ 
to  any  other  reputable  person  or  corporation  whp  desired  to  engage 

elevator  compames  from  participation  in  this  busmess  has  been  adopted  by  the  co^ssipn 
the  elevator  cWanies  mentioned  in  the  petition  have  been  and  are  legally  ^cen*cd  to  engage  in  the  busmess 
of  grain  commission  merchants,  and  such  hcenses  can  only  be  canceled  for  cause,  and  then  only  alter  a 
hearing  and  investigation-.”  (May  29, 1914.) 

«  Kansas  General  Statutes,  ch.  371,  sec.  5. 


iAanbao  VjreutJldi  Otcfctuteo,  oi  i,  V.  oA  XT  xxr 

«  state  ex  rel.  Seek  v.  Wagener  (1899).  77  Mmn.  483.  80  N.  W.  633^ 

60  Valentine  v.  Berrien, Circuit  Judge  (1900),  124  Mich.  664,  83  N.  W.  594. 


60 


TERMINAL  GRAIN  MARKETING. 


mission  men,  and  who  were  powerless  to  detect  or  prevent  the  wrong,  and  that  the 
business  had  thus  become  sufficiently  affected  with  public  interests  as  to  be  the 
proper  pbject  of  police  regulation.  We  are  of  opinion  that  the  legislature  did  not 
exceed  its  powers  when,  under  the  circumstances,  it  enacted  a  measure  having  relation 
^  and  a  tendency  to  accomplish,  the  desired  end,  such  as  is  the  law  now  before  us. 
ihis  enactment  was  designed  to  prevent  false  and  fraudulent  practices  of  the  char¬ 
acter  cornplained  of,  to  correct  tho  evils  generally  believed  to  prevail,  and  to  compel 
the  merchant  to  whom  property  was  consigned  for  sale  on  commission  to  deal  honestlv 
and  to  be  faithful  to  his  trust. 

******* 

The  treatment  of  consignors  was  frequently  most  exasperating  and  injurious  to 
them.  Sometimes  reports  were  never  made  of  sales,  and  on  other  occasions  were 
purposely  delayed  so  that  it  would  be  difficult,  if  not  impossible,  for  the  consignor 
to  ascertain  the  real  facts  of  a  given  sale.  Prices  of  grain  fluctuated,  not  only  from 
but  from  hour  to  hour.  It  might  make  a  great  difference  to  the  consignor 
whether  lus  grain  was  sold  in  the  morning  or  near  the  close  of  the  day.  And  for  these 
reasons  the  law  has  therefore  studiously  provided  that  the  reports  of  sales  shall  state 
the  day,  hour,  and  minute  when  they  are  made. 

The  Michigan  court,  however,  found  no  existing  evils  which  would 
warrant  an  exercise  of  the  police  power,  such  as  the  legislature  had 
attempted.®^  The  act  had  provided — 

That  every  person  who  shall  solicit  to  receive  for  sale,  for  himself  or  another  or 
who  shall  receive  for  sale,  or  offer  for  sale,  for  another,  for  hire,  or  cause  the  same  to 
be  done,  any  grain,  fruits,  vegetables,  live  stock,  meats  or  poultry,  and  all  other  kinds 
of  farm  or  dairy  produce  shall  execute  a  bond  in  the  penal  sum  of  five  thousand  dollars 
running  to  the  people  of  the  State  of  Michigan,  to  be  approved  by  the  judge  of  probate 
in  the  county  where  his  principal  office  may  be,  except  as  hereinafter  provided  with 
two  or  more  sureties,  or  by  an  indemnity  company  authorized  by  law  to  do  business 
in  this  State,  conditioned  for  the  faithful  performance  of  the  trust  reposed  in  him  as 
a  commission  man  or  broker,  and  to  pay  over  all  moneys  to  the  proper  parties  coming 
into  his  hands  by  virtue  of  his  agency  or  trusteeship,  by  virtue  of  his  receiving  the 
goods  and  produce  a,foresaid  which  shall  justly  belong  to  any  person.  Such  bond 
when  approved,  shall  be  filed  with  the  county  clerk  of  the  county  where  such  com- 
imssion  or  brokerman  shall  be  engaged  in  business  and  where  he  shall  have  his  prin¬ 
cipal  office:  Provided,  That  the  provisions  of  this  act  shall  apply  only  to  persons  firms 
and  corporations  who  hold  themselves  out  as  commission  men,  brokers  agents  or 
merchants  and  their  agents.  ’  ’ 

The  opinion  of  the  Michigan  Supreme  Court  was,  in  part,  as 
follows : 

The  business  of  buying  and  selling  on  commission  has  existed  ever  since  commerce 
began.  There  are  and  always  have  been  dishonest  men  engaged  in  it,  as  there  are 
and  always  have  been  in  every  other  branch  of  business.  There  are  and  always  h^ve 
been  dishonest  sellers,  who  will  pack  their  produce  in  such  a  manner  as  to  deceive 
It  would  be  as  reasonable  to  require  the  latter  to  give  bond  to  properly  pack  their 
produce.  In  every  such  case  the  common  law  provides  an  ample  remedy  for  redress 
to^  the  injHired  party  for  breach  of  contract.  There  is  no  more  reason  why  a  com- 
mission  inerchant  should  pay  a  license  fee  and  execute  a  bond  to  pay  his  debts  and 
to  do  his  business  honestly  than  there  is  that  any  other  merchant  should  pay  a  like 
fee  and  file  a  like  bond  to  properly  do  his  business  and  pay  his  debts.  The  business 
requires  no  regulation,  any  more  than  any  other  mercantile  pursuit. 

The  validity  of  similar  legislation  in  Kansas  was  sustained  in  1918 
by  the  Supreme  Court  of  the  United  States.®^  ^^g 

on  appeal  from  a  decision  of  the  Supreme  Court  of  the  State  of 
Kansas  which  had  upheld  the  validity  of  the  Kansas  law  of  1915  for 
licensing  commission  merchants.  In  affirming  the  judgment  of  the 
Kansas  court  the  United  States  Supreme  Court  said: 

The  validity  of  c.  371,  Laws  of  Kansas,  1915— “An  act  in  relation  to  the  sale  of 
farm  produce  on  commission  is  challenged  by  certain  grain  dealers  carrying  on 
business  in  that  State.  It  forbids  the  sale  of  farm  produce  on  commission  without 


«  Public  Acts  of  Michigan,  1899,  sec.  1,  p.  391. 

M  Payne  v.  State  of  Kansas,  248  U.  S.  112;  63  Lawyers  Edition,  153. 


RECEIVING  FROM  COUNTRY  POINTS. 


61 


an  annual  license,  to  be  procured  from  the  State  board  of  agriculture  upon  a  proper 
showing  as  to  character,  responsibility,  etc.,  and  a  bond  conditioned  to  make  honest 

accounting.  A  fee  of  $10  is  required.  , 

Plaintiffs  in  error  maintain  that  the  statute  is  class  legislation  which  abridges  their 
rights  and  privileges,  that  it  deprives  them  of  the  equal  protection  of  the  laws  and 
also  of  their  property  without  due  process  of  law — ^all  in  violation  of  the  fourteenth 

amendment.  .  ^  xu 

Manifestly,  the  purpose  of  the  State  was  to  prevent  certain  evils  incident  to  tne 

business  of  commission  merchants  in  farm  products  by  regulating  it.  Many  former 
opinions  have  pointed  out  the  limitations  upon  powers  of  the  States  concerning 
matters  of  this  kind,  and  we  think  the  present  record  fails  to  show  that  these  limita¬ 
tions  have  been  transcended. 

Section  8.  Purchasing  direct  from  country  points. 

In  GENERAL. — As  already  stated,  grain  is  frequently  purchased 
directly  from  country  shippers  by  terminal  market  dealers  prior  to 
its  arrival  at  the  terminal  point.  Direct  purchases  may  be  made  on 
the  basis  ‘'net  your  station,’’  i.  e.,  f.  o.  b.  cars  country  station  track; 
or  they  may  be  made  on  the  basis  “delivered”  at  the  terminal 
market.  In  the  former  case  they  are  customarily  known  as  “qn- 
track”  purchases;  and  in  the  latter  as  “  to-arrive”  purchases.  While 
such  transactions  more  frequently  originate  from  a  terminal  market 
they  may  originate  in  the  country,  as  when  a  country  elevator  man¬ 
ager  notifies  his  commission  house  at  the  terminal  to  sell  a  ^iven 
quantity  and  grade  of  grain  “to-arrive,”  perhaps  setting  a  limit  on 

Sie  price.  ,  .  ,  ,  .  •  i,  -x 

Where  grain  so  purchased  is  received  by  a  commission  mercnant  it 

is  usually  on  the  basis  of  orders  previously  in  hand  and,  although 
technically  he  takes  title  to  the  grain,  the  routine  of  handling  the 
commodity  and  the  accounting  thereof  follows  closely  that  already 
described  for  the  consignment  business. 

Direct  purchases  from  country  shippers  are  more  often  on  a 
grade  than  on  a  sample  basis;  since  these  transactions  are  usually 
contingent  upon  terminal  market  official  grades  and  considerable 
delay  may  be  involved  in  shipping  type  samples  in  from  the  country 
as  a  basis  for  the  sale.  However,  it  appears  that  a  small  volume  of 
this  business  is  done  on  a  sample  basis,  as  when  an  elevator  com¬ 
pany  determines  to  sell  part  of  its  country  stocks  “to-arrive”  on  the 
basis  of  type  samples  sent  to  a  commission  house. 

During  exchange  hours  to-arrive  bids  are  sometimes  made  to  coun¬ 
try  points  by  wire  for  immediate  acceptance.  After  exchange  hours 
it  is  customary  for  many  firms  at  primary  markets  to  send  out 
“overnight  bids”  to  the  country  on  postal  cards.  The  private-wire 
systems  out  of  Chicago  are  employed  in  making  direct  bids  at  ah  times. 

At  five  markets — Kansas  City,  Chicago,  Milwaukee,  Omaha,  and 
St.  Louis— the  practice  of  “bidding  the  country”  after  exchange 
hours  has  been  sufficiently  large  to  lead  to  the  adoption  of  rules  for 
its  regulation  in  connection  with  the  so-called  uniform  commission 
rules.  In  Chicago  bids  after  hours  (and  during  exchange  hours) 
may  be  direct  to  the  country  from  the  buyer’s  office  or  through  a 
receiving  firm,  or  both.  In  case  the  bid  is  made  through  a  receiver  at 
the  terminal  market  it  is  made  gross,  i.  e.,  to  include  terminal  charges 
End  commission.  When  the  bid  is  made  to  the  country  directly,  these 
charges,  or  their  equivalent,  must  be  deducted.  The  grade,  variety, 
price,  and  billing  are  usually  stated.  After-market  bids  direct  to  the 
country  are  usually  subject  to  acceptance  prior  to  the  opening  of  the  ex- 


56976°— 22 - 6 


62 


TERMINAL  GRAIN  MARKETING. 


change  on  the  next  business  day.®^  To-arrive  ’’  bids  are  usually  com¬ 
puted  at  a  difference  over  or  under  the  close  of  the  next  maturing  future, 
as  a  convenience  in  hedging,  although  they  are  issued  to  the  country 
at  a  flat  price.  The  use  of  a  flat  price  on  direct  bids  during  the 
trading  session,  however,  necessarily  entails  some  risk  of  loss  due  to 
rnarket  fluctuations,  since  the ‘‘ to-arrive”  market  prices  are  par¬ 
ticularly  sensitive  to  changes  in  the  futures  market.  This  is  re¬ 
flected  m  the  following  regulation of  the  Chicago  Board  of  Trade: 

Du^g  the  hours  of  regular  trading,  all  bids  to  persons  located  outside  of  Chicago 
for  wheat,  corn,  oats,  or  rye  to  be  shipped  to  this  market,  shall  be  based  upon  the  price 
then  and  there  prevailing  in  the  open  and  competitive  “to-arrive’*  market,  less  the 
charges  prescribed  in  section  32  of  Rule  IV.  All  bids  forwarded  during  the  regular 
session  to  persons  located  outside  of  Chicago  on  the  basis  of  a  flat  price  shall  be  made 
upon  the  condition  that  acceptance  thereof  shall  be  filed  within  five  minutes  after 
receipt,  and  all  such  bids  not  then  accepted  within  said  time  shall  be  null  and  void. 

To-arrive  ”  BIDS. — Following  is  the  card  issued  by  a  Kansas  City 
company  for  No.  1  hard  wheat  and  No.  3  mixed,  yellow,  and  white 
corn.  It  will  be  noted  the  wheat  prices  are  bid  on  either  a  Kansas 
City  or  Gulf  basis  with  prices  varying  in  accordance  with  the  tima 
allowed  for  shipment.®^ 


Form  4.— TO-ARRIVE  BID  CARD  ISSUED  FROM  KANSAS  CITY. 
Barnes-Piazzek  Co.  (Inc.),  New  England  Building,  Kansas  City,  Mo. 


April  16,  1921. 

[Acceptance  to  reach  us  by  8.30  a.  m.  Monday.) 

We  bid  you  the  following  prices  for  grain,  Kansas  City  official  weights  and  grades,, 
gram  not  to  be  mixed  in  transit,  shipment  direct  from  the  country. 


Price. 

Basis. 

Shipment. 

1  hard  wheat . 

81. 29 

1.  28 
1.26 

1. 51i 

1. 50i 
1.48J 

ir  n 

10  days. 

20 

30  “ 

10  “ 

20  “ 

30  “ 

1<4  ((  . 

44  44 

1  44  44  . 

44  44 

^44  44  . 

Gulf 

1  44  44  . 

44 

1  44  44  . 

44 

[Special  bid  to  originate  west  of  Concordia,  or  Union  Pacific  west  of  Salina.) 


1  hard  wheat . . 

#3  or  better  mixed  corn. 
^  or  better  yellow  corn, 
or  better  white  corn . 
#3  or  better  yellow  corn. 


SI.  30 

K.  C . 

10  days. 

.47^ 

K.  C . 

30  days. 

.49 

K.  C . 

30  “ 

.49 

K.  C . 

30  “ 

.50 

K.  C . 

5  “ 

When  consigning  to  the  Kansas  City  or  St.  Joseph  market  for  good  prices,  prompt 
returns,  be  sure  your  next  car  reads;  “Barnes-Piazzek  Company.” 

All  offers  or  bids  subject  to  following  conditions: 

(1)  Acceptance  reaching  us  before  opening  on  next  business  day  and  if  received 
after  opening  subject  to  our  confirmation. 

(2)  Acceptances  for  more  than  5,000  bushels  subject  to  our  confirmation. 

(31  Acceptances  must  specify  capacity  of  cars  or  bushels. 

(4)  State  price  and  amount  when  accepting. 

(5)  Prices  quoted  are  basis  bulk. 

(6)  Demand  draft  B-L  attached. 

(7)  Overfilled  contracts  to  be  applied  at  market  differences  unless  otherwise 
specified. 

Barnes-Piazzek  Co.  (Inc.). 


M  See  1  Arbitratira  Decisions,  Grain  Dealers’  National  Association,  p.  252:  "  It  is  the  opinion  of  the  com- 
imttee  that  a  firm  offer  without  any  hnutation  as  to  the  amount  is  good  for  acceptance  until  there  is  a  change 
m  the  market  or  the  offer  is  withdrawn.  In  this  case  the  defendants  did  not  send  out  their  wire  until  after 
tne  close  of  the  market  on  the  13th  and  the  same  offer  went  out  to  four  other  firms.  As  the  offer  did  not 
carry  any  Binit  as  to  the  amount  that  they  would  accept  on  their  bid,  they  were  bound  to  accept  anv 
aniounts  offered  that  were  within  their  hands  before  the  opening  of  the  market  on  the  14th  or  until  they 
had  wired  a  cancellation  of  their  offer,  which  they  did  not  dp.”  ^  or  umu  rney 

Chicago  Board  of  Trade  Yearbook,  1920,  p.  116, 

65  See  Vol.  II,  p.  254,  '  -  ' 


RECEIVING  FROM  COUNTRY  POINTS. 


63 


Grain  sold  on  the  bids  shown  in  the  card  above  must  be  shipped 
within  the  period  specified  (excepting  the  day  of  issue)  and  delivered 
at  the  terminal  point  shown  in  the  column  headed  basis.’  ’  The  seven 
conditions  listed  on  the  bottom  of  the  card  are  typical  of  this  class 
of  business.  That  is,  limits  are  usually  placed  upon  the  time  of 
acceptance  and  the  quantities  accepted  for,  and  it  is  customary  to 
specify  or  agree  that  a  demand  draft  with  bill  of  lading  attached  will 
be  accepted,  although  arrival  drafts  are  sometimes  employed.  The 
specification  that  overfilled  contracts  may  be  applied  at  market  differ¬ 
ences  protects  the  buyer  in  case  more  grain  arrives  than  he  has  booked 
and  the  adjustment  may  result  in  favor  of  either  buyer  or  seller  con¬ 
tingent  upon  the  course  of  the  market.^® 

The  following  bid  card  issued  by  the  Quaker  Oats  Co.  shows  the 
conditions  of  ‘‘  to- arrive  ”  bids  for  corn  and  oats  by  a  converter: 

Form  5.— TO-ARRIVE  BID  CARD  ISSUED  FROM  CHICAGO  FOR  GRAIN  TO  BE  DELIVERED 

AT  MILLS  IN  IOWA. 

Form  812  25M  3-10-21. 

Codes— Robinson  and  Universal. 

Chicago,  Apr.  15,  1921. 

Subject  to  wire  acceptance  to  reach  us  at  Chicago  time  prior  to  9.30  a.  m.  to-morrow 
or  next  business  day,  we  bid  the  following  prices,  errors  excepted,  basis  Chicago  for  * 
20  days  shipment  to  our  mills  at  Cedar  Rapids  or  Fort  Dodge,  Iowa,  our  option,  our 
weights  and  approval. 

White  or  yellow  milling  oats,  30  pounds  or  better,  free  from  foreign,  damaged,  or  stack 
burned  grains,  35^. 

Yellow  corn  (milling  quality),  subject  to  discount  for  moisture,  53. 

Over  17^  per  cent. 

White  corn  (milling  quality),  subject  to  discount  for  moisture,  53. 

Over  17^  per  cent. 

Load  cars  to  capacity.  Sell  bushels  instead  of  cars.  Grain  shipped  to  our  mills 
subject  to  our  weights  and  approval.  Grain  not  suitable  for  our  milling  requirements 
will  be  turned  over  to  any  commission  firm  requested  on  payment  of  draft  or  we  will 
sell  same  for  your  account  charging  usual  commission.  Other  shipments  must  be  made 
to  replace  those  rejected. 

All  quantities  over  10,000  bushels  subject  to  our  wire  confirmation. 

If  grain  is  not  shipped  within  time  specified,  seller  agrees  that  contract  is  open  until 
shipped  or  until  we  advise  you  that  we  have  closed  same. 

Make  no  shipments  until  you  receive  our  shipping  directions. 

Draw  on  us  at  Chicago  with  B/L  and  weights  attached. 

Draw  not  to  exceed  four-fifths  value  of  shipment. 

•  The  Quaker  Oats  Company, 

1600  Railway  Exchange  Bldg.,  Chicago. 


It  will  be  noted  that  under  the  conditions  of  Form  5  above  the  grain 
is  not  bought  subject  to  primary  market  official  grades  and  weights, 
but  subject  to  the  weights  and  approval  of  the  milling  concern; 
and  that  grain  not  considered  suitable  for  milling  requirements,  after 
delivery,  will  be  sold  on  a  commission  basis  or  sold  to  a  commission 
man. 

‘‘On-track  bids.” — The  card  below  may  be  used  for  a  bid  f.  o.  b. 
country  station,  i.  e.,  “on-track”;  or  a  bid  delivered  Kansas  City, 
i.  e.,  “to-arrive”;  or  for  both  of  these  terms.  The  card  as  shown 
gives  bids  for  wheat  “on-track”  at  Elsmore,  Kans.  (addressed  to  the 


M  Rule  14  of  the  Grain  Dealers’  National  Association  provides  that  “suri)lus  ^ain  shall  be  taken  to 
account  by  the  buyer  at  the  current  market  price  on  the  day  after  the  last  car  is  vudoaded.  (Nov.,  1920.) 


64 


TERMINAL  GRAIN  MARKETING. 


Elsmore  Elevator  Co.),  indicating  that  the  buyer  will  furnish  billing 
instructions  after  acceptance  and  will  pay  the  freight  costs. 

Form  6.-ON.TRACK  BID  CARD  ISSUED  BY  KANSAS  CITY  RECEIVERS  AND  SHIPPERS. 

.Bell  3925  Main.  „ 

Home  9670  Victor. 

Hodqson-Davis  Grain  Co. 

BOARD  OF  TRADE,  KANSAS  CITY,  MO. 

E.  H.  Sullivan,  Mgr.  Cash  Grain  Dept. 

We  bid  for  ^ceptance  to  reach  us  before  8.30  a.  m.  to-morrow  (Sunday  excepted). 
Gestination,  official  weights  and  grades,  our  option.  Clerical  errors  excepted. 


F.  0.  b. 
your 
station. 

Delivered 

Kansas 

City. 

2  hard  dark  wheat . 

1  hard  wheat . 

116i 

113J 

116J 

113J 

2  hard  wheat . 

1  red  wheat . 

2  red  wheat . 

3  or  better  corn . 

3  or  better  yellow  corn . 

3  or  better  white  corn . 

- 

Shipment 


Apr.  25. 


To  avoid  errors,  acceptance  should  state  price,  grade,  and  number  of  bushels 
When  shipments  are  not  made  according  to  contract,  we  reserve  the  right  to  extend 
the  time  of  shipment  or  cancel  sale  or  buy  in  the  grain  for  shipper’s  account 
Inspection  and  weighing  charges  to  be  paid  by  shipper. 

Board  of^Tmde^^  handled  at  Kansas  City,  subject  to  the  rules  of  the  Kansas  City 

If  acceptance  reaches  us  later  than  specified  time,  we  will  enter  the  purchase 
unless  you  hear  from  us  to  the  contrary  by  wire.  This  bid  is  based  on  1,000  bushels 
to  the  car,  exc^t  when  only  one  car  is  sold  it  will  mean  capacity  of  car  unless  other¬ 
wise  aped.  Our  option  to  accept  or  reject  more  than  10,000  bushels  of  any  one 
kind  of  grain  at  this  bid.  ^ 

Cars  to  be  loaded  to  capacity  required  by  railroad. 

Unless  otherwise  provided,  any  grain  failing  to  grade  as  specified  in  contract  will 
be  accepd  at  market  difference  unless  unfit  for  our  use,  in  which  case  same  will 
be  sold  for  shipper  s  account,  by  sample,  at  the  usual  commission,  but  can  not  in 

that  case  be  applied  on  contract,  and  other  shipments  must  be  made  to  replace  any 
80  soldi. 

Subject  to  reinspection  after  arrival  at  unloading  elevator. 

instructions  and  bill  as  directed,  making  draft  on  us 
at  Kansas  ^ty,  Mo.,  with  bill  of  lading  attached,  leaving  a  fair  margin. 

K.  &  O.  E.  °  * 

Hodgson-Davis  Grain  Co. 

U.  S.  Food  Administration  license  number.  No.  G-35952. 


Bids  from  smaller  markets  appear  to  be  most  frequently  on  the 
on-track  basis.  The  following  card  was  sent  by  a  cash  grain 
concern  at  Indianapolis  to  a  shipper  at  Le  Roy,  Ill. : 


KECEIVING  PROM  COUNTRY  POINTS. 


65 


Form  7.— ON-TRACK  BID  CARD  OF  A  DEALER  LOCATED  AT  INDIANAPOLIS  AND  CINCINNATI. 

Phones,  Bell  Circle  0749.  Automatic  21-742. 

The  Early  &  Daniel  Co. 

Indianapolis,  April  13,  1921. 

For  acceptance  to  reach  us  by  9.15  a.  m.  to-morrow  or  next  business  day,  we  bid 
you,  less  weighing  and  inspection  charges,  any  part  of  5,000  bushels  of  each  kind  of 
grain,  acceptance  of  more  than  5,000  bushels  subject  to  our  immediate  wire  con¬ 
firmation.  Specify  amount  of  acceptance  in  bushels.  E.  &  0.  E. 

F.  o.  b.  Your  basis.  Shippers  pay  war  tax.  • 


Acceptance  to  arrive  by  8.15  a,  m. 

Indianapolis  terms,  47  N.  Y. 

P  red  w.  wheat,  10  days .  118 J 

^3  yellow  corn,  10  days .  44 

#3  wht.  oats  orbtr.,  10  days .  31 

Cincinnati  terms,  19\  Cin. 

p  red  w.  wheat,  10  days .  118i 

1^3  yellow  corn,  10  days .  45 

i^3  white  corn,  10  days .  46^ 

#4  grades  at  2^  discount. 

#3  wht.  oats  orbtr.,  10  days .  32^ 


Wire  us  your  acceptance. 

We  solicit  your  consignments. 


On- track  bids  are  frequently  issued  by  brokers,  as  shown  by  the 
following  card  sent  from  Wichita,  Kans.,  to  Fletcher,  Okla.: 

Form  8.— BROKER’S  Bm  CARD  FOR  GRAIN  F.  O.  B.  CARS  ON-TRACK  IN  THE  COUNTRY. 

Grain,  Feed,  Kaffir,  Hay.  Local  Phone — Mkt.  696. 

Robinson’s  Code.  Long  Distance— L.  D .  24. 

The  Anchor  Grain  Co., 

E.  M.  Flickinger,  Mgr. 


Sedgwick  Building,  Wichita,  Kans., . 

Gentlemen:  Subject  prior  purchase  and  further  confirmation,  we  can  contract 
purchase  of  few  cars  wheat,  usual  terms,  at  following  prices,  f,  o.  b.  your  track: 


For  April  shipment .  $1. 10 

For  15  days  shipment .  1. 05 

For  30  days  shipment . . .  1 . 00 

For  May  shipment . 95 


For  June  shipment .  $0. 90 

For  July  10th  shipment . 85 

For  July  20th  shipment . 80 

For  July  31st  shipment . 75 


4/20/21. 

E.  &  O.  E. 

Quotations  subject  to  further  confirmation. 

Yours,  truly. 

The  Anchor  Grain  Co. 


Eastern  shippers  sometimes  arrange  their  cards  so  as  to  base  the 
bids  on  a  schedule  of  domestic  rates  to  a  designated  destination,  thus 
making  it  unnecessary  for  the  sender  to  determine  the  ‘‘on-track’’  price 
for  eadi  shipper  on  the  mailing  list.  The  following  card  was  sent  to 
Lochiel,  Ind.,  Buffalo  terms  to  apply,  the  bids  being  arranged  to 
cover  points  having  domestic  rates  to  Philadelphia  ranging  from  29 
to  45  cents: 


66 


TERMINAL  GRAIN  MARKETING. 


Form  9.  BID  CARD  ISSUED  BY  A  BUFFALO  ELEVATOR  COMPANY  FOR  GRAIN  FOB 

CARS  AT  DESIGNATED  RATE  POINTS.  O.  B, 


IHE  H/LECTRIC  GRAIN  LlEVATOR  Co., 

p. ,  „  Buffalo,  N.  Y.,  April  15,  1921. 

to  reach  us  before  the  opening  of  market  next  business  day. 
lerms.  Buffalo  weights,  grades  and  terms— Lower  grades  to  apply  at  market  dif¬ 
ference  day  of  arrival.  Not  our  bid  difference.  y  uii 

5,000  bushels  subject  to  our  confirmation  as  to  such  excess. 
docu^Ss  properly  margined  and  accompanied  by  properly  executed 


Drafts.— To  be  drai^n  on  us  through  the  Marine  Trust  Co. 

Note  — When  wiring  acceptances  state  quantity  in  bushels, 
are  niade  in  cars  we  will  consider  as  being  a  carload  wheat,  rye. 
Oats  2,000  bushels.  ’ 


When  acceptances 
corn  1,100  bushels. 


E.  &  O.  E. 

F.  o.  b.  points  taking  following  new  domestic  rates  to  Philadelphia,  buyer  paying 


Grade. 

Rates. 

29 

30 

33 

33.5 

36 

38.5 

40 

40.5 

41.5 

42 

45 

3  yellow  corn  or  better.. 

Shipment. 

2  white  oats  or  better. . . 

3  white  oats  or  better... 

. .  -do..^ 

35| 

35| 

341 

351 

34| 

34i 

331 

33f 

321 

33J 

32i 

33 

32 

32f 

31^ 

32i 

31J 

3ii 

30i 

The  Electric  Grain  Elevator  Co. 


Confirmation. — Direct  purchases,  whether  '^to-arrive’'  or  ''on- 
tpck,  are  usually  contingent  upon  the  exchange  of  written  confirma¬ 
tions,  especially  where  the  shipper  desires  to  accept  for  a  quantity  of 
gram  m  excess  of  the  limit  set  in  the  buyer’s  bid.  Confirmations  are 
to  furnish  sapping  instructions.  The  board  of  directors 
ol  the  Chicago  Board  of  Trade  have  recommended  the  following  form 
to  the  trade:  ‘  ° 

Form  lO.-CONFIRMATION  OP  TO-ARBIVE  TRANSACTION  RECOMMENDED  BY  CHICAGO 

Chicago, . •^19....  - 


We  herewith  confirm  purchase  from  you  of  . . . . . 
of...... . bushels 


At 


per  100  lbs. 

.  per  bushel  net 

,  ,  ,  .  Iper  ton 

shSir  weighing,  and  for  State  inspection . terms. 

Bill  of  order . .  . 

Notify . . . 

Subject  to  the  rulca  of  the  Board  of  Trade  of  the  City  of  Chicio  and  the  r^iilations 

on  cnXcr.f  “n  Off  grades, ^if  merchantable  gr^^ifto  appfy 

on  contracts  at  market  differences  on  arrival.  Manifest  errors  excepted.  ^ 


Per 


(Duplicate  to  read): 

Accepted  and  approved: 

S®  contract  remains  unfilled  at  expiration,  the  buyer  reserves  the 
nght  without  further  notice  to  the  seller,  to  extend  time  of  shipment  to  cS  the 

SSaccoS"^^  concellation,  if  any,  to  the  seller,  or  to  buy  same  for 


RECEIVING  FROM  COUNTRY  POINTS. 


67 


The  shipment  pebiod. — It  will  be  noted  from  the  cards  previously- 
shown  that  the  shipment  period  for  grain  bought  to-arrive’’  and 

on- track’’  is  most  frequently  stated  as  a  definite  number  of  days 
or  as  a  designated  month  or  half  month.  When  cars  are  bought 
‘^20  days’  shipment,”  for  example,  the  plain  inference  is  that  the 
commodity  must  leave  the  shipping  station  or  that  instructions  be 
issued  by  the  shipper  to  the  carrier  within  20  days  from  the  effective 
date  of  the  contract.  The  cars  must  be  shipped  within  20  days  from 
the  date  of  contract  as  shown  by  written  confirmation  and  the  date 
of  the  bill  of  lading  must  indicate  this  fact.  Under  these  conditions,  ^ 
where  cars  are  shipped  within  the  specified  period,  the  cars  can  be 
applied  upon  the  contract  no  matter  what  length  of  time  may  inter¬ 
vene  before  their  actual  arrival  at  the  terminal. 

On  the  exchanges  at  Minneapolis  and  Duluth  the  term  ‘^to-arrive” 
(without  other  specification)  has  a  technical  meaning,  indicating  that 
the  cars  must  arrive  at  the  terminal  market  within  20  days  from  the 
date  of  sale.  Members  are  of  course  free  to  make  special  contracts 
regarding  both  the  time  of  arrival  and  the  period  within  which  ship¬ 
ment  must  be  made;  and  they  may  make  contracts  requiring  that 
cars  must  not  only  be  shipped  within  a  certain  number  of  days  but  that 
they  must  also  arrive  within  a  certain  specified  period.  In  Duluth 
the  contracts  often  specify  ‘‘ to-arrive,”  calling  for  delivery  at  the 
'terminal  within  20  days  in  order  to  meet  vessel  sailings.  Under  the 
rules  of  the  Duluth  Board  of  Trade  ^‘if  the  grain  is  not  delivered 
within  the  20-day  period,  the  contract  continues  in  force  until  such 
time  as  the  buyer  makes  demand  upon  the  seller  for  delivery.  When 
demand  is  made  the  seller  has  until  12  o’clock  of  the  next  business 
day  to  fill  the  same,  otherwise  he  is  in  default.” 

Delivery. — The  rules  for  valid  delivery  of  grain  on  sales  for 
shipment  are  discussed  in  connection  with  the  shipping  business 
(Chap.  V) .  The  question  of  delivery  on  direct  purchases  from  coun¬ 
try'  points  presents  few  points  not  covered  there. 

^^To-arrive”  purchases  are  frequently  made  on  the  basis  of  contract 
grades  to  facilitate  hedging  of  the  .acceptances.  Delivery  of  grades 
lower  than  those  specified  may  usually  be  made  at  a  discount  at  the 
bu\  ^er’s  option. 

The  coimtry  run  of  grain  is  required  to  be  delivered  on  to-arrive”*^ 
contracts  at  Minneapolis,  where  the  milling  demand  dominates  the 
wheat  market.  It  has  been  ruled”  that  ‘‘on  all  sales  of  grain, 

‘  to-arrive  ^  the  buyer  is  entitled  to  receive  grain  from  country  points, 
and  grain  which  was  not  inspected  at  the  time  when  the  sale  ‘  to- 
arrive’  was  made.”  In  markets  where  local  milling  is  not  so  active 
there  appears  to  be  less  insistence  upon  receiving  the  country  rim 
stuff.  During  the  operation  of  the  Call  Ryle  in  Chicago  (1906-1913) 
there  was  no  such  requirement.”  But  the  rule  now  in  force  relating 
to  “to-arrive”  grain  states  that  it  is  intended  “that  all  sales  of 
wheat,  corn,  oats,  or  rye  made  in  accordance  therewith  shall  be 
filled  by  the  delivery  of  grain  billed  direct  from  the  country  point  of 
origin  to  the  seller  at  this  market.”  ” 

67  Board  of  Directors,  Chamber  of  Commerce,  Circular  No.  97,  Mar.  16, 1909. 

68  See  Vol.  II,  Ch.  Ill,  sec.  5. 

69  Rules  of  the  Board  of  Trade,  sec.  32. 


68 


TERMINAL  GRAIN  MARKETING. 


"I  xT-»  *  AFTER-MARKET  BIDS. — In  the  primary  markets, 

where  there  is  active  bidding  after  hours  for  grain  at  country  points 
the  exchange  regulations  usually  require  that  in  case  a  firm  departs 

closing  ''to-arrive’’  price  other  representative  firms 
shall  be  notified  of  the  price  bid.  If  the  buyer  offers  a  higher  price 
to  country  shippers  he  is  expected  to  show  that  it  is  a  bona  fide  bid 
1.  e.,  based  on  actual  orders  in  hand;  and  due  publicity  must  be  given 
to  the  change  in  ^ice.««  Under  the  “  to-arrive  rules  and  regulations 
on  tne  Chicago  Board  of  Trade,  notice  must  also  be  given  to  the 
secretary  s  office  of  the  price  bid  and  the  firms  notified.  Further-' 
more,  it  has  been  the  custom  to  require  the  firms  notified  to  advise 
secretary  s  office  upon  receipt  of  such  bids,  so  that  the  exchange 
omcials  may  have  at  all  times  a  reliable  check  upon  the  publicity 
given  to  after-market  bids  when  the  price  set  is  higher  than  the 
closing  quotation.  The  regulation  of  the  Chicago  Board  of  Trade 
on  this  subject  should  be  considered  in  its  entirety: 

regular  market  for  grain  to-arrive  has  closed,  any  member  may  base  his 
persons  located  outside  of  Chicago,  for  wheat,  corn,  oats,  or  rye  to  be  shipped 
to  this  market,  either  upon  the  closing  quotation  of  said  “  to-arrive ’’market,  less  the 
handing  chaiyes,  or,  upon  a  price  higher  than  said  closing  quotation:  Pro- 
vvied,  however^ the  member  or  members  departing  in  their  bids  from  said  closing 
quotation  shall  in  every  instance  comply  with  the  following  conditions  ^ 

Iirst.  Ibe  handhng  charges  prescribed  in  section  32  of  Rule  IV  shall  be  deducted 
o^Siicago^^^  forwarded  to  persons  located  outside  * 

such  bids  shall  in  every  instance  file  with  the  secre- 

on^hp  T  V*  next  business  day,  or  by  United  States  mail 

soPb  bi Ilf  authority  for  making 

such  bids.  Such  authority  shall  be  evidenced,  either  by  a  bona  fide  bid  in  hand 

rom  a  buyer  at  this  market,  or  by  a  clear  showing  that  the  member  or  members  - 

here^blna^L^pl^ldf  Chicago  have,  prior  thereto,  made  to  members 

faiX^a  ^pw  InrW  1  ®nfRcient  number  and  for  sufficient  quantities  to  establish 
fairly  a  new  market  level;  and  further  such  member  or  members  must  show  the  bids 

S^ges^  i^epresent  the  price  thus  bid  to  the  members  here,  less  the  regular  handhng 

regular  “to-arrive”  market,  all  bids  to  persons  located 
outside  of  Chicago,  shall  expire  at  9.30  a.  m.  on  the  following  business  day.^^ 

The  following  letter  will  illustrate  the  practice  in  enforcing  this 
regulation :  ® 

Armour  Grain  Co., 

208  So.  La  Salle  St., 

The  To-Areive  Grain  Commiitee. 

(Care  Secretary’s  Office), 

Board  of  Trade  of  City  of  Chicago,  Chicago,  III. 

Dear  Sir:  We  have  authorized  the  following  firms:  [Enumerates  37  firms  all 
pri^lprou^count  bueinese.]”  to  bid  the  folloiring, 

3  white  o^s.  Aug.-Sept.  shipment  53|  cents  T.  M.  &  I  P  ea 
Standard  Oats  Aug.-Sept.  shipment  54|  cents  T.  M.  &  I.’p. 

We  are  using  the  same  bids  ourselves  less  the  usual  commission  ^ 

Yours  very  truly, 

Armour  Grain  Co., 
(Signed)  W.  A.  Fraser. 


60  See  Vol.  II,  p.  292.  ' 

61  Regulations  in  force  Mar.,  1921. 

S'oUcTtK 

BilUng  T.  M.”  means  Trans-Mi^isslppi  Billing;  “I.  p,”  means  Illinois  Proportional 


RECEIVING  FROM  COUNTRY  POINTS. 


69 


The  following  letter  illustrates  the  requirement  of  publicity  of 
overnight  to-arrive’’  bids  on  the  Kansas  City  Board  of  Trade: 


Kansas  City,  Mo.,  Aiigusl  18,  1917. 

E,  D.  Bigelow,  Secretary. 

A.  J.  Poor  Grain  Co. 

W.  S.  Nicholson  Grain  Co. 

Shannon  Com.  Co. 

Hoebel  Grain  Co. 

A.  C.  Davis  Grain  Co. 

E.  D.  Fisher  Com.  Co. 

E.  E.  Roahen  Grain  Co. 

Gentlemen:  We  are  making  the  following  bid  to-night  basis,  Kansas  City  weights 
and  grades: 

54^<t;  K.  C.  or  better  white  oats,  August  shipment. 

53|(t  K.  C.  ^3  or  better  white  oats,  September. 

Yours  truly, 

'  S.  "  Moore-Seaver  Grain  Co. 


It  has  been  the  custom  in  the  secretary’s  office  at  Chicago  to  keep 
a  tabular  list  of  after-market  bids  reported,  showing  the  date,  the 
firm  making  the  bid,  the  price,  the  commodity,  and  the  period  of 
shipment,  viz: 


5/16 

Quaker  Oats  Co. 

1.  62f 

3  W.  0. 

6/1 

Rosenbaum  Bros. 

1.  67 

N.  2  Rye. 

1.  65 

N.  2  Rye 

6/6 

Harris  Winthrop 

.64i 

St.  0.  I.  P. 

6/7 

Armour  Gr.  Co. 

.63^ 

3  W.  0. 

ii 

U  U  U 

.63i 

St.  0. 

H 

ii  a  a 

.63i 

3  W.  0. 

10  days. 
July. 
August. 
15  days. 
10  days. 
10  days. 
15  days. 


Conditions  affecting  the  “to-arrive”  business. — The  volume  of 
shipping  direct  to  buyers  is  considerably  influenced  by  the  demand 
for  cash  grain  in  the  terminals  and  the  existing  relation  between  the 
futures  and  cash  prices,  as  well  as  the  car  supply  in  the  country.  If 
the  spot  market  is  running  at  a  premium  over  the  futures  market  it 
may  be  more  profitable  to  ship  on  consignment,  since  the  ^Ho-arrive” 
price  is  influenced  by  the  future  as  well  as  by  the  spot  price,  and 
will  therefore,  presumably,  also  show  a  discount.®^  Where  country 
elevators  wish  to  protect  themselves  against  a  possible  decline  in  the 
market,  they  often  cover  purchases  of  stocks  on  hand  by  sales  ‘^to- 
arrive.”  Commission  firms  sometunes  urge  their  country  elevator 
customers  to  sell  part  of  their  stocks  ‘Ho-arrive”  against  a  possible 
decline  in  the  market. 

When  the  grade  of  a  crop  is  known  to  be  extremely  high  or  ex¬ 
tremely  low,  the  consignment  method  becomes  preferable  to  selling 
direct,  since  the  country  grades  are  often  not  very  reliable  and  more 
satisfactory  returns  may  be  obtained  by  selling  in  the  sample  market 
than  from  ^To-arrive”  sales  on  a  grade  basis.  It  is  said  to  be  dif¬ 
ficult  to  get  bids  from  Chicago  except  for  contract  grades,  irrespective 
of  the  condition  of  the  crop,  the  reason  being  that  the  buyers  un¬ 
dertake  to  keep  in  position  to  hedge  all  commitments.  This  is 


65  The  following  extract  from  a  market  report  will  illustrate  this  point: 

“Country  acceptances  of  wheat  on  overnight  bids  have  been  small  the  past  few  weeks.  With  export 
demand  generally  dull  and  premiums  [on  futures]  as  a  rule  under  [or  below]  a  workable  basis,  terminal 
dealers  have  not  been  inclined  to  issue  Arm  bids,  and  country  shippers  have  preferred  to  consign  their 
wheat  direct.  As  a  result  offerings  onthecarlot  market  last  month  were  much  larger  than  in  January 
when  receipts  were  larger  but  included  much  grain  arriving  on  contract.  Liberal  amoimts  of  consigned 
wheat  are  en  route  from  Kansas  and.  Oklahoma  to  Gulf  ports,  which  is  being  traded  in  actively.  (Kansas 
City  news  in  the  American  Elevator  and  Grain  Trade,  Mar.  15, 1921.) 


70 


l^ERHlNAL  GRAIN  MARKETING. 


illustrated  by  the  complaint  voiced  in  the  following  letter  written  to 
the  secretary  of  the  Chicago  Board  of  Trade  in  1918: 

I  do  not  pretend  to  be  an  expert  on  future  trading  or  hedging  in  connection  with  cash 
transactions,  but  it  does  seem  to  me  that  it  is  very  inconsistent  under  existing  condi¬ 
tions  tor  termiiral  elevator  buyers  to  insist  upon  making  bids  for  corn  to-arrive  on  the 
basis  ot  grades  deliverable  on  contracts,  when  there  is  no  such  corn  in  existence  and  a 
very  small  percentage  of  the  corn  that  will  be  shipped  can  be  dried  so  that  it  will 
enter  into  contract  grades.  Why  is  it  not  a  practical  proposition  for  the  terminal  ele¬ 
vator  operator  to  engage  in  a  business  of  merchandising  the  corn  as  it  exists  as  to  quality, 
making  purchases  as  required  to  fill  the  actual  sale  and  basing  such  sales  and  purchases 
on  a  grade  or  quality  by  samples  lower  than  the  contract  grade  and  thus  establish  its 
business  on  the  basis  of  the  quality  that  exists  instead  of  the  ideal  quality  that  does 

The  numerous  bid  cards  exaimned  tend  to  show  that  purchasers 
and  terminal  market  dealers  buying  from  territory  east  of  the  Mis¬ 
sissippi  are  more  frequently  inclined  to  buy  on-track  and  finance  the 
transportation  costs  than  those  buying  from  territory  farther  west 
where  there  are  fewer  outlets  available  to  the  country  shippers. 

Economic  effects  of  selijng  direct. — The  most  conspicuous 
effect  of  marketing  grain  by  direct  purchase  is  the  increase  in  cash 
trading  off  exchange.  Extension  of  the  to-arrive”  and  “on-track” 
business  frequently  narrows  the  trading  on  the  exchange  floor.  As 
^^^®^dy  noted,  this  has  led  to  the  adoption  of  exchange  rules  requiring 
the  equivalent  of  a  commission,  as  well  as  the  customary  terminm 

charges,  to  be  deducted  from  bids  or  prices  on  purchases  direct  from 
the  country. 

Both  advantages  and  disadvantages  in  the  practice  of  buying  direct 
from  country  points  have  been  enumerated  by  the  trade.  It 
appears  that  the  method  is  generally  favored  by  large  dealers,  such  as 
terminal  elevator  operators  who  are  interested  in  handling  round  lots 
of  grain,  irre^ectiye  of  the  premium  qualities  inherent  in  any  par¬ 
ticular  car.  Opposition  to  an  increase  in  direct  trading  has  come 
generally  from  commission  men  and  other  traders  who  are  especially 
interested  in  the  maintenance  of  sample  markets. 

The  advocates  of  direct  buying  by  means  of  “to-arrive”  contracts 
contend  that  “to-arrive”  bids  are  important  in  that  they  form  the  con¬ 
necting  link  between  cash  and  future  prices  and  renderThejmarket 
t  values  rnore  certain ;  that  tbcTto-arrive’  ’  bids  give  the  country  shippers 
a  reliable  basis  for  buying  from  producers  and  so  tSndlb^fembve  un- 
^certamty  as  to  the  values  in  the  country  markets;  that  the  to- 
/  arrive  sale  frequently  offers  the  country  shipper  a  more  dependable 

■y  Imdge  than  the  sale  of  the  future  and  that  the  necessity  of  hedging  in 

tlm  future  market  is  thereby  transferred  to  the  buyer  in  the  terminal, 
who^is presumably  equipped  with  a  better  knowledge  of  future  trading 

In  opposition  to  purchasing  direct  on  to-arrive  contracts,  it  has  been 
asserted  at  Chicago  that  without  exchange  regulation  direct  buying 
results  in  a  concentration  of  the  grain  business  in  the  hands  of  a  few 
large  operators  and  the  gradual  elimination  of  the  open-sample 
market.  Commission  men  in  Milwaukee  have  stated  this  to  be  a  real 
menace.  It  has  been  further  alleged  that  this  method  increases  the 
speculative  risks  of  terminal  buyers  who  put  out  bids  overnight  and 
run  the  risk  of  being  able  to  hedge  their  acceptances  during  the  next 


66  Forms  4  to  9,  inclusive. 


RECEIVING  FROM  COUNTRY  POINTS. 


morning’s  market,  and  that  direct  selling  from  the  country  leads  to 
speculation  on  the  part  of  shippers  who  accept  to-arrive”  bids  before 
purchasing  from  producers. 

Section  9.  Marketing  operations  of  line-elevator  companies. 

Extent  of  this  type  of  organization. — In  the  earlier  days  of 
grain  marketing,  when  the  system  of  trunk  line  railroads  was  in 
process  of  development  and  while  capital  was  scarce  in  the  produc¬ 
ing  areas,  corporations  were  organized  for  the  construction  of  dines” 
of  elevators  along  the  railroads  and  their  branch  lines  (sometimes 
along  the  rivers)  to  provide  marketing  outlets  for  the  newly  developed 
territory  and  to  supply  the  milling  and  shipping  demand  at  the 
larger  centers.  Frequently  the  railroads  assisted  these  line-elevator 
companies  in  order  to  build  up  the  grain  traffic. 

The  largest  commercial-line  companies,  i.  e.,  those  operated  for 
merchandising  purposes,  are  located  in  the  Northwest.  Further¬ 
more,  in  many  of  the  larger  producing  States,  line  companies  have 
been  organized  or  acquired  by  milling  interests  as  feeders  for  mill 
consumption.  In  the  Southwest — Kansas,  Oklahoma,  and  Colo¬ 
rado — line-elevator  development  by  mills  has  been  particularly 
important. 

Line-elevator  companies  operating  as  rnerchandisers  were  char¬ 
acteristic  of  the  grain  trade  as  developed  in  the  Northwest  during 
the  seventies  and  eighties;  and  trading  corporations  of  this  character, 
operating  in  a  few  instances  more  than  100  local  elevators  in  one 
system,  nave  continued  to  operate  in  that  area.  Line  companies 
of  this  character  hold  exchange  memberships  and  are  in  position  to 
market  grain  through  their  own  selling  agencies  at  the  terminals,  or 
to  sell  it  through  commission  houses  at  members’  commission  rates; 
the  latter  being  a  not  uncommon  method.®^  Line-elevator  systems 
were  also  built  up  in  Nebraska,  Iowa,  Missouri,  and  in  other  Middle 
Western  States. 

The  sites  for  the  local  elevators  of  line  companies,  as  well  as  for 
the  other  country  elevators,  are  usually  leased  from  the  railroads. 
There  is  considerable  variety  in  the  conditions  of  lease.  For  example, 
one  lease  stipulates  that  the  elevator  must  be  ‘  ‘  operated  for  public  use 
and  safe  and  prompt  receipt,  elevation,  and  delivery  on  board  cars 
of  grain  purcnased  at  fair  and  reasonable  rates  without  discrimina¬ 
tion.’^  Another  lease  has  a  similar  clause  with  the  exception  that 
the  elevator  must  furnish  facilities  for  receiving,  elevating,  and 
delivering  grain,  and  “charge  fair  and  reasonable  rates.”  One 
prescribes  that  the  elevator  is  to  be  used  “in  accordance  with  such 
rules  and  regulations  as  the  railway  may  from  time  to  time  prescribe, 
and  that  the  elevator  must  be  operated  in  “a  prompt  and  efficient 
manner  to  the  satisfaction  of  the  railroad.”  One  railroad  fixes  a 
maximum  charge  of  2  cents  per  bushel  for  “receiving,  storing  for 
not  longer  than  10  days,  elevating,  and  delivering  grain  at  said 
elevator,  or  such  rate  as  the  railway  company  shall  from  time  to 
time  direct,”  and  provides  that  “the  elevator  will  clean  all  gram 
delivered  *  *  *  if  required  at  prices  satisfactory  to  railway  com¬ 

pany.”  Another  lease  provides  that  the  elevator  must  be  operated 

w  Frequently  the  line  company  in  the  Northwest  also  operates  a  commission  business  through  which 
It  may  dispose  of  its  grain. 


72 


TERMINAL  GRAIN  MARKETING. 


‘'for  public  use  without  discrimination/’  and  “shall  at  all  times  fur¬ 
nish  all  requisite  facilities  for  the  receiving,  elevating,  cleaning,  and 
shipment  of  grain  to  the  reasonable  satisfaction  of  the  railway  com¬ 
pany  and  so  as  to  give  no  ground  for  complaint  to  anyone  doing 
business  thereat.”  One  of  the  leases  specified  above  further  provides 
that  the  elevator  “  shall  furnish  to  the  railway  company,  upon  request, 
a  statement  of  the  amount,  kinds,  and  grades  of  grain  in  the  said 
elevator;  and  in  default  thereof,  the  railway  company  shall  have  the 
right  to  enter  upon  the  premises  and  examine  the  bookstand  records.” 

The  elevator  companies  frequently  agree  to  ship  all  their  grain  over 
the  railroad  of  the  lessor.  A  clause  in  one  lease,  for  example,  pro¬ 
vides:  “No  other  railroad  or  transportation  company,  or  person 
engaged  in  transportation,  shall  be  allowed  to  use  any  track  now  or 
hereafter  upon  or  extending  to  the  premises  without  permission  in 
writing  of  the  railway  company,  and  the  railway  company  shall  have 
exclusive  right  of  carrying  all  grain  to  be  transported  by  rail  to  or  from 
said  elevator.”  Another  lease  contains  the  following:  “The  lessee 
hereby  agrees  to  ship  all  freight  he  can  control  by  the  lessor’s  rail¬ 
road  during  the  continuance  of  the  tenancy  hereby  created.”  One 
railroad  stipulates  in  its  leases  that  the  elevator,  as  far  as  it  has 
control,  “will  route  all  shipments  to  and  from  demised  premises 
over  the  railroads  of  the  lessor  and  connecting  lines  selected  by  the 
lessor”  whenever  the  transportation  rates  are  not  greater  than  those 
of  other  railroad  companies. 

It  is  doubtful,  however,  whether  the  railroads  try  to  enforce  aU 
or  even  any  of  these  provisions.  Apparently  they  are  inserted  largely 
to  protect  the  rights  of  the  railroad  companies  in  case  of  disagreement. 

During  the  past  25  years  the  movement  for  farmers’  elevators  has 
retarded  the  progress  of  the  line  companies  both  in  volume  of  re¬ 
ceipts  and  number  of  elevators  operated,  and  in  many  instances 
local  stations  have  been  sold  by  line  companies  to  cooperative 
companies.®*  The  conimercial  line  company  type  of  organization, 
however,  is  still  in  active  operation  throughout  the  principal  grain- 
growing  areas,®*  and  in  Minnesota,  North  and  South  Dakota,  Ne¬ 
braska,  and  Montana  they  apparently  operate  more  country  elevators 
than  any  other  one  type  of  organization.  In  most  of  the  other  States 
considered  (Indiana,  Illinois,  Iowa,  Michigan,  Ohio,  IVisconsin,  Mis¬ 
souri,  and  Kansas)  the  independent  country  elevator  is  a  more  fre¬ 
quent  type.  As  already  stated,  lines  of  elevators  operated  bv  mills  are 
especially  proniinent  in  Oklahoma  and  Kansas:^*  These  concerns 
however,  take  little  or  no  part  in  the  movement  of  grain  toward  the 
primary  markets. 

From  a  survey  of  over  9,000  country  elevators  and  warehouses  of 
all  types  and  in  all  producing  sections  it  appears  that  about  36  per 
cent  were  operated  By  commercial  line  companies  in  1918.^^  Elimi¬ 
nating  the  elevators  and  warehouses  operated  by  millers  and  con¬ 
verters,  it  is  fair  to  assume  that  at  least  until  very  recently  about  40 
per  cent  of  the  elevators  and  warehouses  shipping  to  terminal  markets 


See  Vol.p  Chap.  II,  sec.  11,  Chap.  IV,  8-13,  and  Chap.  XI,  sec.  11.  Forexamnle  one  Kansas Citvli-no 

69  See  Vol.  I,  Table  13. 

71  Vol.  I,  Table  13. 


RECEIVING  FROM  COUNTRY  POINTS. 


73 


were  commercial  line  houses.  Occasionally  the  line-house  local  ele¬ 
vator  managers  are  instructed  to  ship  to  other  grain  dealers  or  com¬ 
mission  merchants,  so  that  it  is  difficult  to  determine  the  total  volume 
handled  by  the  main  offices  of  commercial  line  companies.  There  is 
some  evidence,  however,  that  marketing  through  the  main  office  is 
more  frequently  the  practice  at  Minneapolis  than  elsewhere,  and  the 
returns  from  that  market  during  the  five-year  period  1913-1917  show 
that  about  28  per  cent  of  all  grain  shipped  to  Minneapolis  was  brought 
in  and  (presumably)  handled  by  the  main  office  organizations  of  com¬ 
mercial  line  companies. 

The  actual  buying  and  handling  of  grain  by  country  elevators  in 
the  northwestern  grain  States  has  been  described  m  Volume  I, 
Chapters  V  and  VI,  of  this  report.  In  the  case  of  line  elevators, 
particularly  the  large  ones  with  head  offices  at  Minneapolis,  it  is 
necessary  that  the  activities  of  the  country  agents  be  closely  super¬ 
vised  in  order  to  prevent  irregularity  and  to  conduct  the  business  of 
the  company  efficiently.  As  a  part  of  this  supervision  the  agents  of 
the  line  companies  are  required  to  send  to  their  head  offices  detailed 
reports  of  the  business  done  each  day  (Vol.  I,  Chap.  V,  and  sec. 

2  of  Chap.  VI). 

In  addition  to  these  daily  reports,  line  companies  employ  traveling 
superintendents  who  visit  the  elevators  and  keep  a  check  on  the 
business  done  by  each  agent.  These  superintendents  make  regular 
visits  to  each  station  in  their  territory  and  also  are  available  for 
emergency  calls.  In  addition  to  keeping  informed  of  the  operations 
of  the  elevators  operated  by  their  employers  these  superintendents 
are  frequently  called  upon  to  settle  disputes  between  country  agents 
and  also  have  been  instrumental  in  effecting  agreements  and  under¬ 
standings  as  to  prices  and  other  competitive  matters  (Vol.  I,  Chap. 
XI,  sec.  21). 

These  superintendents  usually  have  headquarters  at  some  town 
from  which  they  can  cover  their  territory  to  the  best  advantage. 
Each  superintendent  usually  has  about  25  elevators  under  his  super¬ 
vision,  which  is  believed  to  be  the  largest  number  one  man  can 
look  after  efficiently.  By  means  of  these  superintendents  and  the 
agents’  daily  reports  the  head  office  is  kept  in  close  touch  with  the 
general  situation  at  each  country  station  where  they  operate  eleva¬ 
tors.  All  reports,  both  from  the  agents  and  the  superintendents, 
are  carefully  checked.  Errors  are  called  to  the  attention  of  the 
agent  responsible  and  explanations  required.  These  reports  form 
the  basis  lor  many  of  the  accounting  entries  at  the  head  office.  The 
quantity  of  grain  to  be  insured  and  the  quantity  to  be  hedged  are 
also  determined  from  the  reports  received  from  country  agents. 

Price  instructions  to  agents. — ^The  line  companies  in  the  North¬ 
west  very  often  instruct  their  agents  to  follow  as  closely  as  possible  the 
Grain  Bulletin  cards  which  are  sent  out  by  a  private  quotation 
agency In  other  sections  of  the  producing  area  the  companies 
sometimes  prepare  daily  price  instructions  ol  their  own,  and  some-  • 
times  the  price  information  is  furnished  by  mills  or  commission 
houses.  The  following  form  was  used  by  the  Hynes  Elevator  Co.,  at 
Omaha : 


72  See  Chap.  VIII. 


74 


TERMINAL  GRAIN  MARKETING. 


Form  11.— PRICE  INSTRUCTION  CARD  FOR  LINE-ELEVATOR  AGENTS. 

- . Station, 

On  receipt  of  this  card  we  pay  the  following  prices  for  grain  until  further  notice* 
Ear  com . lbs . ° 

3  corn . ]!!!!!!.!.! . 

4  corn . ]  . 

No  grade  corn . '  . . 

3  yellow  corn . 

3  white  corn . * . . 

3  white  oats,  testing  28  lbs.  or  more . 

'4  white  oats,  testing  22  to  28  lbs . ^  . 

3  mixed  oats,  testing  28  lbs.  or  more . 

2  hard  wheat — ^new,  60  lbs . . . 

2  hd,  wheat,  dark  variety,  60  lbs .  '  * . 

2  hd.  wheat,  yellow  variety,  60  lbs . . 

3  hd.  wheat,  testing  59  lbs.  or  more . 

3  hd.  wheat,  testing  58  lbs . . 

3  hd.  wheat,  testing  57  lbs . 

3  hd.  wheat,  testing  56  lbs . . 

4  hd.  wheat,  testing  55  lbs.  or  more . 

4  hd.  wheat,  testing  53  to  55  lbs . . 

No  grade  hard  wheat,  dry,  sweet . . . . . . . 

No  grade  hard  wheat,  damp,  bin  burnt,  musty,  sour,  or  hot 

2  rye . . .  . 

3  rye . 

4  rye .  . 

Malting  barley . . 

Feed  barley . 


A  Chicago  line  company,  during  the  season  of  heavy  grain  move¬ 
ment,  made  a  practice  of  sending  a  daily  price  letter  to  each  agent, 
while  any  changes  necessitated  by  a  fluctuating  market  were  tele¬ 
graphed  to  a  central  point  (Pontiac)  and  from  there  telephoned  to 
the  agents.  Another  concern  operating  lines,  at  1.30  p.  m.  daily 
telegraphed  to  its  agents  the  closing  prices  of  the  Chicago  Board  of 
irade,  and  these  formed  the  basis  of  country  prices  for  the  day. 
Any  sudden  or  violent  market  changes  were  communicated  imme¬ 
diately  with  instructions  covering  purchases.  The  agents  of  an  In¬ 
dianapolis  coinpany  received  price  quotations  daily  by  telephone 
from  the  superintendent.  A  St.  Louis  company  kept  in  touch  with 
its  agents  by  means  of  the  telephone  and  telegraph,  besides  frequent 
letters.  The  agents  of  a  Kansas  City  company  were  informed  of 
current  market  prices  by  means  of  evening  letters  sent  out  by  the 
company,  supplemented  by  telephone  or  telegraph  messages  when 

necessary.^3 

Traffic  departments.— In  prosecuting  claims  for  loss  and  in 
other  traffic  matters  the  individual  country  shipper  is  largely  de¬ 
pendent  upon  the  consignee  when  he  ships  on  consignment;  the  line 
companies,  on  the  other  hand,  frequently  operate  traffic  and  claims 
departments  of  their  own. 

In  the  decision  of  the  Interstate  Commerce  Commission  on  Claims 
for  Loss  and  Damage^^  (Feb.  4,  1918),  it  was  pointed  out  that  ‘Hhe 
shippers  filing  a  majority  of  the  claims  were  the  line  elevator  com¬ 
panies  or  those  having  a  general  office  at  a  terminal  market  and 
operating  a  line  of  country  elevators  where  the  grain  is  purchased 
and  stored  preparatory  to  shipment.’’ 


«  48 C.Tp^®636^^  country  price  services,  see  Chap.  VIII,  and  Vol.  I,  Chap.  VIII,  secs.  1-5, 


RECEIVING  FROM  COUNTRY  POINTS. 


75 


Some  of  the  line-elevator  companies  were  more  zealous  than  others  in  filing  claims. 
On  each  road  there  were  one  or  two  shippers  who  filed  a  large  proportion  of  all  claims. 
On  the  Great  Northern,  for  example,  the  claims  of  the  St,  Anthony  &  Dakota  Co. 
represented  27  per  cent  of  the  entire  loss  claimed,  although  it  shipped  but  11  per  cent 
of  the  cars.  This  company  filed  claims  on  40  per  cent  of  its  shipments.  On  ship¬ 
ments  to  Minneapolis,  via,  the  Minneapolis,  St.  Paul  &  Sault  Ste.  Marie,  the  claims  of 
the  Osborne-McMillan  Co.  embraced  25  per  cent  of  the  entire  loss  claimed,  although 
it  shipped  but  6  per  cent  of  the  total  number  of  cars.  On  the  Chicago,  Milwaukee  & 
St.  Paul,  the  Empire  Elevator  Co.  shipped  5.1  per  cent  of  the  cars  to  Minneapolis  and 
claimed  32  per  cent  of  the  total  loss.  It  shipped  0.8  of  1  per  cent  of  the  cars  to  Chicago 
and  claimed  15  per  cent  of  the  loss. 

The  highly  organized  line  companies  are  very  insistent  in  requiring 
their  agents  to  send  in  detailed  shipping  reports,  since  over  a  large 
system  such  incidental  losses  may  aggregate  a  considerable  amount. 
On  the  basis  of  these  reports,  claims  for  loss  or  damage  can  be 
prosecuted  from  the  head  office. 

The  following  form  used  by  a  Minneapolis  company  for  claims  on 
loss  in  transit  is  instructive  as  an  illustration  of  this  practice: 

Form  12.— CLAIM  FOR  LOSS  IN  TRANSIT. 

F.  C.  A.  No .  Our  claim  No . 

Minneapolis,  Minn., . . 191 — .  - 


To  Minnekota  Elevator  Company,  Dr. 
Wholesale  Grain  Dealers,  652  Chamber  of  Commerce. 
To  loss  in  transit  as  follows: 

From . to . 


Date. 

W.  B. 

Car. 

Initial. 

Contents. 

Weights. 

Loaded. 

Received. 

Shortage. 

Figured  from  depth  measurement  of . inches.  f  weighed  1 

Contents'?  >by  shipper. 

Figured  from  test  weight  of . lbs.  per  bushel.  lestimatedj 


Pounds. 

Grade. 

Gross  bu. 

Dockage. 

Net  bu. 

Price. 

Amoimt. 

Attached  (as  checked): 

1.  Report  of  shipment. 

2.  Bill  of  lading. 

3.  Expense  bill. 

Freight . 

Amount  of  claim . 

$ 

6.  Certificate  of  weights  received. 

6.  Certificate  of  inspection. 

7.  Affidavit  of  depth  loaded. 

8.  Weighmaster’s  report. 

9.  Certified  copy  of  invoice. 

10 . 


Remarks: 


Please  advise  your  claim  number  and  place  in  line  for  prompt  settlement. 
Shipment  report  No . 


76 


TERMINAL  GRAIN  MARKETING. 


Supervision  of  agents. — Essential  factors  in  the  successful 
operation  of  line-elevator  systems  are  the  securing  of  competent 
local  agents  and  the  maintenance  of  a  rigid  supervision  over  their 
operations  in  the  local  markets.  Most  of  the  large  companies,  as 
alread;^  stated,  employ  traveling  superintendents  whose  duties  are  to 
supervise  local  agents  and  correct  practices  found  to  be  unprofitable 
to  the  company.  The  local  manager  of  a  line-company  elevator  is 
usually  bonded,  is  more  closely  supervised,  and  enjoys  less  independ¬ 
ence  of  action  than  any  other  operator  in  the  country  market. 
The  policies  of  the  company  are  determined  from  the  head  office  and 
are  explicitly  defined  for  the  local  agent. 

Several  line  companies  issue  printed  instructions  to  their  agents 
who  must  promise  to  comply  with  them  while  in  the  employ  of  the 
company.  At  least  one  Minneapolis  company  has  issued  a  pamphlet 
of  instructions  to  its  agents,  relating  the  requirements  of  the  bonding 
company,  and  giving  detailed  directions  as  to  ffre  protection  and 
insurance,  office  and  elevator  management,  power  and  engine-room 
management,  receiving  of  grain,  grading  of  grain,  docking  of  grain, 
weighing  of  grain  and  coal,  binning  and  disposition  of  grain  in  elevator, 
coopering  of  cars,  loading  of  cars,  shipping,  issuing  and  buying  grain 
storage  tickets,  forms  of  reports,  relations  with  competitors,  etc. 

Competitive  methods. — The  competitive  methods  of  line-elevator 
companies  in  the  country  have  been  set  forth  in  Volume  I,  Chapter 
XI,  of  the  report. 

Examination  of  voluminous  correspondence  has  shown  that  line 
companies  in  the  Northwest  have  forbidden  their  agents  to  overgrade 
and  underdock  and  that  they  have  tried  to  prevent  other  local  Healers 
from  engaging  in  such  practices.  Furthermore,  they  have  not  as  a 
rule  favored  any  modification  or  elimination  of  charges  for  elevation 
and  storage  in  country  markets;  i.  e.,  for  handling  grain  for  producers 
prior  to  purchase.  The  evidence  also  shows  that  the  line  companies 
m  the  Northwest  have  preferred  to  adhere  to  ^‘lisf  prices  (prices  on 
the  Grain  Bulletin  card) ,  and  that  they  have  tended  to  follow  rather 
than  to  lead  their  coinpetitors  in  bidding  up  the  local  market  prices.^^ 
When  nonline  competitors  have  secured  business  through  overgrading 
or  underdocking,  free  elevation,  or  free  storage,  etc.,  the  line  compa¬ 
nies  have  usually  instructed  their  agents  to  meet  this  competition  by 
bidding  up  the  price  rather  than  by  employing  such  methods.  Under 
the  antidiscrimination  laws  in  force  in  some  States  it  has  become 
necessary  for  line  companies  to  offer  the  same  price  basis  at  all  country 
markets,  subject  to  the  exception  of  meeting  competition.  The  cor¬ 
respondence  of  the  line  companies  is  replete  with  complaints  from 
the  head  office  of  one  company  to  another  regarding  competitive 
practices  at  specified  stations  and  making  requests,  demands,  and 
suggestions  for  adjustments;  and  they  also  show  a  general  effort  to 
rectify  conditions  detrimental  to  line  company  interests.  There  is 
plenty  of  evidence  of  actual  agreements  as  to  prices,  grades,  etc., 
between  the  head  offices  of  line  companies  in  the  Northwest,  and 
even  more  evidence  of  mutual  cooperation  in  the  same  matters. 
Positive  instructions  and  frequent  suggestions  have  been  issued  to 

«  ^scussion  of  supervision  ofline  elevators,  see  Vol.  I,  Chap.  VI,  sec.  2. 

See  Vol.  II,  Chap.  XI,  secs.  15, 16.  >  f  > 

”  Vol.  I,  pp.  275-282. 

Vol.  I,  Chap.  XI,  sec.  16. 


RECEIVING  EROM  COUNTRY  POINTS. 


77 


local  agents  at  competitive  points  with  a  view  to  keeping  them  on 
harmonious  terms  with  the  other  agents  at  such  markets.  When  cor¬ 
respondence  fails  to  harmonize  a  particular  local  point  with  reference 
to  prices,  grades,  dockage,  etc.,  a  traveling  superintendent  or  auditor 
is  frequently  sent  on  to  make  a  satisfactory  arrangement.'^®  In  some 
instances  it  is  known  that  the  agents  of  one  line  company  have  been 
directed  to  act  according  to  the  instructions  of  a  superintendent  of 
another  line  company. 

Where  the  line  companies  have  been  confronted  with  the  ‘^cooper¬ 
ative  movement”  they  frequently  have  been  obliged  to  close  their 
houses,  since  the  cooperative  often  obtained  so  large  a  volume  of 
,  business  that  certain  of  the  lines  found  it  unprofitable  to  operate  at 
that  point  either  temporarily  or  permanently.®® 

The  correspondence  examined  indicates  that  agreements  at  local 
stations  have  been  originated  more  frequently  by  line-elevator  com¬ 
panies  than  by  cooperatives  or  independents.  These  agreements  have 
often  resulted  as  a  reaction  from  severe  competition  m  certain  local 
markets  and  have  probably,  at  times,  enabled  a  line  elevator  to 
continue  to  operate  when  it  might  otherwise  have  been  impossible.®^ 

Alleged  economy  of  line-elevator  operation. — In  considering 
the  question  of  economical  distribution  the  following  arguments  have 
been  advanced  in  favor  of  line-elevator  systems: 

(a)  That  by  holding  exchange  memberships  the  line  companies 

operating  from  terminal  markets  can  either  eliminajba  ^ 

charges  or,  when  selling  through  commission  men,  can  secure  mem¬ 
bers’  rates.®^ 

(b)  That  by  operating  on  a  large  scale  they  can  employ  speciahsts 
to  work  out  operating  standards  and  records  whereas  ea^  inde¬ 
pendent  local  elevator  must  work  out  its  own  system  regardless  of 
the  practices  at  other  stations.  The  line  company  is  in  position  to 
bring  each  of  its  elevators  up  to  the  standards  maintained  by  the 
most  efficient. 

(c)  That  through  their  traffic  and  claims  departments  at  the  head 
office  they  can  obtain  cars  and  prosecute  claims  for  loss  and  damage 
more  effectively  than  in  the  case  of  any  individual  country  dealer. 

(d)  That  the  line-elevator  companies  (at  least  in  the  Northwest) 
consistently  hedge  their  grain,  and  by  so  doing  are  able  to  secure 
credit  froiri  terminal  market  banks  at  minimum  rates. 

The  major  argument  advanced  against  the  line-elevator  system  is 
that  it  tends  toward  concentration  and  a  resultant  lessening  of 
competition  for  grain  in  the  producing  areas.  There  seems  to  be  no 
doubt  that  price  agreements  and  divisions  of  receipts  have  char¬ 
acterized  line-company  operations  in  country  areas,  and  that  the 
cooperative  movement  gained  impetus  because  of  the  evident  lack 
of  competition  in  the  country  markets.  The  fact  that  cooperative 
country  elevators  in  competition  with  the  lines  have  handled  more 


Idem,  sec.  21. 

80  The  comparative  margins  and  returns  on  investment,  as  between  the  various  types  ef  country  elevators, 
appear  in  V ol.  IV. 

81  See  Vol.  I,  Chap.  XI,  sec.  17. 

82  Members’  rates  are  usually  half  those  charged  to  nonmembers. 


56976°— 22 - 7 


78 


TERMINAL  GRAIN  MARKETING. 


gram,  paid  higher  prices,  and  increased  competition  for  individual 
lots  at  many  country  points,  together  with  the  patronage  dividend 
feature  often  employed,  have  operated  adversely  to  the  line-elevator 
plan  of  distribution.®^  It  appears  probable  that  agreements  and 
understandings  as  to  prices,  competitive  methods,  and  divisions  of 
receipts  in  the  country  markets  (sometimes  instituted  by  individual 
local  companies  as  well  as  by  the  lines)  serve  the  line  companies 
to-day  rather  as  a  means  of  remaining  in  business  than  as  a  method 
of  controlling  the  local  markets. 


For  financial  results  supporting  this  conclusion,  see  Vol.  IV. 


0 


\ 


Chapter  III. 

TRANSPORTATION  AND  RAILROAD  TERMINAL  FACILITIES. 

Section  1.  Relation  of  the  freight  rate  structure  to  grain  marketing. 

The  rate  increases  of  1920. — Transportation  rates  and  trans¬ 
portation  facilities  have  been  of  primary  importance  in  the  main¬ 
tenance  of  grain  markets  at  terminal  points;  and  transportation  has 
recently  been  absorbing  an  increasingly  large  part  of  the  total  cost  of 
distributing  grain  and  grain  products.  Certain  effects  of  freight 
rate  adjustments  upon  the  growth  of  individual  terminal  markets 
are  set  forth  in  Volume  II  of  the  report.  The  importance  of  such 
adjustments  with  reference  to  competing  markets  was  emphasized 
in  the  decision  on  Increased  Rates,  1920,^  by  the  Interstate  Commerce 
Commission,  viz: 

There  are  in  the  Middle  West  a  number  of  important  grain  markets  through  which 
it  has  been  customary  to  maintain  an  equalization  of  the  rates  from  important  produc¬ 
ing  States  to  important  consuming  regions,  under  which  the  sum  of  the  rates  into  and 
out  of  the  various  markets  is  in  most  cases  equal.  This  adjustment  differs  from  an 
ordinary  differential  basis  in  that  it  is  in  substance  providing  an  equal  through  charge 
over  various  routes  between  the  same  points  by  the  use  of  sums  of  proportional  ^  rates 
rather  than  the  establishment  of  joint  through  rates  or  of  transit.  The  application  of 
different  percentages  in  the  various  groups  will  result  in  dislocation  of  this  equalization. 

Carriers  and  shippers  unite  in  recommending  that  this  equalization  be  continued 
because  of  the  keenly  competitive  situation  of  the  various  markets  and  of  the  lines  of 
railway  serving  such  markets.  However,  sufficient  detailed  information  to  cover 
fully  the  situation  is  not  before  us  upon  this  record.  We  find  that  the  grain  rates  into 
and  out  of  these  markets  maybe  increased  by  the  general  percentages  herein  approved, 
vdth  the  understanding  that  the  carriers  will,  within  30  days  after  the  service  of  this 
report,  file  tariffs  restoring  the  equalization  through  the  grain  markets  now  enjoying 
that  basis. 

That  is,  in  the  car-lot  grain  market,  differences  in  the  price  of  grain 
on  a  delivered  basis,  as  between  the  various  terminals  conform  very 
closely  to  the  differences  in  transportation  charges.  Railroad  con¬ 
gestion  and  an  inadequate  car  supply,  or  other  influences,  may  widen 
the  spreads  between  markets,  as  these  conditions  did  in  the  period 
from  November,  1919,  to  August,  1920.  Again,  the  premiums  which 
sometimes  prevail  for  spot  grain  and  the  variations  in  value  within 


1  gg  I  Q  0  220 

2  The  “proportional  rate”  was  devised  to  equalize  rates  for  shipment  via  one  gateway  as  compared  with 
existing  through  rates  via  another  gateway.  It  also  provided  a  through  rate  basis  for  certain  interior  points 
which  were  formerly  restricted  to  local  rates  or  a  combination  thereof.  It  enabled  shippers  already  enjoying 
a  through  rate  via  one  route  to  consuming  territory  to  obtain  a  similar  rate  via  a  different  junction  point  or 
terminal  market.  It  also  enabled  shippers  in  producing  territory  who  had  never  been  allowed  a  through 
rate  to  obtain  such  a  rate  by  combination  via  a  given  gateway  or  basing  point.  The  existing  1  ocal  rate  was 
replaced  by  a  so-called  “proportional”  into  the  junction  point,  and  this  proportional  was  combined  with 
another  proportional  out  of  that  junction  point  so  as  to  provide  a  through  billing.  The  intermediate  gate¬ 
ways  or  junctions  in  this  rate  structure  were  known  as  “basing  points.”  In  the  case  of  grain,  the  basing 
point  was  usually  a  terminal  market.  It  was  thus  made  possible  for  a  grain  dealer  in  Chicago,  for  example, 
tohuy  grain  in  lowafor  ultimate  shipment  to  New  York  on  a  through  rate:  orfora  Minneapolis  shipper  to 
bring  in  grain  from  the  country  on  a  “proportional”  and  ship  the  grain,  or  its  equivalent  in  grain  products, 

out  of  the  market  on  the  same  billing.  x  j  -  ..  4.  •  4.x. 

In  determining  freight  rates  between  two  points  the  rate  by  the  shortest  or  most  direct  route  is  the  pre¬ 
vailing  maximum  through  rate  which  the  longer  and  more  indirect  routes  must  not  exceed  if  tlmy  are  to 
participate  in  the  traffic,  A  reshipping rateis  often  referred  to  as  a  ^^proportional,  ^  meanmg  the  part  of 
the  through  rate  covering  the  haul  from  the  primary  market  to  destination.  (V ol.  II,  pp.  43,  44.) 

79 


80 


TERMINAL  GRAIN  MARKETING. 


the  same  grade  under  conditions  of  sample  buying  at  milling  centers 
necessarily  affect  the  spreads  as  between  markets;  but  for  shipping 
purposes  it  is  generally  true -that  the  price  differences  between  ter¬ 
minal  points  are  closely  approximate  to  the  freight  rate  differentials. 

Accordingly  the  percentage  increases  in  freight  rates,  which  became 
effective  after  July,  1920,  operated  to  the  disadvantage  of  the  more 
distant  shippers  and  dislocated  the  adjustments  between  markets, 
which  had  been  constructed  in  most  instances  on  a  competitive  basis. 
To  consider  the  country  shipper  first,  the  rate  from  Ellsworth,^ 
Kans.,  to  Kansas  City  was  increased  from  16  cents  per  100  pounds 
to  21i  cents  ^  per  100  pounds,  while  that  from  Brantford,"  K  Dak., 
to  Duluth  was  increased  from  17  cents  to  23  cents^  per  100  po-unds, 
and  that  from  Martinsdale,"  Mont.,  to  Minneapolis  from  36  cents  to 
48  cents  ^  per  100  pounds.  The  increase  was  5}  cents  in  the  first 
rate,  6  cents  in  the  second,  and  12  cents  in  the  third.  Without  further 
analysis  it  is  apparent  that  the  country  shipper  who  customarily 
shipped  the  greater  distance  was  more  seriously  affected  by  the  rate 
increase  than  the  shipper  who  shipped  the  lesser  distance;  and  that 
the  effect  of  the  general  increase  upon  country  shippers  was  to  lead 
them  to  ship  to  a  nearer  buyer’s  market,  if  possible,  in  order  to  shift 
part  of  the  burden  of  the  freight  increase  to  a  manufacturer  or  another 
dealer. 

The  freight  rate  increase  was  of  immediate  concern  to  the  terminal 
market  dealers,  since  in  the  shipping  business  a  few  cents  advantage 
secured  by  the  markets  operating  over  one  route  as  against  those 
dependent  upon  another  may  constitute  a  decisive  competitive 
advantage.  Certain  effects  of  the  rate  increases  of  1920  upon  this 
situation  appear  from  a  consideration  of  the  export  rates.  The 
comparative  export  rates  from  three  primary  markets  are  shown  in 
the  following  tabulation : 

Bates  on  grain  for  reshipment2 
[In  cents  per  100  pounds.] 


From — 

To — 

Kind  of  rate. 

As  of 
July  1, 
1920. 

As  of 
Mar.  1, 
1921. 

As  of 
May  15, 
1921. 

Omaha . 

Galveston  (export). . . 

29 

36^ 

26i 

23 

24| 

39 

Do . 

Baltimore  (export) . 

39 

St.  Louis . 

New  Orleans  (export") 

48 
23i 
2  34, » 38 
<30, ‘33 
34^ 

Do . 

New  York  (export) .... 

dn 

38 

33 

34i 

Chicago . 

Do . 

New  York  (domestic).. 

iui  biupment  w  points  oeyond  or  on  shipments /rom  points  beyond. 

O'*  proportional  rate,  provided  shipments  originate  at  points  west  of  the 
west  bank  of  the  Mississippi  River  from  which  there  is  no  through  joint  rate  in  effect. 

4  ^  roshipping  or  proportional  rate  from  territory  not  covered  by  reference  “2.” 

trai^^M  ssfsSi  proportional  rate  on  traffic  originating  at  points  in  Northwest  territory, 

in^Sfe^  River  territory,  and  northern  Iowa  territory,  from  which  there  are  no  joint  through  rat^ 

rat^  a?e  S  proportional  rate  on  traffic  originating  at  points  beyond  from  which  no  through 


It  will  be  seen  that  the  dealer  at  Omaha  shipping  on  export  billing 
had,  on  July  D  1920,  a  differential  of  7^  cents  in  favor  of  Galveston 
as  against  Baltimore;  whereas  on  March  1,  1921,  this  differential 
amounted  to  13  cents. 


3  yssumed  to  be  the  center  of  production  of  the  State. 


RAILROADS  AND  TERMINAL  ELEVATORS. 


81 


Likewise,  by  the  percentage  increase,  the  differential  in  favor  of 
New  Orleans  as  compared  with  New  York  on  shipments  from  St. 
Louis  was  increased  from  9  to  14^  cents,  and  comparisons  of  other 
differentials  on  export  shipments  from  the  interior  showed  much  the 
same  situation. 

The  differential  as  between  domestic  and  export  rates  was  not 
changed  for  the  Atlantic  ports,  since  it  was  required  ^  that  the 
former  ‘^port  differentials”  be  maintained.  The  percentage  increase 
did  operate  to  widen  the  differences  between  export  and  domestic 
rates  to  other  ports,  notably  Galveston. 

With  ocean  rates  to  Europe  from  the  Gulf  almost  on  a  parity  with 
those  from  the  Atlantic  ports,  as  they  frequently  were  during  1920-21, 
the  widening  of  the  differential  effected  in  1920  was  responsible  for 
an  increased  export  movement  via  the  Gulf  routes. 

Subsequent  adjustments. — Complaints  and  controversies  over 
these  rate  relations  led  to  conferences  early  in  1921  between  repre¬ 
sentatives  of  the  grain  markets,  the  Atlantic  and  Gulf  ports,  and  the 
carriers  of  eastern  and  western  territory.  The  representatives  of  the 
Minneapolis,  Missouri  River,  and  Chicago  markets  proposed  reduc¬ 
tions  of  8  cents  on  export  and  9^  cents  on  domestic  traffic  from  Minne¬ 
apolis  to  New  York,  reductions  of  2  cents  from  the  Missouri  River 
to  Chicago,  4  cents  from  Chicago  to  eastern  points,  and  6  cents  from 
the  Mississippi  River  to  eastern  points. 

These  petitions  were  laid  before  the  Interstate  Commerce  Commis¬ 
sion  and  certain  reductions  in  export  rates  were  advised.  The 
director  of  traffic,  with  the  approval  of  the  chairman  of  the  Interstate 
Commerce  Commission,  made  the  following  comments  ®  on  the  general 
situation: 


4.  It  is  recognized  that  the  differentials  on  traffic  from  the  Missouri  River  to  the 
Gulf  ports  for  export  as  compared  mth  Atlantic  ports  for  export  and  of  the  all-rail 
rates  from  Minneapolis  to  eastern  points  as  compared  with  the  throu^  lake-aim-rail 
charges  have  been  widened  to  an  extent  to  make  desirable  reductions  therein.  Read¬ 
justments  of  rates  to  bring  about  this  end,  however,  must  be  approached  with  extreme 
caution  and  having  in  mind  all  the  factors  which  have  led  to  the  existing  situation 

and  which  are  likelv  to  exist  in  the  near  future.  ,  ,  i  +•  i 

It  has  been  demonstrated  that  during  the  past  season  there  has  been  a  relatively 
gi’eater  movement  of  grain  to  Gulf  ports  as  compared  with  Atlantic  ports  than  existed 
during  the  previous  four  seasons.  It  is  not  considered,  however,  that  this  change  in 
the  trend  of  movement  is  wholly  the  result  of  the  widening  of  rail  differentials. 

Unusual  conditions  appear  to  have  existed  in  the  grain  trad  e  and  particularly  witn 
respect  to  the  ocean  transportation  charges,  which  have  undoubtedly  beeii  lactors  in 
determining  the  movement  during  the  past  season.  The  differences  heretofore  preva¬ 
lent,  Gulf  ports  over  Atlantic  ports,  have  been  materially  Ipsened  during  the  past 
season,  in  many  cases  rates  from  the  Gulf  ports  being  no  higher  than  tho^ 

Atlantic  seaboard,  which  leads  to  the  conclusion  that  movement  via  the  Gull  would 
have  been  stimulated  had  there  been  no  widening  of  the  rail  differentials.  It  is  con¬ 
ceded  that  as  conditions  become  more  nearly  normal,  the  ocean  rates  from  the  Lull 
ports  will  inevitably  become  higher  than  those  from  the  Atlantic  ports.  While  no 
information  as  to  the  trend  of  ocean  rates  since  February  1  is  available,  an  increased 
exportation  of  grain  from  Atlantic  ports  would  indicate  a  tendency  to  return  to  nomal 
ocean  rates  and  further  demonstrate  that  the  relatively  greater  tonnage  to  the  Gulf 
ports  during  the  fall  of  1920  was  not  wholly  due  to  rail  rate  ditlerences 

5.  As  above  stated,  practically  all  the  rates  involved  are  related  one  to  another,  and 
changes  in  one  rate  must  be  carefully  considered  with  respect  to  the  e^ct  which  sue  i 
changes  may  have  upon  other  rates.  Reductions  in  rates  east  of  Chicago  and  the 
Mississippi  River  upon  grain  originating  at  the  Missouri  River  may  be  restricted  to 
Missouri  River  grain  only  by  the  expedidht  of  establishing  joint  through  rates  less 


5  Interstate  Commerce  Commission  Ex  Parte  74,  P- 253. 

8  Letter  of  W.  V.  Hardie,  director  of  traffic,  Mar.  30,  1921. 


I 


82 


TERMINAL  GRAIN  MARKETING. 


than  the  sums  of  the  proportional  rates  to  and  from  Chicago  or  the  Mississippi  River 

out  of  the  principal  primary  markets  have  generallv  been  not 
greater  than  the  through  rates.  In  our  report  in  ex  parte  74  the  importance  of  main¬ 
taining  this  equalization  was  recognized,  and  it  is  not  thought  desirable  at  this  time 

equalTzato  ^^^ioh  will  have  the  effect  of  destroying  S 

It  must  therefore  be  assumed  that  whatever  reductions  are  to  be-made  from  the 
Missouri  River  to  ARantic  ports  should  be  in  the  proportional  rates  east  or  ™t  of 
Chicago,  or  both.  Reductions  east  of  Chicago  and  the  Mississippi  River  reflect 

to  traffic  from  the  Missouri  River  but  as  to  all  other  grain 
traffic  oiigmabmg  in  the  West,  thus  making  reductions  in  such  rates  vital  t^  the 
revenues  of  the  earners.  As  the  rates  from  Lake  Erie  ports  and  eastern  points  ap- 

the^all  raiT?ftP^rfmm  into  such  ports  by  lake  have  a  definite  relatFonship  to 
the  all-rail  rates  from  Chicago  and  Milwaukee  they  may  not  be  maintained  upon  a 

result  in  unduly  high  through  lake-and-rail  charges  as  compared 
wi^  the  all-rail  rates,  unless  the  lake  route  is  to  be  substantially  closed. 

Reductions  in  the  rates  east  of  Buffalo,  termed  “at  and  east  rates,”’ are  reflected 
and^&nadlan  pFrts^  originating  not  only  at  Lake  Michigan  ports  but  at  Duluth 

in  mind  these  and  other  factors,  it  is  not  found  consistent  to  recom 

Srirn’i!  MWp^o.ronf 

As  a  result  these  recommendations  new  tariffs  were  filed  show¬ 
ing  certain  reductions  m  the  export  rates.  Those  applicable  to  the 
three  markets  included  m  the  last  preceding  table  were  as  follows: 

grita  prodlte‘““  ^  8^““  ““d 

A- \  ““t  grain  and  grain  products  from  Missouri  River  points 
expoSSfic  oSy  to  apply'^^^on 

priducts"*''’”''‘'"“  ^  ^  nnd  grain 

These  changes  reduced  the  differentials  as  between  Atlantic  and 
Gull  ports  to  a  basis  very  close  to  the  adjustments  prevailing  prior 

ff  y,  •‘'I'®  widening  of  the  differential  in  fiTvor  of 

the  Gulf,  as  compared  with  July  1,  1920,  now  amounted  to  less  than 
I  cent  per  bushel  (for  wheat)  in  most  instances.'^ 

Relation  of  1921®  rates  to  prices. — As  an  indication  of  the  rela- 
tion  of  rail  rates  on  gram  for  shipment  from  west  of  the  Mississippi 
the  following  quotations  for  No.  2  hard  wheat  issued  by  a  KansM 
City  shipper  on  May  20,  1921,  are  in  point-  ^ 


Delivery  terms. 

Price. 

Percent¬ 

age 

added. 

F.  0.  b.,  Kansas  City . 

C.  a.  f.,  East  St.  Louis .  . 

C.  a.  f.,  Chicago  or  Minneapolis..  . 

$1.55 

1-641 

1.67i 

1.70 

1.81i 

1.88 

0.0 

6.1 

8.1 

9.7 

17.4 

21.3 

C.  a.  f.,  Group  1,  Texas .  . 

C.  a.  f.,  Philadelphia .  . . . 

The  rate  from  Kansas  City  to  Philadelphia  was  53  cents  per  100 
pounds,  or  31.8  cents  per  bushel.  A  spread  of  33  cents  was  flowed 
between  these  pomte  in  the  above  quotations.  In  any  case  at  least 
20  per  cent  had  to  be  added  to  the  Kansas  City  price  to  lay  the  com¬ 
modity  down  at  Philadelphia.  ^ 

juAem  ofthfASuc-oX^^^  “PP™''®!  Aug.  8,  1921,  eflected  a  material  read- 

8  Prior  to  reductions  ordered  after  the  middle  of  1921. 


KAILKOADS  AND  TERMINAL  ELEVATORS. 


83 


As  a  comparison  with  prewar  conditions,  on  May  20,  1914,  the 
price  of  No.  2  hard  wheat  at  Kansas  City  was  92  cents  per  bushel. 
The  rate®  to  Philadelphia  was  24  cents  per  100  pounds,^®  or  14.4 
cents  per  bushel;  that  is,  on  the  same  rate  basis  it  was  necessary 
to  add  15.6  per  cent  to  the  Kansas  City  price  to  cover  transporta¬ 
tion  charges. 

As  a  further  illustration,  it  may]  be  assumed  that  Ellsworth, 
Kans.,  is  the  center  of  production  in  that  State.  The  rate  from 
Ellsworth  to  Kansas  City  amounts  to  12.9  cents  per  bushel.  The 
spread  in  freight  costs  alone  between  Ellsworth  and  Philadelphia 
would  have  amounted,  on  May  20,  1921,  to  fully  one- third  of  the 
Ellsworth  price.  This  takes  no  account  of  handling  costs  and 
profits  or  the  terminal  charges  that  would  necessarily  have  been 
incurred. 

To  consider  another  central  market,  the  transportation  charge, 
June  1, 1921,  from  Omaha  to  Baltimore  represented  29  cents  a  bushel, 
the  increase  since  July,  1920,  being  7  cefits  on  a  per  bushel  basis. 

Transportation  absorbs  a  relatively  larger  part  of  the  price  of 
corn  delivered  in  consuming  territory  than  it  does  of  wheat,  be¬ 
cause  of  the  lower  price  of  the  former  commodity;  and  the  same 
statement  is  true  for  oats,  except  that  the  lighter  weight of  the 
latter  commodity  would  more  nearly  offset  the  relatively  heavy 
transportation  costs. 

Section  2.  Railroad  construction  of  grain  elevators. 

Prior  to  about  1885  the  terminal  elevators  operated  for  general 
shipping  purposes  were  chiefly  those  constructed  by  the  railroads. 
The  operation  of  terminal  elevators  for  private  merchandising  pur¬ 
poses  originated  after  that  date.  There  have  been  at  least  three 
reasons  for  the  construction  of  elevators  by  railroads:  (1)  To  secure 
tonnage  in  competition  with  other  lines,  (2)  to  release  equipment  by 
transferring  the  commodity  to  a  connecting  line,  and  (3)  the  legal 
obligation  of  the  carrier  to  provide  elevation  at  break-bulk  points. 

The  first  consideration,  i.  e.,  to  secure  tonnage,  has  influenced  the 
railroads  to  provide  elevator  facilities  at  terminal  grain  markets  for 
transfers  between  connecting  lines.  For  example,  in  1906  it  was 
testified  by  the  president  of  the  Rock  Island  Co.^®  that  he  had  no 
choice  as  to  what  was  paid  for  certain  elevators  purchased  at  Chicago: 


9  Proportional  export  rate. 

10  The  rate  on  com  was  23  cents.  .  j  cc 

11  The  legal  weights  per  bushel  in  the  grain  States  are  as  follows:  Wheat,  60  pounds;  shelled  corn,  56 

pounds;  oats,  32  pounds;  rye,  56  pounds;  barley,  48  pounds.  , 

12  Inquiry  by  the  Interstate  Commerce  Commission  mto  the  relations  of  common  carriers  to  the  gram 

trade,  59th  Cong.,  2d  sess.,  S.  Doc.  No.  278,  p.  115.  .  ,  ,  .  •it.  i  .. 

13  It  appears  that  the  Rock  Island  lines  in  1918  owned  eight  termmal  elevators  with  an  aggregate  rated 
capacity  of  8,300,000  bushels  and  seven  country  elevators  with  an  aggregate  rated  capacity  of  135,000 
bushels.  The  terminal  elevators  were  distributed  as  follows: 


Location. 

Capacity. 

Year  built. 

Lessee  (1918). 

1, 200, 000 

1882 

J.  Rosenbaum  Grain  Co. 

Dn  . 

1,500,000 

1894 

J.  C.  Shaffer, 

Dn  . 

1,500,000 

1894 

Do. 

Po  . 

1,500,000 

Unknown. 

Do. 

J.  Rosenbaum  Grain  Co. 

500,000 

1905 

r>n  . 

1,000,000 

1913 

Do. 

rin  . 

1,000,000 

100,000 

1914 

Do. 

rin  . 

(«) 

Do. 

a  Leased  in  1912. 


84 


TERMINAL  GRAIN  MARKETING. 


additional  footing  on  the  Calumet  River  and  it  was  property  we  could 
not  atford  to  have  come  into  the  possession  of  any  other  railroad  company  anv  of  our 
western  rivals.  I  made  the  best  trade  I  could. 

Likewise  the  early  elevating  facilities  in  the  Kansas  City  market 
were  constructed  by  the  various  trunk  lines  and  branch  roads  com- 
traffic  and  the  bulk  of  the  storage  at  that  market,  al¬ 
though  operated  to  a  large  extent  by  private  concerns,  has  always 
been  owned  by  the  railroad  companies.  Similar  competitive  reasons 
have  often  existed  for  the  construction  of  railroad  elevators  at  other 
primary  markets  in  the  West. 

The  consideration  of  releasing  equipment  was  of  greater  influence 
m  the  early  years  of  transcontinental  roads  than  in  recent  years- 
subsequent  arrangements  for  the  interchange  of  cars— at  the  Missouri 
and  Mississippi  River  crossings,  for  example — modified  the  necessity 
ot  providing  elevators  for  transferring  the  traffic.  However  the 
western  railroads  have  always  made  an  effort  to  retain  their  own 
equipment  in  sufficient  quantity  to  move  grain  during  the  shipping 

SGS^SOH. 

The  third  consideration,  that  of  the  obligation  of  the  carrier  to 
provide  elevation  at  terminal  and  break-bulk  points,  has  resulted  in 
the  construction  of  railroad  elevators  to  transfer  grain  to  connecting 
lines,  especially  at  transshipment  points  such  as  Buffalo  and  the  ocean 
ports.  In  the  interior  this  obligation  has  often  been  met  by  contract¬ 
ing  with  private  operators  for  transfer  service.  In  some  instances 
subsidiary  companies  have  been  formed,  the  stock  being  controlled 
by  one  or  more  railroad  companies. 

^^Transportation  elevation^’  has  been  defined  by  the  Interstate 
Commerce  Commission  as — 

*  *  *  u^oad^ing  grain  from  cars  or  grain-carrying  vessels  into  a  grain  elevator 

loading- it  out  again  after  a  period  of  not  to  exceed  10  daysj  it  does  not  include 
treatment  or  grading,  cleaning,  and  clipping  of  grain;  and  retention  in  an  elevator 
beyond  10  days  becomes  storage  and  is  not  a  part  of  the  service  of  elevation  as  that 
word  IS  used  in  the  statute. 


It  has  also  been  decided  by  this  authority  that  'Hhe  act  to  regulate 
commerce  requires  carriers  to  furnish  transportation  elevation”  • 
and  by  the  United  States  Supreme  Court  that  the  term  ''transporta¬ 
tion”  shall  include  all  facilities  of  shipment,  irrespective  of  ownership 
and  all  services  in  connection  with  the  elevation,  transfer  in  transit 
and  handling  of  property  transported.^^  ' 

In  the  course  of  transportation  development  it  has  become  apparent 
that  the  mterests  of  railroads  in  providing  grain  elevation  can  be  fully 
secured,  especially  in  the  interior,  by  leasing  elevator  property  to  a 
large  private  shipper  and  contracting  for  the  transfer  of  grain  routed 


p  George  B.  Flack,  secretary  of  the  Midland  Elevator  Co.  of  the  Peavey  system  (idem, 

elevator  of  any  magnitude  to  be  built  here.  There  were  no  trans- 
uonorigmating  roads  built  elevators  to  attract  grain  away  from  the  other  railroads, 
and  to  do  It  they  had  to  give  concessions  of  some  description.  ^ 

cA  allowances  and  privileges  given  free  are  in  the  line  of  inducements? 

grain  to  go^th^i-e^”™^  ^  object  m  puttmg  up  an  elevator  here  unless  it  would  be  to  get 

15  Allowances  to  elevators  by  U.  P.  R.  R.  Co.,  12 1.  C.  C.,  85.  See  also,  24  I.  C.  C.  202  where  it  was  said* 
oro  IS  extremely  difficult  to  separate  tonsportation  elevation  from  commercial  elevation.  Both  things 

^^"'®  ^®°®/f  ^  Pr(fess.  The  same  plant  facilities,  the  same  power,  the  same  gang,  arc  eiS^ 
ployed,  and  the  pr^^ess  of  transfer  and  the  commercial  process  go  on  at  the  same  time  It  has  therefore 

the  dffierent  items  of  expense  and  to  say  with  confidence  this’belongs  to 
transportation  and  this  to  commercial  elevation.” 

16  24  1.  C.  C.,  200. 

1^  Union  Pacific  R.  R.  v.  Updike  Grain  Co.,  222  U.  S.,  218. 


RAILROADS  AND  TERMINAL  ELEVATORS. 


85 


over  the  line  of  the  lessor.  This  practice  of  leasing  will  be  discussed 
in  a  subsequent  section. 

The  transfer  service  constitutes  a  question  in  itself  because  of  its 
relation  to  freight  rates  and  because  of  the  overlapping  of  railroad 
and  private  commercial  services.  This  problem  has  been  developed 
in  the  so-called  elevation  allowance  cases  in  proceedings  before  the 
Interstate  Commerce  Commission  and  the  Federal  courts. 

Section  3.  The  elevation  allowance  cases. 

The  Peavey  case. — In  1904  the  Interstate  Commerce  Commission 
instituted  an  inquiry  into  the  matter  of  allowances  to  elevators  by  the 
Union  Pacific  Railroad  Co.  at  Kansas  City.^*  It  was  found  that  the 
Union  Pacific  was  the  only  extensive  system  then  operating  wholly 
in  the  territory  west  of  the  Missouri  River;  that  a  substantial  pro¬ 
portion  of  the  grain  grown  in  Nebraska  and  Kansas  moved  over  the 
fines  of  this  carrier  on  its  way  to  eastern  and  foreign  markets;  and 
that  in  order  to  retain  possession  of  cars  sufficient  to  meet  the  require¬ 
ments  of  its  own  shippers  it  was  ‘^highly  important,  if  not  absolutely 
essential  *  *  *  to  provide  for  the  transfer  of  this  grain  to  other 

cars  than  its  own  at  its  termini  on  the  Missouri  River.’’  Not  choosing 
to  operate  facilities  of  its  own  for  such  transfers  the  Union  Pacific  on 
February  7,  1899,  had  entered  into  a  contract  with  Frank  H.  Peavey, 
of  Minneapolis,  whereby  the  railroad  company  agreed  to  convey  to 
him  a  tract  of  land  on  the  right  of  way  at  Council  Bluffs,  and  Peavey 
agreed  to  construct  an  elevator  of  about  1,500,000  bushels  capacity 
at  that  point  and  to  transfer  grain  originating  on  the  Union  Pacific. 
The  Union  Pacific  agreed  to  pay  a  charge  of  1^  cents  per  100  pounds 
to  the  elevator  company  on  all  grain  transferred  and  there  were  speci¬ 
fications  as  to  switching  arrangements  and  like  matters.  Peavey  later 
assigned  his  interest  in  this  plant  to  the  Omaha  Elevator  Co.,  which 
apparently  was  organized  to  conduct  this  business.  A  controlling 
interest  in  the  stock,  however,  was  held  by  F.  H.  Peavey  &  Co. 

A  similar  arrangement  was  made  at  Kansas  City  whereby  an  eleva¬ 
tor  of  1,000,000  bushels  capacity  was  constructed  and  operated  by 
the  Midland  Elevator  Co.  under  contract  to  transfer  grain  for  the 
Union  Pacific.  The  stock  of  this  elevator  company  also  was  for  the 
most  part  owned  by  the  individual  members  of  the  firm  of  F.  H. 
Peavey  &  Co. 

It  appeared  that  in  addition  to  these  two  elevators  the  Peavey  in¬ 
terests  comprised  some  450  country  elevators  in  the  States  of  Kan¬ 
sas,  North  Dakota,  South  Dakota,  Minnesota,  Iowa,  and  Nebraska, 
^‘besides  large  elevators  at  Council  Bluffs,  Kansas  City,  Duluth,  Min¬ 
neapolis,  and  Chicago.”  The  Union  Pacific  had  thus  entered  into 
contracts  with  a  large  merchandising  syndicate  to  provide  for  the 
transfer  of  grain  at  the  Missouri  River  crossings.  It  developed  that 
Peavey  &  Co.  directly  or  through  their  subsidiaries  handled  ‘^some 
60  per  cent,  perhaps  more,  of  the  grain  shipped  from  Union  Pacific 
stations,”  20  and  that  ‘‘little  or  no  grain”  was  transferred  through 
these  elevators  for  other  parties,  “although  the  Union  Pacific  had 
the  right  to  require  such  transfer  under  the  terms  of  its  contract.” 


18  lOl.C,  C.,309. 

19  Idem,  p.  315. 

20  Idem,  p.  316. 


86 


TERMINAL  GRAIN  MARKETING. 


^  other  words,  the  great  bulk  of  the  grain  so  handled  was  owned  bv 
Feavey  &  Co.  ‘ 

It  was  stated  by  the  Union  Pacific  Co.  that  provision  was  made  for 
the  gram  shipped  over  its  lines  by  other  dealers,  through  the  inter- 
chan^  of  cars  with  other  connecting  lines.  That  is,  by  contracting 
with  Feavey  &  Co.  for  the  transfer  of  its  own  grain  the  railroad  com¬ 
pany  was  able  to  retain  equipment  in  sufficient  quantity  to  accom¬ 
modate  the  remaining  shippers. 

view  of  these  facts  it  had  been  charged  that  the  arrangement 

between  Union  Pacific  and  Feavey  &  Co.  was  preferential  and  un¬ 
lawful — 


that  the  allowance  of  a  cent  and  a  quarter  per  100  pounds,  paid  to  the  said  elevator 
companies  for  transferring  their  own  gram,  amounts  in  its  ultimate  result  to  a  rebate 
because  it  so  miich  reduces  the  through  published  ra'te,  in  favor  of  said  elevator  com¬ 
panies,  but  not  in  favor  of  other  shippers. 


It  was  iOimd,  however,  that  the  annual  earnings  from  the  transfer 
ol  gram  by  these  two  transfer  elevators  did  not  net  Feavey  &  Co 
a  profit  on  the  property  investment  and  that  they  ‘‘could  not  afford 
to  construct  and  operate  these  elevators  for  the  sole  purpose  of  trans¬ 
ferring  gram  at  II  cents  per  100  pounds.’'  “As  a  transfer  proposition 
pure  and  simple’ — said  the  commission — “taking  into  account  the 
cost  ol  these  elevators  and  the  expense  of  their  operation,  it  would  not 
seem  to  be  attractive;  by  reason  of  its  incidental  aid  to  the  extensive 
business  of  these  grain  merchants  it  is  undoubtedly  a  very  profitable 
arrangement.”  ^  j  t' 

The  commission  concluded  that  “these  contracts  for  transferring 
gram  were  made  m  good  faith  and  for  a  legitimate  purpose,  and  that 
the  compensation  paid  is  not  unreasonable  for  the  service  performed  ” 
They  said —  •  ^ 


The  law  imposes  no  duty  upon  the  Union  Pacific  to  safeguard  the  business 
of  Its  competitors  or  the  shippers  they  serve.  Granted  that  the  allowance  to  Peavey 
&  Co.  places  these  other  carriers  and  grain  dealers  on  their  lines  at  some  commercial 
disadvantage,  that  it  introduces  an  element  of  competition  which  they  will  be  forced 

to  equalize— and  that  would  seem  to  be  its  character  so  far  as  rival  roads  are  concerned _ 

on  wliat  theory  can  the  commission  interfere  so  long  as  the  obligations  of  the  Union 
Pacific  to  its  own  shippers  are  not  disregarded? 

*  *  *  It  is  scarcely  needful  to  add  that  arrangements  of  the  kind  investigated 

favorably  regarded.  When  anything  directly  connected 
with  the  public  service  which  a  carrier  is  bound  or  undertakes  to  perform  is  farmed 
out  so  to  speak  to  one  of  its  own  shippers,  the  relation  thereby  brought  about  is 
likely  to  excite  distrust  and  to  be  looked  upon  with  suspicion. 


The  SECOND  Feavey  case.— The  matter  of  allowances  to  elevators 
at  these  pomts  was  reopened  before  the  Interstate  Commerce  Com¬ 
mission  two  years  later.  At  that  time  it  appeared  that  the  allow¬ 
ance  of  II  cents  per  100  pounds  for  the  elevation  and  transfer  of  grain 
had  been  extend^  to  all  the  elevators  at  Kansas  City,  Omaha,  and 
Council  Flulis.  The  proceeding  was  reopened  upon  the  petition  of 
certain  railroad  companies  interested  in  the  grain  traffic  of  that 
area,  and  it  was  alleged  that  the  elevator  allowances  made  by  the 
Union  Facific  were  excessive  and  operated  as  a  rebate.^^ 

The  commission  again  found  that  the  railroad  company  had  the 
rig  it  under  the  interstate  commerce  law  to  provide  elevation  for 


21  Idem,  pp.  318  and  322. 

22  Idem,p.  324. 

2*  Idem,  pp.  325,  326. 

2<  Allowances  to  elevators  by  Union  Pacific  R.  R.,  12 1.  C.  C.,  86  (1907). 


RAILROADS  AND  TERMINAL  ELEVATORS. 


87 


its  shippers,  and  that  it  was  ‘^not  to  be  doubted  that  a  railroad  corn- 
pan}^  may  either  construct  and  operate  an  elevator  of  its  own  or  may 
furnish  elevation  facilities  to  its  shippers  by  making  some  .arrange¬ 
ment  with  the  owner  of  an  elevator  for  such  a  service.’^  However, 
they  regarded  the  arrangement  as  objectionable,  ‘‘although  not 
necessarily  and  in  itself  unlawfuP’  because  the  Peavey  interests  not 
only  operated  the  elevators  in  question  for  the  railroad  company  but 
were  “  also  extensive  buyers,  sellers,  and  shippers  of  grain.’’  The  case 
turned  upon  the  reasonableness  of  the  charges  allowed.  And  it  was 
concluded  from  the  evidence  brought  out  at  these  hearings  that  the 
allowance  of  Ij  cents  per  100  pounds  “whatever  the  service  may  be 
called,  results  in  an  appreciable  profit  to  Peavey  &  Co.,  which  can  be 
and  is  used  to  advantage  by  them  as  buyers  and  shippers.” 

Accordingly  the  commission  decided  to  abate  the  allowance  for 
elevation  at  these  points : 

*  *  *  We  are  satisfied  from  the  information  acquired  in  this  and  other  investi¬ 
gations  as  to  the  charges  and  practices  at  other  points  where  large  quantities  of  grain 
are  handled  and  transferred,  that  an  allowance  of  three-fourths  of  1  cent  will  fully 
and  amply  cover  the  actual  cost  of  the  elevation  contemplated  in  the  law  without 
returning  a  profit  and  thus  becoming  a  rebate.^® 

In  the  same  year  it  was  held  that  railroads  which  paid  the  cost  of 
elevating  and  transferring  grain  in  transit  must  not  discriminate  in 
such  allowance  between  shippers  at  common  points : 

*  *  *  It  is  therefore  the  opinion  of  the  commission  that  the  defendant  carriers 
should  not  now  or  hereafter  grant  or  furnish  at  Kansas  City,  Mo.,  Kansas  City,  Leaven- ' 
worth,  or  Argentine,  Kans.,  any  elevator  allowance  or  free  service  in  connection  with 
the  elevation,  transfer,  mixing,  cleaning,  clipping,  drying,  weighing,  storage,  loading 
out  or  shipment  of  grain,  which  is  not  granted  or  furnished  at  the  same  time  in  like 
service  or  equivalent  allowance  to  the  same  degree  and  extent  at  Atchison.  An 
order  will  be  entered  accordingly. 

The  third  Peavey  case. — ^A  year  later  (1908)  the  Peavey  case  was 
reopened  “upon  the  petition  of  the  Chicago  Board  of  Trade,  and  upon 
numerous  protests  from  other  quarters,  indicating  an  extension  of  the 
practice  of  making  elevation  allowances  and  alleging  discriminations 
and  other  evils  arising  therefrom.”^®  The  commission  then  examined 
the  actual  operation  of  the  contract  between  Peavey  &  Co.  and  the 
Union  Pacific  and  found  that  the  benefits  derived  by  the  elevator 
concern  from  elevating  its  own  grain  were  frequently  so  considerable 
as  to  give  the  allowance  paid  by  the  railroad  the  character  of  an 
unlawful  rebate.  The  opinion  ran  as  follows: 

*  *  *  advantages  that  are  unlawful  may  be  enjoyed  in  ways  that  do  not  involve 
the  direct  payment  of  rebates.  And  we  think  that  Peavey  &  Co.  do  enjoy  in  the 
actual  operation  of  their  contract  advantages  that  do  not  accrue  to  other  shippers  of 
grain.  The  mixing  of  grain  is  said  to  be  one  of  the  largest  soiuces  of  profit  to  a  grain 
dealer.  By  mixing  a  carload  of  inferior  grain  with  a  carload  of  grain  of  higher  grade 
the  aggregate  value  of  the  two  carloads  is  increased  and  the  dealer’s  profits  from  the  sale 
are  larger  than  they  would  be  if  the  two  carloads  were  sold  separately.  The  storage 
of  grain  beyond  the  elevation  period  of  10  days  is  also  of  commercial  value  to  grain 
dealers.  The  ‘  ‘  treatment**’  of  grain  is  of  advantage  to  them  in  that  it  results  in  enhanc¬ 
ing  its  value.  Weighing  and  inspection  are  ^  also  of  advantage  to  the  owner  of  the 
grain.  As  was  expressly  stated  in  our  last  report,  such  services  are  commercial  serv¬ 
ices  and  are  in  no  sense  a  part  of  elevation  as  defined  in  the  act  to  regulate  commerce. 

*  *  *  allowance,  therefore,  not  only  results  in  an  undue  preference  when 


25  Idem,  p.  87. 

26  Idem,  p.  90. 

27  City  Council  of  Atchison,  Kans.,  v.  Missouri  Pacific  Ry.  Co.et  al.,  121.  C.  C.,  111.  A  motion  for  rehear¬ 
ing  this  decision  was  denied  the  same  year  (1907),  121.  C.  C.,  254. 

28  In  the  matter  of  allowances  to  elevators  by  the  Union  Pacific  R.,  R.  ,14 1.  C.  C.,  315. 


88 


TERMINAL  GRAIN  MARKETING. 


paid  on  grain  belonging  to  the  owner  of  an  elevator  thus  under  contract,  but,  in  effect, 
IS  also  an  unlawful  rebate,  unless  confined  to  grain  that  is  reshipped  within  the  eleva- 
tion  period  of  10  days  and  has  not  been  mixed,  treated,  weighed,  or  inspected. 

No  way  has  been  suggested  by  which  the  Union  Pacific  Kailroad  Co.  may  avail  itself 
of  the  Peavey  elevators  under  the  contract  in  question  without  giving  to  Peavey  &  Co. 
and  to  their  grain  the  commercial  advantages  alluded  to,  and  these  advantages  we 
regard  as  an  undue  and  an  unlaw^l  preference.  We  therefore  hold  that  the  practice 
of  the  Union  Pacific  Railroad  Co.  in  paying  to  Peavey  &  Co.  an  allowance  under  such 
circumstances  upon  their  own  grain  is  unlawful.  An  order  will  be  entered  in  accord¬ 
ance  with  these  views. 

The  matter  of  alleged  discrimination  against  St.  Louis. — 
On  the  same  day  (June  29,  1908)  the  commission  disposed  of  another 
case  involving  elevation  allowances  at  the  Missouri  Kiver  by  five 
other  railroads.  Action  was  brought  on  complaint  of  the  traffic 
bureau  of  the  Merchants'  Exchange  of  St.  Louis.^^  The  defendants 
had  proceeded  in  reliance  upon  the  decision  in  the  second  Peavey  Case 
and  had  established  ‘^elevation  allowances"  of  three-fourths  of  1  cent 
per  100  pounds.  It  developed  that  whereas  an  elevator  company 
marketing  grain  at  Omaha  for  shipment  and  sale  to  consumers  at 
points  east  was  allowed  a  charge  of  three-fourths  of  1  cent  by  the  out¬ 
bound  carrier,  an  elevator  company  similarly  situated  at  St.  Louis 
and  marketing  grain  for  shipment  and  sale  to  points  east  was  com¬ 
pelled  to  pay  the  full  freight  charge  regardless  of  elevation  services. 

The  question  was  raised  whether  this  discrimination  against  the 
market  of  St.  Louis  was  undue  and  unlawful. 

The  defendants  alleged  that — 

competitive  conditions,  not  existing  at  St.  Louis,  force  the  payment  of  this  eleva¬ 
tion  allowance  at  the  Missouri  River  *  *  *  The  traffic  representatives  of  these 
defendants  all  testified  that  they  paid  this  sum,  not  as  a  transfer  charge,  not  because 
they  had  occasion  to  use  a  transfer,  but  because  they  were  compelled  by  competitive 
conditions. 

It  appeared  from  testimony  in  this  and  the  preceding  cases  that 
the  elevation  services  paid  for  by  the  carriers  had  not  been  performed 
prunarily  as  incidents  of  transportation,  since  in  the  great  majority  of 
cases  the  elevator  companies  owned  the  grain  which  they  transferred 
and  the  elevator  equipment  was  essential  to  their  business;  so  that, 
in  most  instances,  they  would  have  passed  the  grain  through  their 
houses  regardless  of  elevation  allowances  from  the  railroad.  More¬ 
over,  it  appeared  that  the  elevation  allowance  had  not  decreased 
transportation  costs  to  the  shipping  public  since  the  railroads  had 
increased  their  rates  so  as  to  more  than  offset  the  ‘‘transfer  charge." 
Furthermore,  the  traffic  conditions,  commercial  arrangements,  and 
rate  adjustments  had  undergone  such  changes  in  the  years  1904  to 
1908  that  the  arguments  advanced  during  the  earlier  period  in  support 
of  allowances  to  elevator  companies  were  affected  by  an  entirely 
new  set  of  facts. 

It  was  pointed  out  that  there  were  shippers  and  consumers  in 
territory  on  both  sides  of  the  Missouri  River  who  did  not  desire  and 
could  not  use  the  privilege  of  free  elevation  allowed  by  the  carriers 
at  Missouri  River  points.  The  commission  held  that  the  elevation 
allowances  resulted  in  a  rate  discrimination  between  certain  classes 
of  shippers  and  that  such  discrimination  was  undue  and  unlawful. 


29  Docs.  1239, 1240,  1241, 1263,  and  1267, 14 1.  C.  C.,  317. 

30  Chicago,  Burlington  &  Quincy  R.  R.  Co.;  Missouri  Pacific  Ry.  Co.;  Chicago,  Rock  Island  &  Pacific 

&  San  Francisco  R.  R.  Co.;  and  the  Missouri,  Kansas*  Texas  Ry.  Co. 

31 12 1.  C.  C.,  85,  discussed  supra. 


RAILROADS  AND  TERMINAL  ELEVATORS. 


89 


The  Diffenbaugh  decision. — The  effect  of  these  decisions  would 
have  been  to  prohibit  certain  railroad  companies  from  paying  to  the 
owners  and  lessees  of  elevators  any  compensation  for  the  elevation  of 
grain  in  transit  at  the  Missouri  River.  Bills  of  complaint  were  filed 
in  the  Federal  Circuit  Court  for  the  Western  District  of  Missouri  by 
the  Peavey  interests  and  others  raising  this  specific  question  on  the 
basis  of  facts  already  enumerated. 

The  court  reviewed  the  contracts  involved  and  the  decisions  of 
the  Interstate  Commerce  Commission  in  considerable  detail.  They 
decided  that  it  was  without  the  power  of  the  commission  to  attempt 
to  regulate  the  measure  of  profits  derived  by  shippers  from  the  use 
of  facilities  of  trade  which  were  also  used  for  purposes  of  transpor¬ 
tation.  The  reasoning  of  the  court  was  as  follows: 

It  is  no  part  of  the  duty,  nor  is  it  within  the  power,  of  the  commission  to  see  that  all 
shippers  of  like  commodities  derive  the  same  measure  of  profit  from  their  trade  in  and 
treatment  of  the  articles  which  they  ship,  to  see  that  a  shipper  who  owns  a  warehouse, 
an  industrial  track,  and  private  cars  derives  no  greater  profit  from  dealing  in  the 
groceries  or  other  articles  he  ships  than  a  shipper  who  has  none  of  these  facilities, 
to  see  that  a  shipper  of  coal  who  owns  a  tipple  from  which  he  loads  it  gains  no  greater 
profit  from  the  handling  of  his  coal  than  one  who  loads  it  from  a  wagon.  Harp.  v. 
Choctaw,  Oklahoma  &  Gulf  R.  Co.  (125  Fed.  445,  61  C.  C.  A.  405).^  Pecuniary 
advantages  derived  by  shippers  from  the  ownership  or  use  of  such  facilities  of  trade 
are  attributable  to  that  ownership,  and  not  to  the  transportation  of  the  articles  shipped, 
and  the  consideration  and  regulation  of  these  advantages  are  without  the  scope  of  the 

commission’s  power.  ^  ,  ,  , 

The  truth  is  that  trade  advantages  of  this  nature  do  not  condition  the  questions  of 
reasonableness  of  rates,  of  rebates,  or  of  discrimination.  The  shipper  who  owns 
warehouses,  tipples,  spur  tracks,  cars,  mills,  and  by  their  use  derives  greater  profit 
from  the  dealing  in  the  articles  which  he  ships  over  a  railroad,  is  entitled  to  the  same 
rate  of  charge  for  transportation  and  the  same  reasonable  compensation  for  transporta¬ 
tion  services  which  he  renders  that  the  shipper  who  owns  less  or  no  such  trade  facilities 
and  derives  less  profit  is  entitled  to.  The  reasonableness  of  and  the  discrimination 
by  the  charge  and  the  compensation  is  conditioned  by_  the  reasonable  value  of  the 
service,  not  by  the  gain  or  the  loss  which  the  shipper  derives  from  the  use  of  the  trad¬ 
ing  facilities  he  owns  in  the  handling  of  the  articles  transported.^^ 

*  *  *  'pjjg  enforcement  of  these  orders  can  not  fail  to  cause  great  losses  and  to 
entail  much  discrimination.  It  will  strike  down  the  practice  of  a  decade  in  reliance 
upon  which  elevators  have  been  built,  terminal  grounds  in  large  cities  have  been 
bought  and  equipped,  contracts  have  been  made,  business  and  markets  have  grown 
up,  and  business  relations  have  been  established.  If  the  carriers  whose  roads  ter¬ 
minate  at  the  Missouri  River  cities  may  not  pay  for  this  elevation  in  transit,  they 
must  furnish  it  themselves  free,  or  the  producers  and  consumers  whose  grain  passes 
over  their  roads  must  ultimately  bear  the  expense  of  it.  If  they  furnish  it  free,  or  if 
they  construct  elevators  and  charge  a  reasonable  compensation  for  it,  the  owners  of 
the  terminal  elevators  at  the  river  must  lose  the  use  which  in  large  part  induced  their 
construction  and  must  lose  a  portion  of  their  value.  If  the  carriers  charge  for  it, 
producers  and  consumers  of  grain,  which  on  account  of  its  origin  must  pass,  or  for 
other  reasons  does  pass,  over  their  railroads,  must  bear  this  charge,  while  those  whose 
grain  may  pass  over  the  through  roads  may  be  free  from  it,  and  this  fact  will_  imces- 
sarily  have  the  effect  to  divert  grain  and  the  business  in  it  from  the  Missouri  River 
cities  and  to  diminish  the  value  of  all  investments  therein  in  facilities  for  conduct¬ 
ing  it.^ 

Consequently  decrees  were  entered  in  favor  of  the  complainants 
in  accordance  with  the  following  conclusions: 

Orders  of  the  commission  which  prohibit  the  allowance  or  payment  by  carriers  of 
all  compensation  to  owners  and  operators  of  elevatop  for  elevation  and  transfer  in 
transit  are  beyond  the  delegated  power  of  the  commission. 


32  Bills  bv  F.  H.  Peavey  &  Co.  and  others  against  the  Union  Pacific  Railroad  Co.  and  the  Interstate 
Commerce  Commission,  and  by  Harry  J.  Diffenbaugh  and  others  against  the  Interstate  Cornmerce  Com¬ 
mission,  the  Chicago  Alton  RaUroad  Co.  and  others,  mtervemng.  Decrees  for  complamants.  (176 

Fed.,  409.) 

33  176  Fed.,  419.  420. 


Idem,  pp.  425,  426. 


90 


TERMINAL  GRAIN  MARKETING. 


An  order  which  forbids  a  carrier  to  allow  or  pay  to  the  owner  of  an  elevator  any 
compensation  for  elevation  in  transit  of  grain  which  he  ships,  unless  he  refuses  to 
clean,  clip,  mix,  inspect,  or  grade  the  grain  while  it  is  passing  through  the  elevator, 

IS  beyond  the  power  of  the  commission. ^  ’ 

On  appeal  the  case  was  reviewed  by  the  United  States  Supreme 
Court  in  1911  (Interstate  Commerce  Commission  v.  Diffenbaugh) 

^Uie  decision  of  the  circuit  eourt  was  affirmed  in  its  main  point  with 
the  modification  that  the  commission’s  order  of  1907,  diminishing 
the  allowance  to  three-quarters  of  a  cent,  and  so  much  of  the  Peavey 
order  of  1908  as  confines  allowances  to  grain  reshipped  within  10 
days,  should  be  allowed  to  stand.” 

Although  the  courts  differed  with  the  Interstate  Commerce  Com- 
mission  in  construing  the  interstate  commerce  act  as  applied  to  eleva- 
tion  lacilities,  it  was  clearly  shown  in  the  records  and  decisions  of 
both  bodies  that  the  use  of  terminal  elevators  as  facilities  for  trans¬ 
portation  puiTioses  was  inseparable  froiri  their  use  as  facilities  of 
ij  had  seemed  to  the  commission  that  the  elevator  companies 
could  not  be  properly  remunerated  for  transportation  services  without 
allowing  them  commercial  benefits  amounting  to  an  unlawful  dis- 
crimination  against  other  dealers.^^  The  court,  on  the  other  hand 
held  that  carriers  were  required  to  provide  elevation  under  the  act  and  i 
that  the  trading  benefits  accruing  to  operators  who  performed  such 
effivation  services  for  the  carriers  could  not  be  considered  as  affecting  j 

the  question  of  a  reasonable  rate  for  the  service  of  elevating  and  trans¬ 
ferring  grain.  1 

Subsequent  orders  and  decisions.— Pursuant  to  the  decisions  of  \ 
the  court,  the  Interstate  Commerce  Commission  modified  its  orders 
^  as  to  permit  elevation  allowances  by  the  railroads  at  Missouri 
Kiver  points,  provided  the  grain  be  unloaded  and  reshipped  within  ' 
a  10-day  period.  They  also  interpreted  the  decision  of  the  court  to 
require  that  a  railroad  ^  must,  when  it  makes  this  allowance  to  one 
elevator  under  such  circumstances  as  to  give  that  elevator  payment 
lor  commercial  elevation,  extend  the  same  privilege  to  all  other  ele-  ’ 
vators  similarly  situated  at  that  point.”  , 

As  the  effective  date  of  these  orders  approached,  it  was  pointed  out 
to  the  commission  that  several  lines  of  railway  operating  at  the  Mis-  , 

souri  Kiver  had  not  been  defendants  in  the  previous  cases  and  there-  i 

lore  subject  to  the  10-day  order.  Moreover,  complaints 

were  filed  by  the  Missouri  Kiver  interests  insisting  that  to  apply  this 
order  to  the  Missouri  Kiver  and  not  to  other  grain  markets  would  ^ 
create  a^  discrimmation  against  that  locality.  For  these  and  other  ^ 

reasons  it  was  determined  to  broaden  the  investigation  so  as  to  : 


35  Idem,  p,  409. 

Pacifl!;TR.“vSto  Grata 

222  U.  opinion  ol  Justices  McKenna  and  Hughes  (1. 0.  C.  v.  DlSenbaugh, 

ri  Inspectmg,  Cleaning,  and  mixing— that  is,  raising  the  quality  of  the  grain  tosult  tho 

deruand  of  the  market  is  the  busmess  of  the  grain  dealer  or  others,  and  the  two  businesses  are  nof  tn 
thp  1  think,  the  purpose  of  the  statute  to  confound  them.  The  statute  makAg 

oniv  include  all  instrumentalities  and  facilities  of  shipment  or  carriage  ’  and  it  is 

1™  tmmernalRv  Zd  ‘connected  with  such  tran^ipXuon,  ™&shcs  w 

therein,  that  he  inay  be  compensated  by  the  railroad:  What  goes  bevond  that 
^  38  99  T  P  becomes,  as  the  commission  held, a  discrimination.”  oeyond  that 

an’^onfhe  oteakiSrifra  Mississippi,  and  Ohio  Blv«^ 


RAILROADS  AND  TERMINAL  ELEVATORS. 


91 


take  in  the  Ohio  River  and  points  generally  north  of  the  Ohio  and  east 
of  the  Missouri. 

It  was  found  at  the  final  hearing  that  in  all  eastern  territory,  except 
upon  the  Ohio  and  Missouri  Rivers,  the  elevation  allowance  for  a  long 
time  had  been  and  still  was  one-fourth  of  1  cent  per  bushel,  which  was 
‘‘supposed  to  cover  merely  the  passing  of  the  grain  through  the 
elevator.’’  If  the  owner  of  the  grain  obtained  storage,  or  if  the  grain 
was  ‘^subjected  to  any  of  the  various  commercial  processes”  an  addi¬ 
tional  payment  was  required.^®  The  dealers  and  carriers  in  this 
territory  desired  that  such  a  rate  be  continued,  and  this  rate  was 
agreed  to  by  the  Ohio  River  interests  and  by  a  minority  of  the  inter¬ 
ests  from  the  Missouri  River. 

The  decision  in  this  case  was  influenced  by  evidence  relating  to  the 
operation  of  “  what  is  known  as  the  railroad  elevator.”  It  was  shown 
that  nearly  all  railroads  operating  at  the  Missouri  River  owned  one  or 
more  ebvators  at  the  grain  markets,  and  that  these  elevators  included 
as  a  part  of  their  elevation  service  the  cleaning,  mixing,  and  clipping 
of  grain  and  other  operations.  In  many  instances  these  elevators 
were  operated  by  the  railroad  itself,  either  directly  or  through  a 
subsidiary;  in  other  cases  they  were  leased  to  grain  dealers  “some¬ 
times  at  an  almost  nominal  rental  and  sometimes  upon  a  fairly  com¬ 
pensatory  basis.” 

It  then  appeared  that  to  require  a  imit  of  one-fourth  of  a  cent  per 
bushel  when  an  allowance  was  paid  by  the  carrier  to  a  private  elevator 
while  at  the  same  time  railroad  elevators  were  performing  these 
various  commercial  services  free  of  charge,  would  create  a  discrimina¬ 
tion  “  in  favor  of  the  shipper  who  uses  the  railroad  elevator  and  against 
the  shipper  who  employs  his  own  elevator  for  these  commercial 
operations.^^ 

The  commission  found  that — 

*  *  *  In  order,  therefore,  to  do  justice  at  the  Missouri  River,  where  these  rail¬ 
road  elevators  exist,  we  must  not  only  prohibit  the  payment  by  the  railroad  to  the 
private  elevator  of  more  than  one-fourth  cent  per  bushel,  but  we  must  also  prohibit 
the  railroad  from  rendering  for  the  shipper  at  its  own  elevator,  free,  any  service  beyond 
transportation  elevation  proper.  We  must  go  further.  We  must  determine  what  is  a 
just  charge  for  these  commercial  operations  and  insist  that  the  railroad  elevator,  if  it 
performs  the  operations,  shall  charge  not  less  than  the  sums  found  reasonable.'*^ 

Accordingly  it  was  recommended  (but  not  ordered)  that  the  allow¬ 
ance  at  Missouri  River  points  for  elevation  under  the  10-day  limit  be 
reduced  to  one-fourth  of  1  cent  and  that  the  railroad  elevators  adopt 
the  following  charges  for  commercial  services  performed: 

For  clipping,  one-fourth  cent  per  bushel. 

For  cleaning,  one-fourth  cent  per  bushel. 

For  mixing  or  turning,  one-eighth  cent  per  bushel. 

For  sulphuring,  one-eighth  cent  per  bushel. 

For  drying,  from  1  to  cents  per  bushel. 

For  sacking,  one-half  cent  per  bushel  (sacks  and  strings  to  be  furnished  by  owner 
of  the  grain). 

In  subsequent  decisions  of  the  commission  it  has  been  ruled  that 
a  carrier  is  not  required  to  make  allowances  for  elevation  unless  it 
can  be  conclusively  shown  that  elevation  is  a  necessary  incident  to 


«24  I.  C.  C.,  201. 


«  24  I.  C.  C.,  203. 


<2  Idem,  p.  204. 


92 


TERMINAL  GRAIN  MARKETING. 


the  transportation  movement  involved;  and  it  has  been  decided 
that  the  carrier  is  not  required  to  transfer  grain  in  order  to  obtain 
correct  weigh ts.^^ 

Section  4.  The  practice  of  leasing. 

Extent  of  leasing. — After  about  1885,  when  several  large 
primary  grain  markets  were  well  established,  it  became  a  frequent 
practice  for  competing  railroads  to  offer  special  facilities  to  certain 
large  shippers  along  the  line  to  secure  their  tonnage.  The  railroad 
carriers  constructed  elevator  facilities  at  terminal  and  sometimes 
at  country  points  on  the  right  of  way,  leasing  such  property  to  large 
merchandising  and  shipping  companies  as  a  means  of  developing 
traffic  in  competition  with  other  lines.  Leases  were  frequently  on 
highly  favorable  terms.  Prior  to  1906,  at  least,  there  was  evidence 
of  preferential  rates;  and  discrimination  in  switching  arrangements, 
and  in  providing  cars  for  the  private  use  of  the  operator,  were 
often  alleged.  At  export  points  and  at  certain  transshipment  points, 
such  as  Buffalo,  where  the  necessity  of  rapid  release  of  equipment 
so  as  to  avoid  congestion  and  demurrage  was  of  paramount  impor¬ 
tance,  the  carriers  more  frequently  retained  operating  control  of  the 
elevators.  But  at  interior  points  it  was,  and  has  continued  to  be, 
a  common  practice  to  lease  a  railroad  terminal  elevator  to  a  certain 
large  dealer  with  sundry  provisions  in  the  lease  for  transferring  the 
grain  of  other  (usually  smaller)  shippers.  The  extent  of  this  leasing 
practice  in  the  United  States  to-day  is  indicated  in  Apnendix 
Table  7. 

Keasons  for  LEASING. — The  first  reason  for  leasing  railroad 
elevators  to  private  dealers  rather  than  operating  them  as  public 
transportation  facilities  relates  to  competition.  The  railroads  have 
found  that  their  chief  interest  in  the  operation  of  elevators,  that  of 
securing  tonnage,  can  be  served  fully  as  well  if  not  even  more  effec¬ 
tively  by  leasing  the  house  to  a  dealer.  In  some  of  the  interior  markets 
the  incoming  lines  have  no  interest  in  following  the  commercial 
course  of  the  grain  after  it  is  delivered. at  the  terminal.  Likewise 
certain  of  the  outgoing  lines  have  no  interest  in  the  origin  of  the 
commodity  so  long  as  they  receive  the  haul.  Consequently  there 
has  been  considerable  advantage  in  leasing  a  terminal  on  the  right 
of  way  to  an  individual  shipper  with  the  expectation — and  some¬ 
times  the  specific  agreement — that  his  grain  shall  be  shipped  in  or 
out  over  the  lessor’s  rails. 


Grain  elevation  allowances  ai  Kansas  City,  Mo.,  and  other  points  (1915),  34  I.  C,  C.,  442.  The  Peavev 
contract  with  the  Union  Pacific  R.  R.  Co.  at  Omaha  (1899)  was  later  assigned  to  the  Omaha  Elevator 
Co.  and  was  invoked  by  that  company  in  an  action  at  law  before  the  Federalcourt  of  appeals  (249  Fed 
SU*?  transfer  of  upward  of  40,000,000  pounds  of  grain  handled  between 

Sept.  1,  1911,  and  Nov.  25,  1914,  amounting  to  S3,005.29.  It  was  held  that  in  view  of  the  fact  that  the 
allowances  in  question  were  no  longer  covered  by  tariffs  duly  published  and  filed,  such  amounts  could 
not  be  collected  by  the  elevator  company.  “  The  cancellation  effective  May  20,  1912,  of  the  tariff  con- 
^^^^Igthese  allowances,  was  a  matter  of  record  of  which  the  plaintiff  was  bound  to  take  notice.”  (249 

«34I.  C.  C.,,445. 

conuni^aion 

“As  this  grain  moves  from  point  of  origin  toward  the  East  and  Southeast  it  reaches  or  comes  within  the 
severalspheres  ofinfluence  of  certain  centers  or  primary  markets.  For  example,  grain  is  shipped  in  large 
quantities  to  Minneapolis  and  reshipped  from  Minneapolis  to  Chicago  or  Milwai^ee  and  fr6m  thence  to 
vanous  destmati^s  in  the  East  and  Southeast .  Severa  1  railroads  have  fines  from  Minneapolis  to  Chicago 

Mmneapofis.  If  they  participate  in  the  transportation  of  tWs  tonnage,  as 
tte  onTf^oT^  as  they  undoubtedly  will  always  insist  upon  doing,  they  must 

Minneapolis  gram  that  comes  in  on  some  other  road.  There  are  numerous  railroads  with 
southeast  from  Chicago  that  have  no  fines  west  or  north  of  Chicago,  and  if  they  participate 
traffic  they  must  take  out  from  Chicago  that  which  comes  in  on  some  other  road. 
In  every  instance  of  a  carrier  so  situated  an  additiona  1  competitive  influence  is  injected  into  the  situation.” 


RAILROADS  AND  TERMINAL  ELEVATORS. 


93 


At  the  important  primary  markets  competition  has  unquestionably 
seen  a  controlling  reason  for  the  leasing  of  the  railroad  houses. 
This  has  been  explained  by  an  operator  of  elevators  leased  from  the 
Rock  Island  Railroad  Co.,  at  Chicago,  as  follows: 

Years  ago  when  the  public  elevators  were  operated,  grain  came  here  from  all  parts 
of  the  country.  Competing  markets  did  not  exist  to  any  great  extent.  This  was  a 
great  central  market.  Markets  like  St.  Louis,  Kansas  City,  etc.,  were  not  in  existence 
at  that  time.  To-day  those  conditions  are  different.  The  grain  does  not  come  here 
of  its  own  accord.  We  go  after  it.  We  are  exporters  as  well  as  public  warehousemen. 
We  go  out  and  meet  competition  as  far  as  we  can  and  bring  the  grain  here.^® 

Similar  testimony  was  offered  in  1906  by  J.  H.  Hiland,  who 
was  then  third  vice  president  in  charge  of  traffic  of  the  Chicago, 
Milwaukee  &  St.  Paul  Railway  Co.  Being  asked  about  the  rental 
accepted  for  the  storage  tanks  of  the  Milwaukee  Elevator  at  Kansas 
City,  he  stated: 

The  people  who  are  occupying  these  properties  have  been  engaged  for  years  in  the 
purchase  of  grain  that  has  been  shipped  over  the  Chicago,  Milwaukee  &  St.  Paul 
Railroad.  They  are  familiar  with  the  points  of  purchase;  they  are  familiar  with 
the  points  of  consumption  and  the  dealers  who  consume  the  various  products  passing 
through  the  elevator;  and  the  mere  fact  of  this  long  experience  and  knowledge  in 
the  conduct  of  the  business  in  itself  is  a  compensation  if  we  gave  them  the  elevators 
for  nothing,  rather  than  to  advertise  or  to  put  on  the  auction  block  in  any  way  these 
properties  to  people  who  did  not  have  the  same  knowledge  and  experience  for  secur¬ 
ing  business  to  the  Milwaukee  &  St.  Paul  Railway  that  the  lessees  did.  ,  There  is  a 
value  in  that  knowledge  that  can  not  be  offset  or  obtained  by  a  mere  increase  in  a 
rental  of  an  elevator  located  as  the  elevators  that  are  leased  by  the  Milwaukee  &  St. 
Paul  Railway. 

Various  instances  might  be  cited  of  close  association  between  a 
railroad  company  and  grain  dealers  on  the  line.  It  was  disclosed  in 
1906  that  the  Chicago,  Milwaukee  &  St.  Paul  Railroad  had  perfected 
an  arrangement  whereby  the  Simonds-Shields  Grain  Co.  at  Kansas 
City  were  allowed  to  operate  the  storage  tanks  of  the  railroad  elevator 
under  lease  from  the  railroad  company  while  the  workhouse  of  the 
plant  was  operated  by  the  railroad  company  through  Mr.  Shields 
as  a  salaried  superintendent — that  is,  the  Simonds-Shields  Grain  Co. 
paid  the  Milwaukee  road  an  annual  rental  of  $2,500  for  the  use  of 
their  storage  tanks,  while  the  railroad  employed  a  member  of  the  firm 
at  a  salary  of  $3,000  as  superintendent  of  the  transfer  house.  It  was 
testified  that  fully  95  per  cent  of  all  the  grain  passing  through  the 
transfer  house  belonged  to  the  grain  company.  The  services  of  mix¬ 
ing,  cleaning,  and  clipping  were  performed  by  the  railroad  free  of 
charge  for  the  lessee,  and  later  for  all  shippers.  Mr.  Shields  as  an 
employee  of  the  railroad  company  v/as  given  a  pass  over  their  lines. 

Another  reason  for  the  practice  of  leasing  frequently  advanced 
by  the  carriers  is  that  of  operating  cost.  It  is  pointed  out  that  at 
competitive  points  in  the  interior  the  terminal  elevator  affords  the 
railroad  no  dependable  revenue  and  is  often  operated  at  a  yearly 
loss.  On  the  other  hand,  to  lease  the  house  at  a  fixed  rental,  arranged 
on  an  interest  basis,  often  affords  a  reduction  in  expense  and 
eliminates  certain  vexatious  operating  problems  at  the  terminal. 
The  situation  has  been  different  at  the  ocean  ports,  where  the 

Hearing  before  the  Interstate  Commerce  Commission,  1906,  in  the  matter  of  Relations  of  Common 
Carriers  to  the  Grain  Trade,  Sen.  Doc.  278,  59th  Cong.,  2d  sess.,  p.  87. 

<7  Idem,  p.  626. 

«  Idem,  p.  345.  As  superintendent  of  the  railroad  elevator  he  was  charged  with  the  duty  of  receiving, 
handling,  weighing,  and  conditioning  grain  in  which  he  frequently  had  a  private  interest. 

56976°— 22 - 8 


94 


TERMINAL  GRAIN  MARKETING. 


problem  is  one  of  providing  water  terminals  in  order  to  secure  export 
shipments.  However,  the  utilization  of  capacity  of  a  railroad  ele¬ 
vator  plant  has  been  uncertain  and  variable  even  at  a  port  terminal, 
as  appears  from  the  following  tabulation  of  all  grain  handled  by  the 
Baltimore  &  Ohio  Railroad  through  its  elevators  at  Locust  Point, 
Baltimore,  during  the  years  1897-1919,  inclusive: 

Receipts  of  grain  from  cars  and  schooners  into  Locust  Point  elevators  B  and  0  for  years 

1897-1919,  inclusive.  . 


1897 

1898 

1899 

1900 

1901 

1902 

1903 

1904 

1905 

1906. 

1907. 

1908. 

1909. 


Quantity. 

Percentage 
received 
based  on 
1916  receipts 
as  100  per 
cent. 

Year. 

Quantity. 

Percentage 
received 
based  on 
191 6  receipts 
as  100  per 
cent. 

40, 866,023 

78.21 

1910 . 

7,047,745 
11, 226, 203 
17, 071, 941 
31,374,  721 
24, 953,  759 
46, 294, 849 
52,249,316 
32, 191, 106 
17,609,378 
18, 326,119 

13.49 

21.49 
32. 67 

ATI  fiK 

49, 403, 586 

94.55 

1911 . 

37, 047, 477 

70.91 

1912 . 

33, 322, 516 

63.  78 

1913 . 

32,877, 576 

62. 92 

1914 . .  . 

OU,  Ut) 

9,887,859 

18.92 

1915. 

• 

/O 
QQ  AA 

12, 909, 104 

24.  71 

1916 . 

100.00 
A1  A1 

7,230,314 

13.84 

1917 . 

14,853, 180 

28.43 

1918 . 

Dl-  01 

21, 143, 041 

40,47 

29.50 

1919 . . 

oo«  /U 

A'T 

15,412,838 

10,427,531 

5, 938, 684 

19.  96 
13.66 

Yearly  average . . . 

23,898,472 

45.  74 

These  figures  show  that  a  plant  which  was  equipped  to  handle  at 
least  52,000,000  bushels  of  grain  annually  (as  in  1916)  had  in  14  of 
the  years  of  operation  handled  less  than  50  per  cent  of  that  quantity, 
V.  1  average  over  a  23-year  period,  only  23,898,472 


Section  5.  Examples  of  leasing  arrangements. 

Lease  op  toe  South  Chicago  elevatobs.— The  transaction  where- 
by  theRo(^  ^land  Railroad  acquired  the  South  Chicago  elevators  from ; 
John  C.  Shaffer  m  1904  illustrates  the  policy  of  that  road  in  relation; 
to  the  business  of  public  terminal  elevators.  Shaffer  purchased’ 
these  elevators,  having  an  aggregate  rated  capacity  of  4,500,000 
f^oin  a  certain  estate  for  $700,000  cash.  He  then  organized 
the  Chicago-Rock  Island  Elevator  Co.,  to  which  he  transferred  the 
elevator  in  exchange  for  $1,000,000  in  5  per  cent  first  mortgage 
onds  and  $1,000,000  in  stock  of  the  company.  The  corporation  < 
was  organized  primarily  to  float  a  loan  on  the  property.  The  ele¬ 
vators  were  then  sold  to  the  Chicago,  Rock  Island  &  Pacific  Railway 
Co.  in  consideration  of  their  assuming  the  bonded  debt  and  under  ? 
an  agreement  made  before  Shaffer  had  acquired  title  to  the  property. 
Ihe  railroad  company  then  entered  into  a  lease  with  Shaffer  wherein 

i  1  agreed  to  redeem  the  bonds  to  the  extent  of 

$50,000  each  year  m  the  following  manner: 

purchase  price  of  one  million  dollars  ($1,000,000)  shall  be  paid  by  the  ' 
st  party,  to  the  tnistee,  in  monthly  instalments,  commencing  on  the  first  day  of 
November,  1904,  of  two  cents  per  one  hundred  pounds  on  all  grain  which  may  be^de- 
elevators,  or  either  of  them,  during  the  continuance  of  this  agreement 
originates  on  the  line  of  the  first  party,  west  of  Joliet,  Illinois,  of  ^hich  is 

Chicago  from  any  point  distant 


RAILROADS  AND  TERMINAL  ELEVATORS. 


95 


The  term  of  the  lease  was  conditioned  upon  the  liquidation  of 
the  bonded  debt.  The  railroad  company  also  agreed  to  keep  in 
repair  the  ‘^permanent  outside  structure  of  the  elevator  bmldmgs, 
to  pay  all  taxes,  insurance,  and  assessments  against  the  property; 
and  as  a  common  carrier  to  receive  and  transport  all  grain  tendered 
to  it  for  shipment  by  the  lessee  at  reasonable  and  customary  rates, 
and  to  furni^  at  all  tunes  reasonable  facilities  for  the  transportation 
of  grain  to  and  from  the  said  elevators,’’  etc.  Among  other  things 
the  lessee  made  the  following  agreement  relative  to  shipping  over 
the  lessor’s  lines: 

*  *  *  that  all  grain  which  may  be  shipped,  into  or^  out  of  said  elevator,  the 
movement  of  which  can  be  controlled  by  him  and  which  is  destined  to  pomts  that 
can  be  reached  by  the  lines  of  railway  operated  or  controlled  by  the  Rock  Island. 
Ck).,  or  by  a  practicable  route  of  which  said  lines  form  a  P^rt,  shall  be  shipped  over 
8ai(i  lines,  or  route,  and  not  otherwise,  provided  the  rates  of  freight  of  the  Rock  Island 
Co.  and  of  such  route,  of  which  its  lines  form  a  part,  shall  be  as  favorable  as  the  rates 
of  other  companies,  which  may  be  published  and  established  in  accordance  vnth  l^w, 
to  and  from  the  same  points;  that  he  will,  at  all  times  during  the  term  hereof  give  the 
lessor  the  opportunity  of  meeting  the  rates  of  any  other  railroad  company ,  or  companies, 
before  shipping  any  grain  over  the  line  of  another  carrier;  that  he  will  route  all  grain, 
the  destination  or  place  of  shipment  of  which  shall  be,  off  the  lines  operated  or  con- 
•  trolled  by  the  Rock  Island  Co.,  so  far  as  he  may  be  able  to  control  the  same,  in  such 
manner  that  it  will  give  the  lessor  the  benefit  of  the  longest  possible  haul  over  the 
lines  operated  or  controlled  by  it,  subject  to  the  conditions  as  enumerated  abo^i 
that  all  grain  carried  on  the  lines  operated  or  controlled  by  the  lessor,  which  shall  be 
consigned  to  or  bought  by  the  lessee,  and  which  shall  pass  through  said  elevators,  or 
either  of  them,  shall  be  there  received  and  unloaded  by  him  as  promptly  as  possible, 
and  that  all  cars  containing  such  grain  shall  be  subject  to  all  rea^nab^  car  service 
rules  and  regulations  which  may  be  applicable  to  the  place  of  such  tramc, 
that  he  will  operate  the  said  elevators,  and  each  of  them,  actively  and  continuously 
during  the  continuance  of  the  term  hereof;  that  there  shall  be  delivered  at  the  said 
elevators  not  less  than  five  million  bushels  of  grain  during  every  period  of  one  year, 
while  this  lease  is  in  force;  *  *  *. 

And  the  lessee  further  agreed  to  deliver  at  the  elevators  not  less 
than  5,000,000  bushels  of  grain  each  year  during  the  life  of  the  lease, 

or  to — 

forfeit  and  pay  to  the  lessor,  as  a  consideration  hereof,  and  as  liqmdated  damag^  for 
said  failure  and  breach  of  covenant,  an  amount  equal  to  one  cent  (:^.)  for  each  and 
every  bushel  of  grain  constituting  the  difference  between  the  number  of  bushels  of 
Irain  less  than  said  five  million  bushels  actually  delivered  to  said  elevators  in  any  one 
year,  and  said  agreed  amount  of  five  million  bushels. 

It  was  also  provided  that  the  lessee  upon  request  of  the  railroad 
company  should  store  or  transfer  grain  m  the  course  of  transporta¬ 
tion,  the  lessee  agreeing  under  this  provision 

that  he  will  always  promptly,  and  when  the  same  is  offered,  receive  for  storage  or 
transfer,  all  grain  which  the  lessor  shall  offer,  to  have  stored  or  transferred  in  or  through 
the  said  elevators,  or  either  of  them,  and  that  the  rate  for  storage  or  transfer  of  such 
grain  when  so  required  by  the  lessor  to  be  stored  or  transferred,  shall,  under  no  cir¬ 
cumstances,  exceed  the  rate  charged  at  the  time  for  like  services  at  the  same  elevator 
performed  by  the  lessee  for  any  other  railroad  company. 

The  property  was  apparently  leased  to  Shaffer  for  a  purely  nominal 

rental;  he  agreed  to  pay  “in  consideration  of  the  leasing  of  the 
premises  *  *  *  the  sum  of  one  dollar  *  *  *  m  full  of  all 

money  rental  for  said  premises  during  the  entire  term  of  this  lease. 
Shaffer  thereby  apparently  made  a  large  profit  on  the  transaction 
and  secured  the  use  of  the  elevator  for  private  account  under  a  guar- 
anty  to  furnish  the  owner  with  a  minimum  tonnage  yearly,  bnaner 


96 


TERMINAL  GRAIN  MARKETING. 


testified  in  1906  that  no  one  could  afford  to  operate  an  elevator  in 
Chicago  unless  he  were  in  the  grain  business.  With  reference  to  the 
operation  of  the  houses  described  above,  he  said : 

We  buy  in  the  country,  out  in  Iowa,  Nebraska,  and  Kansas,  and  then  bring  it  in 
over  the  Rock  Island  road’s  tracks,  and  create  the  business  for  them. 

Keystone  Elevator  Co.  case.— In  1903  the  Pennsylvania 
Railroad  leased  to  the  Germantown  Junction  Elevator  &  Warehouse 
Co.  a  plot  of  ground  adjoining  its  tracks  at  North  Philadelphia, 
Pa.,  and  constructed  thereon,  wholly  at  its  own  expense,  a  fully 
equipped  grain  elevator  and  a  warehouse.  In  the  same  year  all  the 
lessee^s  rights  imder  the  contract  were  transferred  to  the  Keystone 
Elevator  &  Warehouse  Co.,  who  proceeded  to  operate  the  plant  as  a 
private  warehouse.  The  operation  of  the  elevator  by  fiiis  latter 
corporation,  under  its  lease,  subseq^uently  provoked  numerous  com¬ 
plaints  from  grain  dealers  at  Philadelphia  and  elsewhere  and  finally 
led  to  an  investigation  by  the  Interstate  Commerce  Commission  upon 
its  own  motion  m  1912. 

It  was  found  that  the  value  of  the  lands  included  in  the  lease  was 
$15,000  and  the  cost  of  the  plant  $163,065.09.  During  the  period 
1903-1912  the  average  annual  expense  to  the  railroad  company  for 
maintenance  of  the  elevator  plant  was  $3,805.50.  The  rental  paid 
by  the  elevator  company  was  $6,000  per  year,  leaving  the  railroad 
company  an  income  of  $2,194.50  or  about  1^  per  cent  annuallv  on 
its  investment. 

It  was  also  found  that — 

The  railroad  company  by  the  original  lease  bound  itself  to  pay  to  the  elevator  com¬ 
pany  35  cents  per  ton  for  each  ton  of  grain  and  merchandise  handled  through  said 
elevator  and  warehouse,  excepting  that  no  payment  was  to  be  made  upon  traffic 
for  the  movement  of  which  the  railroad  company  received  only  a  switching  rate 
By  an  amended  lease  made  on  April  30,  1910,  this  allowance  was  changed  to  read  aa 
follows: 

“  To  pay  to  the  elevator  company  twenty  (20)  cents  per  ton  of  two  thousand  (2,000) 
pounds  on  all  grain  delivered  from  the  elevator  to  teams,  or  loaded  out  of  the  elevator 
into  cars  for  local  delivery  in  the  city  of  Philadelphia,  it  being  understood  that  this 
applies  solely  to  grain  consumed  in  the  city  and  not  to  business  destined  to  points 
outside  of  the  city,  or  to  points  reached  by  water;  thirty-five  (35)  cents  per  ton  of  two 
thousand  (2,000)  pounds  on  hay,  straw,  and  other  merchandise  delivered  into  or 
received  from  the  elevator  company’s  warehouses  at  North  Philadelphia,  except 
that  no  payment  shall  be  made  upon  merchandise  which  it  is  customary  for  the  rail¬ 
road  company  to  deliver  directly  from  car  on  the  track  and  not  through  railroad  ware¬ 
house  or  across  railroad  platform,  nor  upon  traffic  on  the  movement  of  which  the  rail¬ 
road  cornpany  has  only  received  a  switching  rate,  or  material  and  supplies  belonginf^ 
to  th  e  railroad  company .  ”  ® 

And  that  among  the  obligations  of  the  elevator  company  under  the 
contract  were — 

*  *  *  to  use  all  reasonable  efforts  to  secure  to  the  railroad  company  all  traffic  con¬ 
trolled  by  the  elevator  company  or  destined  to  or  from  the  said  elevator  and  warehouse 
and  to  confine  the  services  of  the  elevator  to  traffic  passing  over  the  lines  of  the  railroad 
company;  to  unload,  load,  and  handle  all  grain  and  merchandise  received  by  it  to  be 
shipped  over  the  lines  of  the  railroad  company  or  received  by  it  for  delivery  to  con¬ 
signee;  to  promptly  notify  consignees  of  the  arrival  of  such  shipments  and  to  pay  all 
running  expenses  of  the  elevator  and  warehouse;  to  be  responsible  to  the  railroad  com¬ 
pany  for  the  prompt  collection  of  all  freights  and  other  charges  upon  inbound  grain 
and  merchandise-  to  indemnify  the  railroad  company  for  all  damage  to  or  loss  of  grain 
and  merchandise  in  the  custody  of  the  elevator  company  and  to  maintain  fire  insurance 


«  Op.  cit.,  Sen.  Doc.  278,  pp.  75,  76. 

60  In  re  Keystone  Elevator  Co.,  1913,  25  I.  C.  C.,  619, 


KAILROADS  AKD  TERMINAL  ELEVATORS. 


97 


on  such  grain  and  merchandise;  to  notify  the  railroad  in  writing  of  the  failure  of  any 
consignee  to  remove  freight  and  to  observe  and  comply  with  all  directions  with  respect 
to  such  freight  which  may  be  received  by  it  from  the  railroad  company;  to  take  charge 
of  grain  as  warehousemen  for  account  of  the  owners  thereof  at  the  expiration  of  the 
period  currently  given  by  the  railroad  company  as  free  time. 

It  was  further  found  that  the  firm  of  L.  F.  Miller  &  Sons,  grain 
dealers,  customarily  owned  and  merchandised  about  92  per  cent  of  all 
the  grain  passing  through  the  elevator  property;  that  during  the  years 
1907-8  and  1908-9  the  payments  made  oy  the  railroad  company  in 
consideration  of  grain  handled  amounted  to  nearly  50  per  cent  of  the 
revenues  of  the  concern;  and  that  the  principal  and  almost  the  sole 
beneficiary  of  the  leasing  arrangement  was  Harvey  C.  Miller,  of  Phila¬ 
delphia.  In  the  course  of  the  opinion  it  was  said  that — 

Itfully  appears  that  the  Keystone  Elevator  &  Warehouse  Co.,  almost  entirely  owned 
by  Harvey  C.  Miller,  pays  to  Harvey  C.  Miller  for  the  use  of  cleaning  rnachines  each 
year  considerably  more  than  the  total  cost  of  construction  of  these  machines  and  con¬ 
siderably  more  than  their  total  value.  It  is  enabled  to  make  this  payment  of  money  to 
Mr.  Miller  over  and  above  the  dividends  on  the  elevator  stock  owned  by  him  by  reason 
of  the  allowances  paid  to  the  elevator  company  by  the  Pennsylvania  Railroad  Co. 

An  order  was  entered  directing — 

*  *  *  the  Pennsylvania  Railroad  to  cease  and  desist  for  the  period  of  two  years 
from  leasing  the  elevator  property  above  mentioned  to  the  Keystone  Elevator  &  Ware¬ 
house  Co.  so  long  as  the  stockholders  of  the  latter  are  owners  wholly  or  in  part  of  the 
property  passing  through  such  elevator,  and  to  cease  and  desist  for  the  period  of  two 
years  from  paying  any  allowance  for  terminal  services  to  the  Keystone  Elevator  & 
Warehouse  Co.  upon  any  property  passing  through  such  elevator  belonging  wholly 
or  in  part  to  any  stockholder  of  said  Keystone  Elevator  &  Warehouse  Co.  unless  its 
published  tariffs  shall  at  the  same  time  offer  such  allowance  to  all  other  shippers  using 
said  or  any  other  elevator  in  the  city  of  Philadelphia. 

This  decision  was  of  controlling  importance  to  the  grain  trade 
throughout  the  East.  At  that  time  L.  F.  Miller  &  Sons  were  known 
to  be  heavy  purchasers  in  the  grain  centers  and,  as  pointed  out  by  the 
Interstate  Commerce  Commission  in  its  annual  report  — 

*  *  *  All  routes  leading  to  or  competing  with  the  route  of  the  Pennsylvania 
Railroad  Co.  to  Philadelphia,  as  well  as  routes  via  other  gateways  to  the  southeastern 
territory  and  New  England  points,  have  felt  the  effect  of  the  enormous  concessions  and 
rebates  paid  by  the  Pennsylvania  Railroad  Co.  to  the  Miller  Bros,  during  recent  years. 
Furthermore,  this  grain  firm  has  been  in  a  position  to  underbuy  and  undersell  its  com¬ 
petitors  in  the  grain  markets  from  the  Atlantic  coast  as  far  west  as  Chicago.^  While  the 
responsibility  for  this  condition  is  disclaimed  by  the  officials  of  the  carrier,  the  fact 
that  L.  F.  Miller  &  Sons  routed  practically  all  of  their  business  via  the  Pennsylvania 
Railroad,  and,  in  fact,  secured  preference  as  to  elevation,  demurrage,  and  storage 
charges  from  this  carrier,  can  not  be  disputed. 

Section  6.  Special  obligations  in  lease  agreements. 

Tonnage  stipulations. — In  several  instances  the  leases  of  railroad 
elevators  have  included  certain  express  obligations  with  reference  to 
the  conduct  of  the  lessee’s  business,  or  with  reference  to  the  facilities 
to  be  furnished  by  the  lessor. 

The  stipulation  of  minimum  tonnage  contained  in  the  Shaffer  con¬ 
tract  already  described  is  also  found  in  other  leases. 

The  J.  Rosenbaum  Grain  Co.  leased  a  500, 000-bushel  terminal 
elevator  from  the  New  Orleans  Terminal  Co.  prior  to  1906,  agreeing  to 
pay  one-fourth  of  1  per  cent  per  bushel  for  every  bushel  of  grain 
handled  through  the  house  and  a  minimum  rental  of  $7,500  per  year. 


w  Twenty-seventh  Annual  Report,  1913,  p.  13. 


98 


TERMINAL  GRAIN  MARKETING. 


The  grain  company  also  paid  for  maintenance  and  75  per  cent  of 
insurance  and  taxes. 

In  some  cases  the  tonnage  agreement  is  exclusive,  as  in  the  agree¬ 
ment  of  lease  between  the  Ind^endent  Elevator  Co.  and  the  Nye- 
Schneider-Fowler  Grain  Co.,  of  Omaha  (July  15,  1917),  where  it  was 
stipulated  that — 

The  lessee  hereby  agrees  that  it  will,  during  the  term  of  said  lease,  ship  over  the  lines 
of  the  Chipgo  Great  Western  Railroad  Co.  all  grain  to  be  shipped  out  of  said  elevator 
to  competitive  points. 

Agreements  to  operate  as  public  elevators. — In  most  of  the 
leases  examined  the  lessee  has  not  assumed  any  specific  obligation  to 
operate  the  house  as  a  public  elevator.  Sometimes  it  requires  only 
that  the  lessee  shall  use  the  property  ‘‘for  the  elevation,  storage,  and 
handling  of  grain  and  sometimes  the  precise  nature  of  the  business 
contemplated  is  not  set  forth. 

Certain  exceptions  to  this  statement  are  wortlw  of  note.  In  the 
lease  of  the  Chicago  &  North  Western  Railroad  Co.  elevator  at  Mil¬ 
waukee  to  the  Rialto  Elevator  Co.  in  1913  it  was  agreed  as  follows: 

The  said  party  of  the  second  part  further  agrees  and  obligates  itself  to  keep  said 
buildings  open  at  all  times  for  the  receipt,  storage,  or  handling  of  grain  in  the  manner 
in  which  public  elevators  or  warehouses  are  usually  kept,  and  to  receive,  store,  and 
ship  grain  from  said  buildings  for  any  and  all  persons  applying  to  it  for  that  purpose, 
at  the  usual  and  customary  rate  charged  therefor,  which  must  in  all  cases  be  reasonable 
rates,  and  if  it  shall  elect  to  close  said  buildings,  it  will  immediately  surrender  up  the 
same  to  said  party  of  the  first  part. 

This  agreement  apparently  brings  the  Rialto  Co.^s  elevator  within 
the  application  of  the  public  warehouse  laws  of  Wisconsin. 

Substantially  the  same  stipulations  were  made  in  the  agreement  of 
lease  entered  into  by  the  Itasca  Elevator  Co.,  of  Duluth,  with  the 
Chicago,  Milwaukee,  St.  Paul  &  Omaha  Railway  Co.  However,  since 
there  is  relatively  little  public  warehousing  at  Duluth,  and  since  the 
Minnesota  law  does  not  prohibit  public  warehousemen  from  storing 
their  own  grain  in  the  public  bins,  the  agreement  has  resolved  itself 
into  an  obligation  to  handle  grain  routed  over  the  lessor’s  line. 

A  more  effective  agreement  to  operate  for  public  account  is  that 
made  by  the  Armour  Grain  Co.  in  leasing  the  recently  constructed 
Calumet  Elevator  at  Chicago  from  the  Chicago  &  North  Western  Rail- 
.  road.  This  agreement  (made  in  1915)  required  the  operator  “to  set 
'  apart  and  completely  separate  at  least  12  storage  tanks  on  the  south 
side  of  the  storage  house,  together  with  the  corresponding'  space  in 
the  workhouse  and  in  the  river  house  and  to  separately  maintain, 
use,  and  operate  said  portions  so  set  apart  as  a  public  warehouse  in 
accordance  with  the  laws  of  the  State  of  Illinois.” 

As  alpady  noted  in  the  Shaffer-Rock  Island  lease,  the  railroad 
companies  have  sometimes  required  a  lessee  to  transfer  grain  moving 
over  the  lessor’s  line  at  customary  rates.  In  the  lease  of  an  elevator 
at  Argentine,  Kans.,  by  the  Atchison,  Topeka  &  Santa  Fe  Railway 
Co.  to  the  Neola  Elevator  Co.  (Armour  Grain  Co.,  guarantor)  in 
1915,  the  lessee  agreed — 

To  promptly  transfer  grain  from  car  to  car  through  said  elevator  upon  request  of 
the  lessor  at  the  expense  of  the  lessor,  and  for  such  rates  as  may  from  time  to  time  be 
fixed  by  the  tariffs  of  the  lessor.  It  is  understood  and  agreed  that  the  insurance 
policy  of  the  lessee  shall  extend  to  and  cover  the  grain  while  being  so  transferred. 


“  Op.  cit.,  Sen.  Doc.  278,  pp.  91,  92. 


RAILROADS  AND  TERMINAL  ELEVATORS. 


99 


In  the  lease  of  the  Chicago  &  North  Western  Railroad  Co.  elevator 
at  Council  Bluffs  to  the  Updike  Grain  Co.  of  Omaha,  1918,  it  was 
provided  that  the  lessee  should — 

*  *  *  promptly  transfer  grain  from  car  to  car  through  said  elevator  upon  the 
request  of  lessor,  and  for  such  charges  and  rates  as  shall  from  time  to  time  be  lawfully 
fixed  by  lessor  or  by  any  lawfully  constituted  public  authority. 

Precisely  the  same  agreement  was  made  by  the  same  parties  in  the 
lease  of  a  railroad  elevator  under  construction  at  Milwaukee  in  1916. 

Free  switching. — ^The  contract  of  lease  between  the  Atchison, 
Topeka  &  Santa  Fe  Railway  Co.  and  the  Armour  Grain  Co.  (1913), 
applying  to  a  grain  elevator  at  Chicago,  incorporated  the  following 
condition : 

Whereas  under  existing  conditions  all  grain  destined  for  said  elevator  reaching 
Chicago  over  the  Atchison,  Topeka  &  Santa  Fe  Railway,  the  Chicago  &  Northwestern 
Railway,  the  Chicago,  Milwaukee  &  St.  Paul  Railway,  the  Chicago  Great  Western 
Railway,  the  Wisconsin  Central  Railway,  the  Chicago  &  Alton  Railway,  and  the 
Chicago,  Madison  &  Northern  Division  of  the  Illinois  Central  Railway  is  now  deliv¬ 
ered  at  the  elevator  free  of  any  Chicago  switching  charges,  and  all  grain  shipped  from 
the  elevator  by  rail  to  any  point  beyond  the  switching  district  of  Chicago  is  now  moved 
free  of  any  Chicago  switching  charges;  now,  therefore,  it  is  further  agreed  that  if 
during  said  term  such  conditions  or  any  of  them  shall  change,  the  lessee  shall  have  the 
right,  upon  thirty  (30)  days’  notice  in  writing  to  the  lessor,  to  cancel  this  lease. 

Such  a  provision  was  rendered  necessary  by  the  requirement  (after 
the  passage  of  the  Hepburn  Act)  that  the  railroads  publish  tariffs  for 
all  switching  allowances  or  absorptions.  Prior  to  1906  switching 
arrangements  between  the  railroads  and  the  lessees  of  their  elevators 
were  a  matter  of  private  arrangement  between  the  two  parties.  It 
was  not  the  custom  of  railroads  to  publish  any  regular  tariff  form  or 
anything  for  switching  arrangements  in  the  city  of  Chicago. 

Section  7.  Agreements  prior  to  construction. 

In  1917-18  the  Chicago  &  Northwestern  Railway  Co.  constructed 
a  10,000,000-bushel  elevator  on  the  Calumet  River  in  South  Chicago 
for  occupation  by  the  Armout  Grain  Co.  In  1915  a  lease  was 
entered  into  which  incorporated  the  plans  and  specifications  as 
approved  by  both  parties. A  rental  was  agreed  to  at  6  per  cent 
per  annum  on — 

(а)  The  cost  to  lessor  of  the  ground  leased,  which  cost  is  hereby  agreed  to  be  the  sum 
of  $33,000. 

(б)  The  cost  to  lessor  of  constructing,  equipping,  and  completing  the  said  elevator 
plant  as  herein  provided,  which  cost  shall  be  shown  by  the  books  of  lessor. 

When  the  plant  was  completed  in  1918  the  railroad  company  made 
the  following  announcement: 

The  Chicago  &  North  Western  Railway  announces  that  their  new  terminal  grain 
elevator,  located  on  the  Calumet  River  in  South  Chicago  at  Irondale,  Ill.,  will  be 
ready  for  operation  by  the  Armour  Grain  Co.  January  2,  1918. 

The  entire  plant  is  fireproof  and  of  the  most  modern  design  and  has  the  largest 
storage,  handling,  and  cleaning  capacity  of  any  grain  elevator  ever  constructed  it  is 
the  largest  grain  elevator  in  the  world. 

The  Chicago  &  North  Western  Railway  facilities  at  the  elevator  are  in  keeping  with 
the  high  standard  of  the  plant.  There  is  a  total  of  18  miles  of  track,  and  the  yard 
capacity  is  1,250  cars.  A  modern  mechanical  fuel  station  and  roundhouse  are  in¬ 
cluded  in  the  terminal. 

Direct  connections  with  belt  and  trunk  lines  are  made  at  this  point. 


M  Op.  cit.,  Sen.  Doc.  240,  p.  116. 

M  The  Chicago  &  North  Western  Railway  elevators  at  Milwaukee  and 
leased  to  the  Updike  Grain  Co.  prior  to  construction  ol  the  plants. 


Council  Bluffs  were  likewise 


100 


TERMINAL  GRAIN  MARKETING. 


With  reference  to  operation  it  was  agreed  as  follows: 

9.  Lessee  agrees  to  keep  the  premises  leased  open  during  the  term  of  this  leasp  for 
the  purpose  for  which  said  premises  are  leased,  and  to  occunv  and  use  for 
receipt,  storage,  and  handling  of  grain  during  the  term  of  thfs  lease  and  ™!et  anart 
and  completely  separate  at  least  twelve  storage  tanks  on  the  south  aide'nf  tho  a+n?o 

and  to  separately  maintain,  use,  and  operate  said  portions  so  set  apart  as  a  nublie 
warehouse  in  accordance  with  the  laws  of  the  State  of  Illinois.  ^  ^ 

nr.  agrees  to  promptly  transfer  grain  from  car  to  car  through  said  elevator 

upon  of  lessor,  and  for  such  charges  and  rates  as  shall  from^time  to  time  be 

lawfully  fixed  by  lessor  or  by  any  lawfully  constituted  public  authSit^ 

In  a  similar  way  negotiations  were  entered  into  between  the  Bur¬ 
lington  road  and  the  Armour  Grain  Co.  in  1917  relative  to  the  con¬ 
struction  of  a  2,000,000-bushel  elevator  at  Omaha,  as  the  following 
correspondence  shows : 

Armour  Grain  Co.,  Chicago,  III.  Chicago,  January  24,  1917. 

Gentlemen:  We  expect  to  erect,  in  the  near  future  at  Omaha  Nebr  a  modem 
elevator  o^  about  2,000,000  bushels  capacity  on  land  adjoining  our  present  terminals 
near  Gibson,  so  as  to  facilitate  the  transportation  of  grain  on  our  western  lines  and 
better  control  our  equipment  and  more  promptly  release  same.  It  is  my  understand¬ 
ing  that  you  are  desirous  of  securing  such  facilities  there  and  I  write  this  to  inalire 
whether  upon  completion  of  the  elevator  your  company  will  lease  same  on  basi^  nf  a 
rental  of  6  per  cent  per  annum  upon  the  cost  of  tl?e  Cd  occuSd  bv 

same  with  usual  provisions  attending  such  leases  as  to  liability,  repairs,  etc  I  would 
be  obhged  if  you  would  advise  me  at  an  early  date  and  if  you  would  undertake  to 
agree  to  take  the  house  on  these  general  terms  with  the  understanding  that  the  details 
of  the  lease  will  be  negotiated  later  when  our  plans  are  completed 
Yours,  truly,  ^ 

(Signed)  C.  G.  Burnham,  Vice  President. 


Mr.  C.  G.  Burnham,  January  24,  1917. 

Vice  Presidmt,  Chicago,  Burlington  &  Quincy  Railroad,  Chicago,  III. 

acknowledge  receipt  of  your  letter  of  this  date  adidsing  that 

2  non  oSi  i!  near  future,  at  Omaha,  Nebr.,  a  modern  elevator  of  about 

2,000,000-bushels  capacity,  on  land  adjoining  your  present  terminal  near  Gib<?nn 

b  to  agree  to  lease  this  elevator  and  the  land  occupied 

by  same  on  the  general  terms  to  which  you  refer,  viz,  rental  of  6  per  cent  Per  annum 
upon  the  cost  of  the  elevator  and  land  occupied  by  same,  with  the  Sual^movlio^ 
lease  as  to  liability,  repairs,  etc.,  with  the  understanding  that  the 
details  of  the  lease  will  be  negotiated  later,  when  your  plans  are  completed 
This  presents  the  matter  in  a  very  general  way  and  we  assume  your  purpose  is  simplv 
to  inquire  if  we  would  be  mlling  to  undertake  to  lease  this  elevator  S  coSKd 
at  the  rental  stated,  provided  the  elevator  as  constructed  would  be  satisfactorv  to 
^  and  we  could  come  to  an  agreement  as  to  the  terms  and  conditions  of  the  leaL 
other  than  the  rental  which  is  specifically  stated  in  your  letter. 

o  thereto  we  advise  y ou  that  we  will  undertake  to  agree  to  lease  the  elevator 

and  the  land  occupied  by  same  at  the  rental  stated,  subject  to  the  plans  and  specifi 
cations  thereof  being  approved  by  us  and  the  terms  and  conditions  as  to  liabflitv 
repairs,  etc. ,  and  otherwise  being  arranged  to  our  satisfaction,  and  with  the  further 
pro'juso  that  the  switching  in  and  out  of  the  elevator  shall  be  done  on  the  same  basis 
as  the  switching  at  other  elevators  in  Omaha  and  Council  Bluffs 
We  would  also  like  you  to  confirm  to  us  that  in  the  event  we  finally  enter  into  this 
lease  with  you,  that  you  will  sell  us  approximately  10  acres  of  land  immediatelv  ad  in 
cent  to  the  elevator  being  part  of  land"^  now  being  purchased  by  yo?,“t  the  S 
the  cost  of  the  said  10  a^es  to  you,  with  the  agreement  that  if  same  is  not  used  by  us 
for  the  purposes  of  our  business,  you  are  to  repurchase  said  10  acres  at  the  original 
price  paid  by  us  to  you  for  same,  plus  the  interest  thereon  ^ 

Yours,  truly, 

Armour  Grain  Co., 
- Vice  President. 


RAILROADS  AND  TERMINAL  ELEVATORS.  10 1 


Section  8.  Nominal  rentals  forbidden. 

For  a  carrier  to  lease  a  grain  elevator  plant,  or  land  for  the  con¬ 
struction  of  such  a  plant,  at  a  nominal  rental  with  a  view  to  securing 
traffic,  has  been  held  to  be  an  undue  preference  and  illegal,  in  Con¬ 
ference  Rulings  of  the  Interstate  Commerce  Commission,  as  is  shown 
by  the  following: 

(June  30,  1908.)  ^  ^  ^  i 

94.  Leasing  carrier’s  property  in  consideration  of  lessee’s  shipments. — A  carrier  leases 
a  part  of  its  property  to  a  certain  industry  under  a  contract  which  contains  the  obliga¬ 
tion  on  part  of  the  lessee  industry  to  make  all  of  its  shipments  by  the  line  of  the  lessor 
carrier.  Such  a  provision  plainly  implies  that  the  traffic  so  furnished  by  the  lessee 
and  so  secured  by  the  lessor  is  an  important  and  substantial  consideration  which 
might  amount  to  a  concession  in  the  rates  for  transportation  and  therefore  be  an 
unlawful  device  for  discrimination.  The  Commission  expressed  doubt  as  to  the  pro¬ 
priety  of  the  practice. 

(June  20,  1911.)  .  ,  ,  .  ,  tt  ^  i 

325.  Lease  of  land  hy  shipper  from  a  can'ier  at  nominal  rental  unlawful. — Under  a  lease 
in  which  a  nominal  rental  is  reserved  a  private  person  has  erected  a  grain  elevator 
upon  land  belonging  to  an  interstate  carrier:  Held,  That  the  arrangement  constitutes 
an  undue  preference. 

(June  3,  1913.)  ^  .  .  . 

421.  A.  carrier  may  not  lease  its  elevators  at  a  nominal  rental. — An  interstate  carrier 
desires  to  lease  to  a  grain  dealer  at  a  nominal  rental  an  elevator  which  has  not  been 
in  use  for  some  time,  and  which  the  carrier  is  anxious  to  dispose  of  because  the  op^a- 
tion  of  the  elevator  would  attract  business  to  the  road.  Upon  inquiry:  Held,  That 
such  a  transaction  would  be  illegal. 

Section  9.  Effects  of  leasing  at  Kansas  City. 

The  leasing  situation  at  Kansas  City  has  been  a  subject  of  recurrent 
controversy.  In  1918  the  receivers  and  shippers  at  Kansas  City  not 
operating  elevators  filed  a  series  of  complaints  with  Government 
authorities  to  the  effect  that  the  lessees  of  railroad  elevators  controlled 
the  storage  and  transfer  facilities  of  the  market  to  the  serious  dis¬ 
advantage  of  other  dealers.  An  investigation  instituted  by  the 
Director  General  of  Railroads  through  (Interstate  Commerce)  Com¬ 
missioner  James  S.  Harlan  as  special  agent,  developed  the  following 
facts : 

(a)  That  all  the  public  elevators  at  Kansas  City  are  owned  by  the  railroads;  (6) 
that,  except  for  two  small  elevators,  one  owned  by  the  Wabash  and  one  by  the  Kansas 
City  Southern,  all  the  railroad  elevators  there  have  been  leased  to  private  interests; 
(c)  that  the  lessees’  rents  for  ffie  elevators  are  on  the  basis  of  5  per  cent  of  their  appraised 
value,  the  railroads,  however,  paying  the  taxes,  fire  insurance,  heavy 
or  replacements,  and  the  lessees  paying  only  for  the  light  repairs;  and  (a)  that  the 
control  of  these  railroad  properties  by  the  six  or  seven  lessees  gives  them  an  advantage 
and  puts  other  grain  dealers  at  that  market  at  a  disadvantage. 

It  was  recommended  that  certain  leases  be  surrendered  so  as  to 
provide  the  ‘'independent'’  receivers  and  shippers  with  the  facilities 
necessary  to  operate  under  the  existing  conditions  and  that  the  rentals 
of  all  leased  houses  be  materially  increased.  The  commissioner  fur¬ 
ther  reported — 

(a)  That  the  rentals  now  paid  to  the  Director  General  by  the  elevator  operators 
are  inadequate  on  the  basis  either  of  the  investment  in  the  elevators  or  of  their  present 
value;  (h)  that  the  present  rentals  give  to  the  operators  undue  advantages;  and  (c) 
that  the  practices  of  the  operators  in  the  past  in  various  particulars  have  subjected 
other  grain  dealers  on  that  market  to  undue  prejudices. 


( 


102 


TERMINAL  GRAIN  MARKETING. 


The  rentals  of  the  leased  railroad  elevators  were  revised  on-the  basis 
of  a  40  per  cent  increase/^  as  follows: 


Elevator. 

Rental  as 
leased. 

Rental  as 
revised, 
1918. 

Santa  re“A” . 

nno  nc 

Chicago  Great  Western . 

in  7ft 

ouu.  uu 
15,140. 69 

07  Adi  Hd 

Chicago,  Milwaukee  &  St.  Paul . 

-  19,743.60 
22,110.55 
1,200.00 
"i  KQ 

Chicago,  Rock  Island  &  Pacific  f  Terminal) . 

QP^d  77 

Chicago,  Rock  Island  &  Pacific  (Patten) . 

1  Aftn  nn 

Frisco . 

J. ,  \J\/ 

A  Ain  AA 

Memphis . 

9  7ft 

vIm  vKJ 

3,519.29 

1  OAA  m 

Missouri,  Kansas  &  Texas . 

900.00 
2Q  280  on 

Missouri  Pacific . 

07  p;fwi  nn 

Chicago,  Burlington  &  Quincy . 

14,325.00 

20,055.00 

The  small  shippers  had  complained  that  the  elevator  charges  were  1 
exorbitant  and  that  increased  rentals  would  only  be  followed  by  fur-  | 
ther  increases  in  these  rates.  In  the  adjustment  reached  in  1918  the  I 
following  schedule  of  elevator  services  and  rates  was  adopted:  I 

Schedule  of  charges  at  Kansas  City  elevators  recommended  by  Commissioner  Harlan  as  the  J 
result  of  conferences  at  New  York  Nov.  12  to  Nov.  17,  and  to  be  made  effective  as  of  1 
Sept.  5,  1918.  J 

1.  For  receiving  and  loading,  including  first  10  days’  storage,  or  part  thereof,  1  cen  t  j 

per  bushel  up  to  Nov.  5,  1918,  and  f  cent  from  that  date  forward,  elevator  to 
insure  against  fire  loss. 

2.  For  direct  transfer,  ^  cent  per  bushel,  elevator  to  insure  against  fire  loss. 

3.  For  storage  after  the  first  10  days,  of  a  cent  per  bushel  for  each  day,  elevator  to 

insure  against  fire  loss. 

4.  For  cleaning,  \  of  1  cent  per  bushel.  Where  special  cleaning  is  necessary,  like  ' 

separating  one  grain  from  another,  or  cleaning  one  kind  of  grain  out  from  another 
kind  of  grain,  or  cleaning  for  board  of  trade  weights,  special  rates  will  be  given.  ; 

5.  For  clipping,  ^  cent  per  bushel. 

6.  For  drying: 

21  cents  per  bushel,  grain  not  over  18  per  cent  moisture.  ’ 

3  cents,  grain  not  over  19  per  cent  moisture.  , 

31  cents,  grain  not  over  20  per  cent  moisture.  *  ’ 

4  cents,  grain  not  over  21  per  cent  moisture.  ; 

41  cents,  grain  not  oVer  23  per  cent  moisture.  ; 

5  cents,  grain  not  over  25  per  cent  moisture.  j 

Oyer  25  per  cent  moisture,  special  rate. 

7.  For  mixing,  |  of  a  cent  per  bushel,  but  no  charge  ’O^hen  mixing  can  be  done  on 

one  elevation. 

8.  For  turning  of  special  bin  grain,  1  of  a  cent  per  bushel,  but  no  charge  to  be  made  \ 

without  owner’s  request  for  turning. 

9.  For  unloading  bulkhead  cars,  $5  per  car  additional.  I 

10.  For  unloading  grain  from  coal  cars,  $10  per  car  additional. 

11.  The  elevator  reserves  the  privilege  of  binning  grain  with  grain  of  similar  grade  and 

character.  ' 

12.  Any  money  collected  from  railroad  company  for  transfer  or  elevation  to.be  paid 

to  ’owner  of  grain. 

13.  For  unloading  sacked  ^ain,  1  cent  per  bushel  extra.  I 

14.  All  grain  and  seeds  will  be  handled  at  owner’s  risk,  including  loss,  damage,  or  9 

shrinkage,  in  or  by  transferring,  turning,  cleaning,  clipping,  mixing,  drying,  1 
bleaching,  water,  or  the  elements.  9 

The  members  of  the  Receivers  &  Shippers  Association  (merchants  I 
and  commission  men  not  operating  elevators)  insisted  that  the  only  9 
equitable  solution  of  the  matter  was  for  the  Director  General  of  I 


In  1913  rentals  had  been  arrived  at  for  the  10  railroad  elevators  on  the  basis  of  5  per  cent  of  “present 
valuation  less  an  average  estimated  depreciation  for  5  years.” 


KAILROADS  AND  TERMINAL  ELEVATORS. 


103 


Railroads  to  take  over  the  operation  of  the  elevators.  Commissioner 
Harlan  had  stated  in  his  report  that  ‘Hhe  ideal  condition  for  the 
Kansas  receivers  and  shippers  would  be  the  operation  of  those  ele¬ 
vators  by  the  director  general.”  However,  this  was  not  considered 
to  be  feasible  at  the  time,  and  the  adjustment  finally  recommended 
by  Commissioner  Harlan  was  adopted. 

Section  10.  Services  and  charges  under  railroad  operation. 

A  modern  railroad  elevator  is  usually  equipped  to  perform  all  of 
the  services  which  are  offered  by  a  private  operator. 

The  CARRIER  AS  WAREHOUSEMAN. — The  investigation  of  railroad 
elevator  facilities  in  1906  disclosed  that  carriers  in  several  instances 
were  performing  commercial  warehousing  services  free  of  charge  as 
an  inducement  to  shippers.  This  was  customary  practice  at  Omaha 
and  Kansas  City  as  me  followmg  excerpts  from  the  testimony  indi¬ 
cate: 


Mr.  Smith.  If  you  bring  into  Omaha  grain  from  any  of  your  country  stations  and 
have  it  transferred  to  the  Great  Western  Railroad,  or  the  elevator  operated  by  the  Great 
Western,  and  they  do  unload  at  the  Great  Western  elevator  and  elevate  and  clean  and 
mix  and  subsequently  load  out  of  the  Great  Western  elevator  and  send  it  over  the 

66  Thecase  as  arguedin  1918  by  the  receivers  and  shippers  included  the  following  considerations  (omitting 

thepointsinthisbriefwhichapply  whoUytowar-timeconditmns):  .  .  „  ^  v 

1.  That  terminal  grain  elevators  owned  by  railroads  or  subsidiary  companies  of  railroads  are  as  much 
nublicterminalf acuities  as  freight  depots  and  should  be  open  to  all  shippers  on  exactly  equal  terms. 

2.  Thatterminalelevator  operation  by  the  railways  should  be  considered  an  actual  part  of  the  operating 

expense  of  the  owning  railway,  ...  i 

3  That  charges  for  elevator  service  such  as  transferring,  unloading,  and  loading,  storage,  etc.,  be  properly 
adjusted  to  protect  the  Government  controlling  the  railways  and  yet  serve  all  the  public  as  on  freights  and 
fares  at  an  exactly  equal  cost. 

4  That  leases  were  originally  made  to  firms  when  railroads  were  competitive  and  were  always  tacitly 
conditioned  on  the  diversion  by  the  lessees  to  the  rails  of  the  lessor,  of  all  possible  tonnage. 

5.  That  in  these  transactions  the  principal  consideration  was  not  the  rental  but  freight  earmngs  to  the 
C3-rri6r  s6cuT6(iiii6xclisiig6  for  volusblo  storOigo  snd  olovsitor  sp3-C6  turriGd.  to  cominorcio-l  nrixis  Et  low  rO/tos, 

6  That  records  on  file  with  the  Interstate  Commerce  Commission  will  show  that  under  lease  terms  in 

effect  untilrecently  ,if  not  now,  the  earnings  on  leases  of  grain  elevatorsin  Kansas  City  in  someinstances 
netted  only  three-tenths  of  1  per  cent  to  2  per  cent.  , 

7  That  an  advance  in  rentals  to  net  6,  7,  or  8  per  cent  to  carrier  would  not  effect  a  cure  of  the  existing 
monopolvin  Kansas  City,  as  only  the  leasing  firms  could  work  through  the  elevators  to  advantage. 

16  That  the  elevator  charges  now  published  and  effective  through  leased  houses  in  I^nsas  City  are  so 
high  that  no  shipper  can  pay  them  and  live,  hence  practically  all  business  is  now  confined  to  the  eight 

PTy^^^^wTeases  on  railroad-owned  elevatorsin  Kansas  City  are  now  confined  practically  to  the  following: 
'  Armour  Grain  Co.,  Chicago  and  Kansas  City,  storage  K.  C.  (approximating)  6  imllion  bushels. 

J  Rosenbaum  Grain  Co.,  Chicago,  through!  ts  Kansas  City  subsidiary ,  the  TerimnalElevator  Co., 
’storage  K.C,  (approximating)  3  million  bushels.  , 

Hall  Baker  Grain  Co.,  Kansas  City,  storage  K.  C.  (approximating)  3  million  bushels. 

Simonds  Shields,  Lonsdale,  Kansas  City , storage  K.  C.  (approximating)  4^  million  bushels. 
Norris  Grain  Co.,  Chicago  &  Kansas  City,  storage  K.  C.  (approximating)  1  miUion  bushels. 

Frisco  Elevator  Co. ,  Kansas  City,  storage  K.  C.  (apppximating)  l^Uion  bushels. 

Rylesworth  Grain  Co. ,  stock  owned  partly  by  Bartlett ,  Frazier  Co.,  Chicago,  storage  K.  C.  (approxi¬ 
Kaw  Grain  &  Elevator  Co. ,  Kansas  City,  storage  K.  C.  (approximating)  i  nnlUon  bushels. 

Million  bus. 

Total  firms  (eight)  railroad-owned,  total  leased  to  them . 

Total  storage  Kansas  City,  approximate . 

Balance  grain  storage, independent . 

Practically  all  mill  storage,  hence  private.  ,  „  , 

18  That  this  affords  an  airtight  monopoly  to  the  eight  firms  above  named.  ,  ,,  j  j 

That  there  is  no  other  large  city  in  the  United  States  where  practically  all  storage  is  railroad  owned, 
where  so  few  firms  arein  such  absolute  control,  where  the  community  ofinterest  is  so  strong  and  yet  so 

circumscribed  asin  Kansas  City.  .  .  .  i  .. -u  i 

25  That  the  continuation  ofexisting  leases  or  renewal  of  expiring  contracts  on  any  interest  basis  net  to 
carrier  and  under  any  conceivable  policing  system  will  further  and  foster  a  monopoly  that  isintolerable  and 

harmful  to  the  producer,  consumer,  and  grain  merchant  oHhe  entire  Southwest. 

26  That  the  nresent  service  rates  effectivein  leased  grain  elevators  at  Kansas  City  woifid  earn  the  rail¬ 
roads  a  fine  retmn,  even  if  based  on  alowered  efficiency  and  higher  cost  of  operation  such  as  lessees  have 

stated  to  Commissioner  Harlan  would  beinevitable.  .  .  ,  ^  ^  +v.., 

27.  That  by  conservation  of  space,  the  operation  of  the  fewest  number  of  elevators  mcessary  and  the 
centralized  control  by  a  competent  Government  agent  should  reduce  cost  and  improve  efficiency. 

28.  That  any  continuation  ofthe  present  plan  ofleasingin  our  market  willmean  the  loss  of  trade  name  to 
the  independent  grain  shipper,  the  maintenance  of  his  organization  at  an  almost  totalloss,  and  1  f  notimme- 
diately  corrected,  the  annihilation  of  45  to  50  soimd  grain  firms  and  the  positive  establishment  in  prestige 
and  power  ofthe  eight  or  ten  firms  nowin  monopoly  and  restraint  of  trade. 

67  Op.  cit.,  S.  Doc.  278. 


104 


TERMINAL  GRAIN  MARKETING. 


Great  Western  road,  who  pays  all  the  charges  that  have  been  incurred  in  transferring 
it,  switching  it,  cleaning  it,  and  loading  it  out? 

Mr.  Updike.  The  Great  Western. 

Mr.  Smith.  And  is  that  done  for  you  and  for  any  other  grain  dealer  in  the  State  of 
Nebraska  free  of  charge? 

Mr.  Updike.  Yes,  sir. 

Mr.  Smith.  About  what  is  the  capacity  of  the  elevator  on  the  Great  Western  road*? 

Mr.  Updike.  A  million  bushels.  (Rec.,  p.  484.) 

Coruinissioner  Clark.  Can  you  tell  me  why  railroad  companies  have  embarked  in 
that  line  of  business — doing  it  free  of  charge? 

Mr.  Crowell.  I  would  be  unable  to  tell  you  why  they  do  so,  unless  it  is  upon - 

Commissioner  Clark.  Give  us  your  theory  of  that. 

Mr.  Crowell.  My  theory  would  be  that  they  do  so  to  facilitate  the  handling  of 
grain  over  their  line  and  to  get  tonnage  for  their  line. 

Commissioner  Clark.  How  long  has  such  a  practice  been  in  vogue  here? 

Mr.  Crowell.  I  understand  ever  since  the  building  of  the  Maple  Leaf  Elevator 
called  the  Great  Western. 

Commissioner  Clark.  How  long  ago  was  that? 

Mr.  Crowell.  I  presume  some  of  these  gentlemen  can  tell  accurately ;  I  do  not  know. 

Commissioner  Clark.  Hid  they  begin  by  furnishing  these  services,  or  did  they  pay 
an  allowance?  ,  >>  f  j 

Mr.  Crowell.  Well,  I  believe  at  first  it  was  based  upon  an  allowance,  and  then  it 
was  based  entirely  on  a  free  handling,  free  clipping,  and  an  allowance  besides  of  a 
cent  and^  a  quarter.  That  is  my  understanding. 

Commissioner  Clark.  Do  all  of  these  elevator  services,  such  as  you  have  just 
enumerated,  partake  of  the  nature  of  an  allowance  from  the  railroad  to  the  shipper 
of  the  grain? 

^  Mr.^  Crowell.  I  would  hardly  consider  it  that,  Mr.  Commissioner.  I  would  con¬ 
sider  it  an  inducement  for  the  shipment  of  grain  over  their  line.  The  privileges  that 
are  granted  they  grant  to  everybody  and  state  openly  what  they  do. 

Commissioner  Clark.  But  it  is  in  the  nature  of  an  allowance  as  an  inducement 
for  grain  to  come  or  go  over  their  lines? 

Mr.  Crowell.  You  might  put  it  that  way;  yes,  sir. 

Corumissioner  Clark.  And  if  one  railroad  company  does  it,  its  competitors  feel 
bound  to  meet  that  competition  either  in  exactly  the  same  or  a  different  way? 

Mr.  Crowell.  Yes,  sir.  It  has  been  contended  by  some,  of  course,  that  the  han¬ 
dling  of  gram  through  an  elevator  is  a  thing  that  is  incumbent  upon  a  railroad  com- 
pany,  the  same  as  the  handling  of  merchandise  upon  their  depot  platform,  etc. 
Whether  that  is  a  good  argument  or  not  I  do  not  know. 

Commissioner  Clark.  If  a  railroad  company  transports  a  car  of  horses  and  it  is 
necessary  to  take  them  out  for  feeding,  or  transfer  them  from  one  car  to  another,  the 
railroad  company  does  it,  doesn’t  it? 

Mr.  Crowell.  I  am  inclined  to  believe  they  do. 

Commissioner  Clark.  Do  they  furnish  any  men  to  clean  the  horses? 

Mr.  Crowell.  Well,  I  presume  not.  (Rec.,  pp.  254-255.) 


Court  decisions.  It  has  b6en  held  by  the  courts  in  certain  juris¬ 
dictions  that  railroads  were  not  authorized  by  their  charters  to  carry 
on  the  customary  business  of  warehousemen.  This  question  was 
passed  upon  by  the  Supreme  Court  of  Illinois  in  People  v.  Illinois 
Central  Ry.  Co.  (1908).^*  A  bill  had  been  filed  in  equity  in  the  name 
of  the  people  of  the  State  of  Illinois  to  enjoin  the  Illinois  Central, 
^e  Chicago,  Burlington  &  Quincy,  the  Chicago,  Rock  Island  & 
Pacific  Railroad  Cos.  and  others  from  discontinuing  the  operation 
(through  their  lessees)  of  certain  grain  elevators  as  public  ware¬ 
houses  of  class  A  under  the  warehouse  act  of  Illinois. 

The  bill  having  been  dismissed  by  the  lower  court  for  want  of 
equity  the  Supreme  Court  affirmed  the  juc^ment  of  the  lower  court, 
referring  to  five  decisions  by  the  courts  of  Illinois  and  other  States 
and  said:  ^ 


58  233  Ill.,  378;  84  N.  E.,368. 

Louisiana  v.  Southern  Pacific  Ry.  Co.,  52  La  Ann- 
and  illtaofs  CemS ^  ^wlgert,  119  lU.,  Ssi 


RAILROADS  AND  TERMINAL  ELEVATORS. 


105 


It  will  thus  be  seen  that  there  is  nothing  in  the  statute  imposing  the  duty  on  a 
railroad  company  to  furnish  public  warehouse  facilities,  or  to  engage  in  the  business 


of  public  warehousing,  and  issue  receipts  to  meet  the  wants  or  convenience  of  members 
of  a  trading  exchange.  It  may  be  conceded  that,  as  incidental  to  their  duty  to  trans¬ 
port  grain  in  bulk,  railroad  companies  may,  under  some  circumstances,  have  the 
power  to  furnish  storage  room  for  grain  at  important  transfer  points  temporarily,  to 
enable  the  owner  to  collect  enough  for  a  cargo  where  the  grain  is  to  be  reshipped  by 
water,  and  it  is  well  known  that  many  railroads  maintain  grain  elevators  for  such 
purposes;  but  such  storage  contemplates  a  rotation,  so  that  no  one  shipper  or  con¬ 
signee  can  monopolize  all  the  storage  room,  and  hold  the  same  indefinitely,  or  until 
the  market  seems  to  j  ustify  him  in  selling  his  grain.  The  duty  of  the  railroad  company 
to  the  public  to  transport  all  the  grain  that  is  offered  for  transportation  forbids  the 
company  from  adopting  a  method  of  business  which  would  permit  third  parties,  over 
whom  the  company  has  no  control,  to  use  its  storerooms  and  warehouses  indefinitely, 
to  the  exclusion  of  other  patrons  and  the  embarrassment  of  the  company  in  the  per¬ 
formance  of  its  duty  as  a  carrier.  The  combined  capacity  of  the  two  elevators  in 
question  is  2,500,000  bushels,  which  is  less  than  10  per  cent  of  the  grain  annually 
transported  to  Chicago  by  the  Illinois  Central  Railroad  Co.  If  appellants’  contention 
is  sustained,  it  would  be  possible  for  one  buyer  of  grain  to  monopolize  all  the  bins 
in  these  two  elevators.  One  person  might  thus  become  the  owner  of  all  the  grain  in 
the  elevators.  Appellants  would  compel  the  railroad  company,  or  its  lessees  in 
charge  of  the  elevators,  to  issue  such  owner  warehouse  receipts  for  the  grain  stored. 
As  long  as  the  owner  is  willing  to  pay  storage  charges  to  a  public  warehouse,  we  know 
of  no  law  limiting  the  time  of  storage.  Under  the  possible  condition  suggested,  the 
ability  of  the  railroad  company  to  serve  the  public  would  be  dependent  upon  the 
will  and  pleasure  of  the  owner  of  the  grain  in  the  elevators.  While  this  might  be  a 
great  convenience  to  persons  engaged  in  trading  on  the  board  of  trade,  we  are  unable 
to  see  how  the  public  generally  will  be  benefited,  or  the  railroad  company  mil 
thereby  be  the  better  able  to  discharge  its  duties  as  a  carrier.  The  producer  and  con¬ 
sumer  of  grain  alike  require  the  services  of  railroad  companies  to  transport  grain  from 
the  former  to  the  latter,  but  neither  will  be  benefited  by  having  the  grain  lodged  in 
a  public  warehouse  at  some  intermediate  point  for  an  indefinite  time,  in  order  to 
allow  speculators  to  use  the  receipts  representing  such  grain  as  a  trading  commodity. 
That  a  railroad  company  has  no  power,  either  express  or  implied,  to  own  and  operate 
a  public  warehouse  as  an  incident  to  public  purposes  as  a  public  carrier  is,  in  our 
opinion,  supported  by  sound  reason  and  authority. 

rstate  commerce  law  the  carriers  are  re¬ 


regular  tariffs  designating  any  services — 


such  as  elevating,  storing,  conditioning  and  generally  warehousing 
grain — which  they  provide  in  the  course  of  transportation.®®  As  a 
general  rule,  if  the  carrier  undertakes  to  transfer  grain  from  car  to 
car  or  from  vessel  to  car,  or  vice  versa,  whether  the  service  be  per¬ 
formed  by  its  own  agents  or  by  contract,  such  service  must  be  speci¬ 
fied  in  a  published  tariff.  If,  however,  “elevation’’  is  absorbed  in 
the  rate,  as  has  been  customary  practice  at  Buffalo  and  New  York 
City,  the  publication  of  a  through  rate  is  sufficient  authority  for 
furnishing  the  transfer  service  free  of  additional  charge.®^  The 
publication  of  additional  rates  for  elevation  and  warehousing  services 
indicates  that  such  services  are  additional  to  the  line  haul  and  are 
not  included  in  the  established  freight  rates.  For  example,  the 
lollowing  tariff  (I.  C.  C.  No.  6714)  became  effective  upon  export 
grain  received  by  the  Western  Maryland  Railway  Co.,  at  the  Port 
Covington  Elevator,  Baltimore,  June  23,  1920: 


60  Interstate  Commerce  Act,  sec.  6,  as  amended  Feb.  28, 1920  (24  Stat.  L.,  379;  25  Stat.  L.,  855;  34  Stat.  L., 
584;41  Stat.L.,483). 

61  See  notes  15  and  64. 

62 1.  C.  C.  Conference  Ruling  59:  “  Where  connecting  lines  have  united  in  publishing  a  joint  through  rate 
between  two  points  it  is  the  sense  of  the  commission  that  it  is  the  duty  of  the  carriers  in  the  route  to  pro¬ 
vide  the  car  and  permit  it  to  go  through  to  destination  or  to  transfer  the  property  en  route  to  another  car 
at  their  own  expense.  (Affirmed  in  ruling  339.)” 


106 


TERMINAL  GRAIN  MARKETING. 


EXPLANATORY  STATEMENT, 

For  charges  on  domestic  (other  than  coastwise)  and  coastwise  grain,  refer  to  I.  C.  0. 
Nos.  6712  and  6713  or  reissues  thereof. 


APPLICATION  OF  TARIFF. 

The  charges  named  in  this  tariff  on  export  grain  apply  on  shipments  delivered  to 
vessels  at  Port  Covington  elevator,  destined  to  foreign  countries,  including  Cuba 
and  the  insular  possessions  of  the  United  States;  also  Panama  Canal  Zone. 

ELEVATOR  CHARGES. 

The  following  charges  which  are  in  addition  to  the  rates  for  transportation,  will  be 
made  for  the  various  services  at  the  Port  Covington  elevator  (Baltimore),  Maryland: 

INSPECTION. 

No  grain  will  be  received  in  store  until  it  has  been  inspected  and  graded  by  authorized  ' 

inspectors,  unless  by  special  agreement. 

The  right  is  reserved  to  decline  to  receive  or  store  unsound  or  unmerchantable  grain 
or  grain  from  vessels. 

INSURANCE.  !i 

*  Unless  otherwise  instructed  by  owners,  this  company  will  cause  to  be  insured 
against  loss  by  fire,  for  account  of  whom  it  may  concern  all  grain  while  in  Port  Cov¬ 
ington  elevator  at  annual  rate  of  25  cents  per  $100.00  of  value  and  for  shorter  periods 
at  short-term  percentages  of  that  rate  as  promulgated  by  the  Association  of  Fire  Under¬ 
writers  of  Baltimore  City, 

Loss  or  damage  by  fire  on  grain  not  so  insured,  and  loss  or  damage  by  deterioration 
from  heating  or  other  inherent  causes  at  owner’s  risk. 

ELEVATOR  CERTIFICATES,  WEIGHTS,  ETC. 

Elevator  certificates  will  be  issued  for  the  actual  weight  of  the  grain  received,  and  jj 
elevator  charges  will  be  based  thereon.  Freight  charges  will  be  collected  on  actual  | 
weight,  subject  to  minimum  carload  weight  of  governing  tariff.  f 


WAREHOUSE  RECEIPTS. 


Warehouse  receipts  will  be  issued  by  the  superintendent  of  the  elevator 
office  upon  the  payment  of  freight  and  charges. 

SCREENING,  BLOWING,  MIXING,  TRIMMING,  ETC. 


Handling . . . . . per  bushel  - . 

Screening  and  blowing . do. . . . 

The  maximum  charge  for  both  mixing,  blowing,  and  screening  of  part  or  all  of 

any  parcel  (the  rate  to  apply  on  entire  parcel) . per  bushel. . 

Mixing  to  apply  on  total  quantity  mixed . . . do _ 

Delivering  in  bags  (specific  weights),  sewing  or  tying  to  be  performed  by  the 

owners . ^ . . . per  bushel  - . 

Reloading  or  trimming  cars . per  car. . 

DRYING  (see  note). 


Corn,  white,  yellow,  or  mixed: 

No.  1 . per  bushel.. 

No.  2 . do _ 

No.  3 . do _ _ 

No.  4 . do. . . . 

No.  5 . do _ 

No,  6 . . . do _ 

Sample  grade  (includes  hot,  fire-burned  and  infested  with  live  weevils  or 
otherwise  of  distinctly  low  quality): 

Dried  for  higher  grade . per  bushel. . 

Dried  for  sample  grade . do _ 


at  his 


Cents. 


$1 


i  i; 

i 

00 


Cents. 

i 

i 

i 

i 

1 


2i 


*  Change. 


RAILROADS  AND  TERMINAL  ELEVATORS. 


107 


WTieat: 


Nos.  1,  2,  and  3 . 

No.  4 . 

No.  5 . 

Sample  grade: 

To  be  dried  for  higher  grade . 

To  be  dried  for  sample  grade . 

Rye: 

No.  3 . 

No.  4 . 

Rejected . 

Cents. 

1 

11 

21 

i 

1 

11 


All  loss  of  weight  to  be  borne  by  the  owners  of  the  grain. 

The  above, rates  will  be  charged  upon  the  weight  of  the  grain  after  being  dried. 

Note,— This  company  does  not  guarantee  to  dry  grain  within  any  specified  time 
and  will  not  be  responsible  for  deterioration  of  grain  due  to  delay  in  passing  through 
drier.  Grain  ordered  through  the  drier  will  be  handled  as  promptly  as  possible, 
taking  its  regular  turn  according  to  the  date  the  order  for  drying  is  received  at  the 
elevator  office. 

STORAGE. 


On  grain  from  cars  for  first  twenty  (20)  days,  or  any  part  of  same,  including  re¬ 
ceiving,  also  delivery  in  bulk  to  vessels  or  cars . per  bushel. . 

On  bulk  grain  (all  grades  except  salvage  grain)  from  vessels  for  the  first  twenty 
(20)  days,  or  any  part  of  same,  including  receiving,  also  delivery  in  bulk  to 

vessels  or  cars . per  bushel. . 

Each  succeeding  five  (5)  days  or  part  of  same . do _ 


Cents. 

1 

2 


[FileTL-846.  Mailing  list  No.  592.  (P.  O.  No.  273.)  750.] 


The  following  extracts  from  an  Erie  Railroad  tariff  illustrates 
present  practice  as  to  free  elevation  and  allowances  at  New  York: 

Graded  grain  ordered  afloat  on  arrival  will  be  delivered  in  boats  in  lots  of  not  less 
than  4,000  bushels  to  any  customary  place  of  delivery  within  the  free  lighterage  limits 
of  New  York  Harbor,  without  extra  charge,  and  consignee  will  be  allowed  four  (4) 
days  to  discharge  the  grain.  *  *  * 

Grain,  in  bulk,  carloads,  consigned  to  New  York,  lighterage  free,  which  has  arrived 
via  this  company  and  been  delivered  to  public  elevator  on  Erie  Railroad  tracks  at 
J  ersey  City,  may  be  delivered  from,  at,  or  through  such  elevators,  or  it  may  be  reloaded, 
in  carloads  of  40,000  pounds  or  more,  in  bulk,  into  cars  and  delivered  at  regular  stations 
of  this  cornpany  in  New  York  and  Brooklyn  at  which  grain  is  handled  *  *  *  to 
private  sidings  on  Erie  Railroad  in  J  ersey  City  and  to  float  bridges  of  connecting  lines  in 
New  York  Harbor  and  to  connecting  lines  at  Weehawken.  *  *  * 

When  delivery  is  made  in  bulk  from  public  elevator  on  Erie  Railroad  tracks  at 
J  ersey  City,  by  boats,  in  accordance  with  lighterage  rules  and  regulations,  an  allowance 
of  60  cents  per  net  ton  will  be  made  to  such  elevator  for  lighterage  service. 

It  is  apparent  that  railroad  elevators  as  at  present  operated  do 
not  attempt  to  distinguish  between  transportation  elevation  and 
commercial  elevation.®* 

Utilization  of  capacity. — It  has  been  alleged  that  the  railroad 
elevator  as  operated  by  the  railroad  agents  for  various  shippers  can 
not  hope  to  utilize  the  capacity  of  the  house  to  any  such  degree 
as  is  possible  in  the  case  of  the  private  operator  who  has  entire  con- 


63 1.  C.  C.  No.  16225,  effective  Jan.  17, 1921. 

6<  This  distinction  was  made  by  the  Interstate  Commerce  Commission,  1912  (In  the  matter  of  elevation 
allowances,  etc., 24  I.  C.  C.,  197),  wdth  the  following  comment: 

“There  are  two  kinds  oi  elevation,  one  of  which  may  be  termed  transportation  elevation,  consisting 
of  the  passing  of  the  grain  through  an  elevator  for  the  purpose  of  transferring  it  from  car  to  car  and  obtain¬ 
ing  its  weight,  and  commercial  elevation,  which  involves  various  processes  in  the  treatment  of  the  grain 
itself,  like  cleaning,  mixing,  clipping,  drying,  etc.  The  first  sort  of  elevation  is  an  incident  to  the  trans¬ 
portation  of  the  grain,  the  second  to  the  merchandising  of  the  grain. 

^  ^  ^  ^  ^  ^  )(c 

“It  is  extremely  difficult  to  separate  transportation  elevation  from  commercial  elevation.  Both  things 
are  part  of  the  same  general  process.  The  same  plant  facilities,  the  same  power,  the  same  gang,  are  em¬ 
ployed,  and  the  commercial  process  go  on  at  the  same  time.  It  has,  therefore,  been  found  impossible  to 
separate  the  different  items  of  expense  and  to  say  with  confidence  this  belongs  to  transportation  and  this 
to  commercial  elevation.” 


108 


TERMINAL  GRAIN  MARKETING. 


trol  of  the  disposition  of  all  grain  received  in  store.  However,  an 
examination  of  the  operating  methods  of  the  more  efficient  railroad 
elevators  shows  that  such  is  not  necessarily  the  case.  The  rail¬ 
road  elevator  is,  to  be  sure,  required  to  store  shipments  received  by 
various  shippers  classified  into  many  varieties  and  grades.  But  it  is 
generally  possible  to  secure  mixing  orders  from  the  owners  of  the 
grain  whereby  several  grades  or  varieties  may  be  mixed  and  rein¬ 
spected,  with  the  result  that  certain  bins  may  be  released  for  new 
receipts.  This  may  be  explained  by  describing  the  operating  meth¬ 
ods  at  a  certain  elevator  on  the  seaboard.  The  superintendent  of 
that  house  has  stated  that  in  1919  he  handled  about  36,000,000 
bushels  of  grain  and  that  at  a  conservative  estimate  he  could  have 
handled  100,000,000  bushels  at  25  per  cent  additional  cost.  Fur¬ 
thermore,  as  it  was,  the  quantit}^  handled  amounted  to  a  capacity 
turnover  of  about  18  times;  that  is,  the  rated  capacity  was  utilized 
one  and  a  half  times  every  month  on  the  average.®^  At  many  times 
during  1919  there  were  from  65  to  70  different  grades  of  grain  included 
in  the  stocks  in  store  in  this  elevator.  As  an  indication  of  the  range 
of  grades  handled  there  were  79  different  grades  in  store  on  June 
21  and  46  different  grades  on  July  6.  To  have  kept  all  of  these 
gradp  separate  for  the  respective  owners  of  the  grain  would  have 
required  special  binning  (such  as  has  been  practiced  at  Buffalo) 
and  would  have  prevented  economical  operation,  since  the  plant 
contains  but  159  bins.  Such  a  condition,  however,  has  been  I 
avoided  by  requesting  owners  to  issue  mixing  orders  when  it  is 
desired  to  release  certain  bins  for  additional  receipts.  At  times 
such  orders  come  from  the  merchants  on  their  own  initiative. 
Frequently,  however,  the  elevator  calls  up  the  board  of  trade  in¬ 
spection  department  and  asks  that  mixing  orders  be  secured  to 
cover  certain  lots  of  grain  represented  by  outstanding  warehouse 
receipts.  The  chief  inspector  of  the  board  thereupon  arranges  with 
the  merchants  interested  to  issue  signed  mixing  orders  whidi  desig¬ 
nate  the  grades,  the  specific  quantities,  and  warehouse  receipts  cov¬ 
ering  these  quantities  so  as  to  relieve  the  elevator  operator  of  all 
responsibility  for  the  mixing  and  reinspection  of  these  lots  of  grain. 
This  practice  appears  to  be  operated  effectively  at  Baltimore  through 
the  harmonious  cooperation  of  elevator  operators,  the  inspection 
department,  and  individual  shippers.  In  that  way  storage  facilities 
are  assured  except  at  times  of  abnormal  congestion  and  the  elevator 
storage  is  utilized  to  an  extent  quite  comparable  with  the  results 
attained  by  most  of  the  private  operators. 

It  appears  that  the  capacity  utilization  of  terminal  elevators  in 
general  increases  in  inverse  ratio  to  the  amount  of  conditioning  (clean¬ 
ing,  drying,  smutting,  mixing,  etc.)  which  is  required.  At  the  ocean 
ports  the  controlling  motive  in  all  operations  is  to  keep  the  traffic 
moving.  Congestion,  blockade,  and  embargoes  lead  to  delays  and 

65  Compare  the  following  statement  (42  I.  C.  C.,  534). 

“Theoretically  an  elevator  will  contain  its  bin  capacity.  Practically  it  is  said  to  be  full  when  75  per 
cent  of  its  capacity  is  in  use.  But  the  working  capacity  fluctuates.  Although  the  identity  of  grain  is 
not  ordinarily  preserved,  the  various  grades  are  separated.  There  are  128  grades  at  Baltimore  and  115 
at  New  York.  In  order  to  move  current  grain  through  to  the  ships,  a  certain  number  of  bins  must  be 
kept  empty.  The  processes  of  mixing,  cleaning,  blowing,  screening,  drjdng,  etc.,  require  space.  Bins 
are  often  not  filled,  but  they  can  not  be  further  utilized  without  commingling  therein  different  grades  of 
^ain.  Por  example,  the  aggregate  bin  capacity  of  the  Baltimore  elevators  of  the  Baltimore  &  Ohio  and 
the  Pennsylvania  Railroads  is  4,800,000  bushels.  The  working  capacity  would  be  approximately  75  per 
capacity,  or  3,600,000  bushels.  During  the  year  1915  these  elevators  handled  approximately 
90,000,000  bushels  of  grain,  or  during  the  year  were  emptied  and  filled  on  an  average  every  12  working  days.” 


RAILROADS  AND  TERMINAL  ELEVATORS. 


109 


demurrage  charges  on  cars  and  vessels ;  and  demurrage  is  the  veritable 
bugbear  of  the  exporter.  At  Buffalo,  which  is  largely  a  transfer 
point  (except  during  the  winter  months),  special  binning  of  large 
shipments  is  a  customary  practice,  and  every  effort  is  made  to  move 
the  grain  so  as  to  increase  capacity  turnover  and,  in  consequence, 
the  transfer  earnings.  At  the  primary  markets,  on  the  other  hand, 
the  storage  factor  is  more  prominent,  storage  and  conditioning 
charges  must  be  considered  as  sources  of  income,  and  both  capacity 
turnover  and  capacity  utilization  are  relatively  less.  At  such  points 
the  railroad  elevator  may  often  be  an  unprofitable  enterprise.  And, 
since  the  carrier  is  interested  primarily  in  moving  freight,  there  has 
been  a  general  tendency,  already  discussed,  to  lease  the  elevators  at 
primary  markets  to  private  operators.  From  the  larger  viewpoint, 
however,  this  may  not  be  the  best  solution  of  the  problem.  While 
the  railroads  may  have  little  direct  interest  in  grain  elevators  except 
as  transfer  facilities,  this  situation  is  no  reason  why  the  larger  problem 
of  storage  or  warehousing  should  be  neglected,  nor  why  the  railroads — 
since  they  have  in  fact  so  largely  entered  this  field — should  not  assist 
in  the  solution  of  this  problem  (Chap.  IV). 


56976°— 22 - ^9 


5^ 


Chapter  IV. 


WAREHOUSING  AND  STORAGE  AT  TERMINAL  POINTS. 

Section  1.  The  terminal  elevator  system  in  general. 

Necessity  of  terminal  storage. — Extensive  elevator  pxants  are 
operated  at  numerous  terminal  points  ^  in  the  United  States  for  the 
purpose  of  storing,  conditioning,  and  shipping  the  surplus  supplies  of 
grain  received.  As  shown  elsewhere  in  the  report,  a  large  proportion 
of  each  marketed  crop  is  moved  from  the  farms  and  country  shipping 
stations  soon  after  the  harvesting  season,  and  the  system  has  devel¬ 
oped  of  storing  surplus  stocks  largely  at  terminal  points.  Grain  at 
terminal  points  is  readily  available  for  consumption  or  shipment  and 
terminal  market  warehouse  receipts  are  high-grade  collateral. 

The  elevators  constitute  the  largest  fixed  assets  of  the  grain  trade 
at  terminal  points.  They  are  operated  to  a  varying  extent  by  deal¬ 
ers,  consumers,  common  carriers,  and  warehouse  companies.  The 
aggregate  rated  storage  capacity  ^  in  the  United  States,  as  reported 
from  various  important  terminal  markets,  on  July  30,  1920,  was  over 
260,000,000  bushels.^ 

Description  of  terminal  elevator  plants  and  facilities. — 
The  typical  elevator  for  storing  and  shipping  grain,  whether  located 
at  an  interior  railroad  terminal  or  at  an  ocean  port,  usually  includes 
the  following  facilities:  (1)  Unloading  pits  or  hoppers  for  receiving 
the  grain  from  railroad  cars  on  the  switch  track;  (2)  elevating  legs 
equipped  with  buckets  on  an  endless  chain  or  belt  for  carrying  grain 
to  the  top  of  the  house  above  the  storage  bins ;  (3)  hopper  scales  above 
the  storage  bins  for  weighing  the  grain  so  received  (in  case  it  has  not 
already  been  weighed  on  track  scales  when  spotted  for  unloading); 
(4)  a  system  of  conveying  belts  for  transferring  grain  from  one  part 
of  the  house  to  another  or  to  place  it  in  position  for  loading;  (5)  a 
workhouse  containing  special  bins  and  machinery  for  cleaning, 
drying,  mixing,  and  variously  conditioning  the  grain  prior  to  storage 
or  transfer  to  a  car  or  vessel  for  shipment;  (6)  one  or  more  batteries 
of  storage  tanks  or  bins.  The  elevator  used  primarily  for  storage 
may  be  equipped  with  as  many  tanks  as  desired  in  connection  with 
the  transferring  and  conditioning  machinery  described.  The  ele-^ 
vator  used  primarily  for  transfer  purposes  will  contain  fewer  storage 
tanks  and  the  workhouse  will  accordingly  be  a  more  essential  part 
of  the  equipment.  The  tanks  may  be  constructed  of  wood,  concrete, 
tile,  or  steel,  and  the  fire  risk  and  corresponding  insurance  rate  at¬ 
tached  to  the  grain  in  store  will  vary  accordingly.  The  insurance 
rates  on  elevators  in  the  same  terminal  market  frequently  vary  from 
as  high  as  $2,50  to  as  low  as  15  cents  per  $100  per  annum. ^ 

1  See  Appendix  Table  11.  . *  * 

*  Excluding  mill  and  manufacturing  storage. 

*  See  Appendix  Tables  6-11. 

<  The  insurance  rate  quoted  on  the  pubhc  elevator  operated  by  the  port  commissioners  at  New  Orleans 
is  13  cents  per  3100;  the  rate  for  one  of  the  Peoria  elevators  in  1919  was  33.34. 


WAREHOUSING  AND  STORAGE. 


Ill 


The  following  description  of  a  fairly  modern  terminal  elevator  in 
operation  at  Chicago  includes  the  essential  features  of  such  a  plant: 

The  elevator  is  situated  on  a  bolt  railroad  outside  the  city  limits.  It  has  a  rated 
capacity  of  about  1,000,000  bushels,  one-fourth  of  which  is  included  in  the  workhouse. 
The  construction  is  concrete  throughout. 

On  one  side  of  the  house  there  are  three  unloading  pits  directly  under  track  scales 
upon  which  the  cars  can  be  drawn  from  the  switch  tracks  where  they  are  delivered. 
On  the  other  side  of  the  house  there  are  two  pits  which  can  also  be  used  for  unloading, 
but  the  weights  for  grain  unloaded  on  this  side  must  be  obtained  from  the  hopper  scales 
at  the  top  of  the  house.  Each  of  the  five  unloading  pits  is  provided  with  an  elevating 
leg  and  there  are  also  four  smaller  legs  for  elevating  into  the  various  workhouse  bins 
or  directly  to  the  cleaning  machines. 

The  cars  are  moved  up  for  unloading  by  means  of  automatic  car  pullers  and  auto¬ 
matic  grain  shovels  are  used  for  each  operation.  Two  shovels  attached  to  cables  are 
used  in  each  car.  The  car  is  weighed  before  the  seal  is  broken  and  after  the  grain  has 
been  removed  to  determine  the  net  weight.  Automatic  scales  are  used,  and  the  weights 
are  recorded  on  small  slips  inserted  in  a  registering  device.  The  weighing  is  done 
by  an  employee  of  the  elevator  and  superintended  by  a  representative  of  the  weigh- 
master  of  the  board  of  trade. 

Grain  flows  into  the  pits  and  down  into  the  boot,  an  iron  receptacle  through  which 
the  baskets  of  the  elevating  legs  pass.  The  buckets  carry  the  grain  to  the  top  of  the 
house  and  dump  it  into  the  spout  through  which  it  passes  into  the  garner  which  has 
been  selected  to  receive  the  particular  carload.  From  the  top  floor  where  the  grain 
is  thus  received  spouts  are  directed  to  the  various  bins  and  the  grain  can  be  spouted 
from  any  garner  to  any  tank  in  the  workhouse  or  can  be  directed  onto  a  conveyor 
belt  ana  conveyed  out  over  a  storage  tank  where  it  is  to  be  stored.  Grain  is  taken 
off  from  the  conveyor  belt  through  a  machine  called  a  tripper,  which  runs  on  steel 
tracks  across  the  top  of  the  bins  and  can  be  set  at  any  point  on  the  conveyor  belt. 
As  there  are  three  rows  of  tanks  and  five  tanks  in  each  row,  there  are  three  conveyor 
belts  and  three  trippers.  As  the  belt  runs  into  a  tripper  it  is  flattened  out  and 
diverted  downward,  causing  the  grain  to  be  dumped  into  a  spout  and  thence  into  the 
desired  tank. 

If  necessary  the  ^ain  can  be  conveyed  into  the  drying  tanks,  of  which  there  are 
three ;  and  when  it  is  in  such  poor  condition  that  it  does  not  flow  readily  through  the 
spouts  screw  conveyors  are  used  to  convey  the  grain  into  these  drying  tanks. 

On  the  scale  floor  are  the  three  hopper  scales  for  weighing  the  grain  received  on  the 
loading-out  side  of  the  house,  and  also  for  weighing  all  grains  shipped  out  of  the  house. 
These  scales  are  of  a  similar  character  to  those  on  the  grain  floor,  recording  automatically 
the  weight  of  the  grain  in  the  scales.  On  this  floor  are  three  separators  for  taking  the 
coarse  &t  and  chaff  from  grain.  These  machines  are  of  the  screen  variety,  there 
being  three  mesh  screens  of  different  sizes.  The  grain  goes  into  the  top  of  the  machines 
through  a  spout,  falls  onto  a  very  coarse  meshed  screen  which  takes  off  any  larger 
sticks  and  stones,  the  smaller  stuff  falling  with  the  grain  onto  another  screen  of  slightly 
smaller  mesh.  The  second  screen  removes  more  chaff  and  dirt,  and  the  grain  then 
goes  onto  a  screen  of  still  smaller  mesh  which  removes  all  small  seeds,  allowing  the 
grain  to  pass  off  into  a  spout  and  so  on  down  into  a  bin.  The  dirt  and  chaff  falls  from 
the  machine  onto  the  floor,  where  it  is  swept  up  and  sacked.  The  seeds  removed  from 
grain  go  into  a  seed  bin. 

There  are  also  five  machines  known  as  oat  clippers.  These  machines  are  used  for 
clipping  oats  for  the  purpose  of  increasing  the  weight  per  bushel.  They  can  also  be 
used  to  scour  wheat  to  remove  smut.  For  this  latter  purpose  a  lime  preparation  is 
necessary. 

For  separating  oats  from  wheat  there  are  four  machines,  known  as  Richardson  oats 
separators.  These  machines  consist  of  a  number  of  steel  plates  containing  numerous 
small  pockets,  over  which  brushes  are  revolved.  The  oats  being  longer  than  the 
wheat,  can  not  enter  the  indentations  on  the  metal  plates  and  are  brushed  off,  while 
the  wheat  is  saved.  The  oats  pass  into  one  spout  and  into  the  oat  bin  and  the  wheat 
goes  into  another  bin  through  another  spout.  There  is  another  machine  for  removing 
the  oats  from  grain  on  this  floor.  This  machine  operates  on  a  suction  principle.  The 
grain  is  introduced  into  the  top  of  the  machine  and  falls  through  an  air  current  which 
catches  the  light  oats  and  draws  them  off  and  allows  the  heavier  grain  to  fall  into  a 
spout  and  into  a  bin.  This  machine  can  be  used  for  removing  any  grain  or  seeds 
that  is  considerably  lighter  than  other  grain  in  the  mixture.  It  would  not,  however, 
separate  wheat  and  barley  or  rye  and  barley. 

In  the  basement  of  the  elevator  are  three  belt  conveyers  which  run  under  the 
storage  tanks.  When  grain  is  to  be  removed  from  the  tanks  the  proper  bin  is  opened 


112 


TERMINAL  GRAIN  MARKETING. 


at  the  bottom  and  the  grain  falls  onto  the  conveyer  belt  and  is  carried  along  under  the 
tanks  into  the  basement  of  the  workhouse  and  dumped  into  a  pit.  From  this  pit  it 
is  elevated  by  a  leg  to  the  top  of  the  house  and  sent  to  a  cleaning  machine,  a  workhouse 
bin,  or  weighed  out  by  the  hopper  scales,  whichever  is  desired.  Another  screw  con¬ 
veyer  is  also  located  in  the  bottom  of  the  house.  This  conveyer  is  reversible  and  is 
for  the  purpose  of  transferring  grain  to  various  parts  of  the  house,  thus  saving  elevating. 

On  the  unloading- side  of  the  house  are  four  unloading  spouts  connected  with  the 
scale  hoppers.  When  grain  is  to  be  shipped  it  is  weighed  and  then  released  from  the 
scale  hopper,  whence  it  falls  through  the  loading  spout  into  the  car. 

The  driers,  of  which  there  are  three,  are  located  just  outside  the  workhouse.  At 
the  top  of  the  drier  is  a  round  tank,  which  is  the  outlet  for  the  conveyers  from  the 
workhouse.  Directly  below  these  tanks  are  the  driers  themselves.  These  are  large 
tanks,  the  upper  halves  of  which  are  subjected  to  a  current  of  hot  air  which  is  driven 
into  the  tank  by  a  blow  fan  through  perforated  ducts. 

As  the  grain  falls  from  the  tank  on  the  top  of  the  drier  into  this  chamber  the  current 
of  hot  air  dries  the  grain.  The  lower  half  of  the  tank  is  used  to  cool  the  grain.  This 
tank  is  provided  with  ducts  which  are  opposite  windows  that  are  kept  open.  At  the 
other  end  of  the  duct  is  a  suction  fan  which  draws  the  cool  air  through  the  grain  and 
rapidly  lowers  its  temperature.  From  this  bin  the  grain  drops  through  funnels  into 
another  trough,  and  so  on  into  a  conveyer  which  carries  it  back  to  the  workhouse. 
As  the  grain  falls  through  these  funnels  the  man  in  charge  of  the  drying  is  able  to 
obtain  a  sample  and  ascertain  whether  the  grain  is  sufficiently  cool  and  dry.  A  car 
of  heating  grain  can  be  cooled  by  this  latter  process  in  a  surprisingly  short  time. 

This  elevator  lacks  a  vacumn-cleaning  system,  and  some  of  the  cleaning  equipment 
is  not  of  the  most  modern  type,  but  in  general  it  is  considered  one  of  the  most  efl&- 
cient  houses  in  the  market. 

A  published  description  ^  of  the  recently  completed  (1920)  Penn¬ 
sylvania  Railroad  elevator  at  Baltimore,  while  not  based  on  actual 
performance,  presents  the  engineering  detail  of  a  modern  railroad 
elevator  for  bulk  grain: 

The  new  Northern  Central  Canton  elevator  has  ample  trackage  and  a  water  frontage 
which  may  accommodate  five  ocean  steamships  at  one  time.  The  loading  gallery 
Avith  its  six  42-inch  belts  and  the  gantries  in  front  of  the  workhouse  can  all  be  utilized 
simultaneously;  as  much  as  60,000  bushels  of  grain  per  hour  can  be  loaded  into  one 
hatchway,  if  desired.  The  details  of  the  unloading  equipment  will  be  given  separate 
treatment  later. 

The  house  is  in  eight  units:  The  workhouse;  three  batteries  of  storage  bins  known 
as  annex  1,  annex  2,  annex  3;  the  drier  building;  boiler  house;  dust  house;  and  office 
building.  The  workhouste  has  four  unloading  pits  from  which  grain  is  received  by 
conveyer  from  car  unloaders;  19  stands  of  elevators;  10  No.  15  Invincible  warehouse 
separators  with  a  combined  capacity  of  75,000  bushels  per  hour;  23  solid  lever  scales 
made  by  the  Standard  Scale  Co.;  14  belt  conveyers,  42  inches  wide,  carry  the  grain 
from  the  head  house  to  the  storage  bins  or  'drier,  and  as  each  of  the  conveyers  has  a 
capacity  of  20,000  bushels  per  hour  there  is  no  danger  of  congestion  in  the  head  house, 
even  though  the  extreme  limit  of  close  to  400  cars  a  day  are  handled.  The  workhouse 
has  a  bin  capacity  of  650,000  bushels.  Including  the  storage  tanks,  the  drier,  and 
the  workhouse,  the  plant  has  a  total  of  522  bins. 

The  dimensions  of  the  various  buildings  are  as  follows:  The  head  house  is  83  by 
212  feet  on  the  ground  plant  and  225  feet  high;  the  original  storage  annex  No.  3  is 
200  by  100  feet  and  110  feet  high;  annex  No.  1,  just  completed,  is  225  by  195  feet  on 
the  ground  and  125  feet  high;  and  annex  No.  2,  which  is  not  yet  completed,  is  240 
by  195  feet  and  125  feet  high.  The  drier  house  is  34  by  64  feet  on  the  ground  plan; 
the  boiler  house,  52  by  47  feet;  and  the  dust  house,  36  by  36  feet.  The  boiler  house 
is  equipped  with  three  200-horsepower  boilers. 

The  drier  house  is  equipped  with  Morris  driers  of  4,000  bushels  per  hour  capacity. 
The  drier  can  be  set  to  extract  any  desired  amount  of  moisture  and  will  perform  its 
function  without  further  attention.  Grain  can  be  sent  from  the  scale  or  from  any  bin 
to  the  drier  and  discharged  direct  to  a  shipping  bin  or  put  back  into  storage.  There 
are  eight  units  of  500  bushels  each  in  the  drier,  with  grain  storage  of  3,000  bushels 
above  and  below  each.  The  grain  is  held  until  the  house  unit  of  20,000  bushels  has 
been  dried;  then  it  is  all  moved. 


6  From  the  American  Elevator  and  Grain  Trade,  July  15,  1920,  verified  by  the  elevator  agent. 


WAREHOUSING  AND  STORAGE. 


113 


The  car-unloader  building  is  68  by  84  feet.  There  is  a  covered  drip  shed  just 
beyond  the  unloaders  where  the  cars  dry  so  the  water  will  not  drip  into  the  grain 
dump  or  the  machinery  of  the  unloader.  This  drip  shed  is  120  by  80  feet  in  size. 

The  dust  house  is  directly  connected  with  the  Day  dust  collecting  system  of  the 
plant.  The  dust  is  delivered  to  bins  under  which  are  spouts  and  packers  so  that  the 
dust  can  be  sacked  or  loaded  into  cars  in  bulk.  The  office  and  welfare  building  is 
completely  equipped  with  recreation  and  lunch  rooms  on  the  first  floor  and  the  general 

offices  on  the  second  floor.  . 

The  operation  of  the  entire  house  is  by  electricity.  No  device  or  equipment  which 
woul d  eliminate  a  man  or  insure  more  prompt  or  accurate  movement  has  been  omitted.  ^  ^ 

The  house  is  as  near  automatic  as  it  is  possible  to  make  it  and  is  interlocked  in  its 
operations.  The  bins  all  have  an  overflow  check.  When  the  grain  gets  to  a  certain 
level  the  check  automatically  stops  the  elevator  and  the  belt  feeding  the 
elevator  chokes  it  stops  automatically  and  a  special  device  at  the  head  holds  the  belt 
so  that  the  loaded  side  can  not  slip  back.  If  grain  rises  more  than  3  feet  in  the  boot 
the  feed  to  the  boot  is  shut  off  until  it  is  again  at  the  proper  level .  At  every  step  of 
its  progress  through  the  house  the  grain  is  protected  against  misadventure  and  almost 
all  fire  hazards  are  eliminated.  All  the  spouts  have  a  choke  feed,  so  there  is  prac¬ 
tically  no  escape  of  dust  into  the  house  and  consequent  loss  of  weight  from  this  cause. 

The  cars  are  received  over  four  tracks  of  the  Pennsylvania  Road.  The  elevator  yard 
extends  from  the  Canton  Railroad  tracks  to  the  end  of  the  pier  along  which  the  unload¬ 
ing  gallery  extends.  To  obtain  the  maximum  car -handling  capacity  the  Stewart 
link  belt  car  unloaders  are  placed  midway  between  the  Canton  tracks  and  the  pier 
end.  By  this  arrangement  16  loaded  cars  can  be  placed  on  each  of  the  four  tracl^ 
and  unloaded  without  the  use  of  a  switch  engine.  Each  track  has  an  unloader  which 
discharges  to  a  conveyer  belt,  which  in  turn  carries  the  ^ain  to  the  head  house. 

Each  track  is  equipped  with  a  disappearing  barney,  which  ivill  drop  down  below  the 
level  of  the  track  or  rise  up  and  pull  a  string  of  16  cars  either  forward  or  backward  as 
the  operator  of  the  car  unloader  in  the  track  shed  may  desire.  Each  barney  is  con¬ 
trolled  by  heavy  endless  cables.  .  ^  t  i  j 

The  operator  of  each  car  unloader  is  stationed  in  a  glass  house  pst  down  above  and 
beside  the  car  on  his  unloader,  so  that  he  can  easily  see  what  is  going  on  at  every  stage 
of  the  operation.  The  cars  are  not  damaged,  marred,  or  soiled  in  the  operation. 

TOen  with  the  assistance  of  the  barney  the  operator  has  pulled  the  foremost  car 
to  the  middle  of  his  unloader,  he  first  anchors  the  car,  then  pushes  in  the  gram  door 
and  slowly  tips  it  to  different  positions,  so  that  all  grain  will  be  readily  dropped  into 
the  receiving  sink.  A  large  car  is  unloaded  just  as  quickly  as  a  small  car. 

Each  movement  of  the  grain  car  unloaderis  controlled  by  an  individual  motor,  and 
all  motors  are  operated  only  from  the  operator’s  house.  All  motors  and  operating 
devices  are  so  arranged  that  when  the  first  and  each  succeeding  motor  is  set  in  motion, 
each  in  its  order  will  perform  the  service  for  which  it  was  designed  and  automatically 
stop  when  its  cycle  of  operation  is  completed.  When  it  is  completed  it  automatically 

connects  the  next  cycle  of  operation.  .  ,  ,  t. 

The  unloader  is  worked  with  the  services  of  two  men,  one  in  the  operator  s  house, 
and  the  other  to  uncouple  cars  and  operate  the  air  hose  to  dislodge  grain  caught  behind 

linings  or  frame  and  sweep  the  car.  ^  i  .<.1. 

The  operator,  after  getting  car  on  unloader,  starts  motor  No.  1,  which  controls  the 
clamps  at  tliG  Giids  of  tho  car  and  holds  fast  tliG  couplers.  These  clamps  when  not  in 
use  drop  down  below  the  level  of  the  rails  out  of  the  way.  They  are  so  arranged  that 
they  will  firmly  engage  the  couplers  of  cars  of  any  length.  ,  •  n 

When  the  end  clamps  have  exerted  a  certain  pressure,  the  power  is  automatmally 
thrown  out,  and  the  motors  controlling  the  side  supports  are  set  in  operation.  These 
side  supports  move  up  against  the  side  and  sill  of  the  car  on  the  receiving-sink  side, 
and  when  they  have  exerted  a  certain  pressure  the  power  is  automatically  thrown 
off  and  motor  No.  3,  which  controls  the  grain-door  opener,  is  set  in  operation. 

The  t^rain-door  opener  is  operated  by  a  motor  which  moves  it  steadily  in  fixed  lines. 

The  front  of  the  opener  first  drops  so  that  the  lower  edge^rests  on  the  floor  P  the 
doorway.  Two  upright  bars  bear  on  their  faces  small ,  sharp-pointed  pins,  which  imme¬ 
diately  engage  the  outer  surface  of  the  grain  door  just  beside  the  car-door  posts.  Ihe 
grain  door  is  quickly  pushed  in  about  6  inches  and  raised  a  similar  distance  from  the 
floor,  so  as  to  insure  the  breaking  of  all  connection  with  the  doorposts. 

The  grain  door  is  retained  on  the  sharp  prongs  of  the  door  pusher  until  all  ^ain  has 
run  out  and  the  car  has  been  swept  out,  when  the  pusher  is  withdrawn  and  the  gram 
door  drops  to  the  floor  of  the  car  intact  without  being  touched  by  hand. 

As  soon  as  the  grain-door  opener  has  pushed  the  grain  door  to  it  linut,  the  next 
motor.  No.  4,  is  automatically  connected  and  this  motor  quickly  tips  the  car  sidewise 


114 


TERMINAL  GRAIN  MARKETING. 


to  an  angle  of  30°.  As  the  ^ain  door  is  retained  on  the  face  of  the  door  opener,  which 
remains  stationary,  the  tipping  of  the  car  sidewise  greatly  increases  the  opening  below 
the  grain  door  and  permits  the  grain  to  drop  into  the  hopper  of  the  receiving  sink. 

When  the  car  has  been  tipped  sidewise  to  an  angle  of  about  30°,  the  current  is 
automatically  transferred  to  motor  No.  5,  which  in  its  turn  tips  the  car  endwise  to  an 
angle  of  45°  while  it  remains  at  30°  sidewise.  This  permits  the  grain  in  the  up  end 
of  the  car  to  run  out  rapidly.  ^ 

Motor  No._5  is  then  placed  in  reverse  motion,  and  the  car  is  tipped  into  a  directly 
opposite  position,  so  that  all  grain  runs  out  from  other  end  of  the  car  box.  Then 
motor  No.  5  is  again  brought  into  operation  and  car  is  raised  to  a  horizontal  position. 
Motor  No.  4  18  reversed  and  car  is  brought  to  a  normal  position.  The  doorman  then 
enters  with  air  hose  and  dislodges  grain  from  linings  and  sweeps  it  out.  As  motor 
No.  3  is  reversed,  the  grain-door  pusher  is  withdrawn  and  the  grain  doors  or  lumber 
are  dropped  to  the  floor  of  the  car.  The  reversal  of  motor  No.  2  withdraws  the  side 
supports  and  the  reversal  of  motor  No.  1  withdraws  the  coupler  clamps  and  drops 
them  below  the  level  of  the  rails.  ^ 

The  car  door  can  be  removed  in  15  seconds  and  the  car  emptied  in  3  minutes. 
Including  spotting  and  removing  the  car,  the  operation  takes  from  7  to  10  minutes* 
but  it  is  confidently  expected  that  with  practice  this  time  can  be  considerably  re¬ 
duced.  It  is  estimated  that  these  four  unloaders  save  employing  about  68  men  to 
unload  the  same  number  of  cars. 

As  the  grain  is  elevated  to  the  head  of  the  house  another  innovation  is  encountered. 
The  Texas  is  dustless.  The  elevator  heads  are  inclosed  in  iron  housings  which  permit 
no  dust  to  escape.  The  motors  driving  the  elevator  heads  are  direct  connected  to 
Stewart-Falk  helical-cut  herringbone  gears  which  effect  the  reduction  in  the  speed 
for  the  elevator  pulleys  with  a  loss  of  only  2^  per  cent  in  efiiciency  at  the  head  pulley, 
as  against  a  loss  of  15  per  cent  where  rope  drive  is  used.  This  gear  is  the  most  eco¬ 
nomical  device  for  speed  reduction  ever  devised.  As  there  is  600  horsepower  on  the 
elevator  heads  costing  approximately  If  cents  per  horsepower-hour,  you  can  figure 
what  this  saving  of  12^  per  cent  over  ordinary  head  installation  means.  The  backstop 
securely  locks  and  holds  the  belt  if  it  is  stopped  under  load  to  prevent  slipping  back 
under  weight  of  the  full  buckets.  This  head  drive  absolutely  eliminates  any  danc^er 
of  misalignment  or  friction  in  the  elevator  head.  It  is  self-oiling  and  noiseless  and  is 
undoubtedly  one  of  the  greatest  advances  in  elevator  equipment  made  in  years. 
The  bins  and  scale  hoppers  are  equipped  with  a  large  ventilator  which  carriers  off 
the  diist  ^  the  grain  is  discharged,  so  that  the  entire  plant  is  peculiarly  free  from  dust. 
The  distributing  spouts  tinder  the  scales  are  a  great  improvement  over  those  usually 
found.  Instead  of  traveling  on  a  single  wheel  on  the  suspended  circular  track  and 
on  casters  on  the  floor,  these  spouts  have  two  ball-bearing  wheels  on  the  track  and  a 
large  ball-bearing  wheel  on  the  floor  with  the  result  that,  literally,  a  touch  of  the  fin^^er 
will  turn  the  heavy  spout  to  the  desired  position.  ° 

The  power  is  entirely  electric,  150  Westinghouse  motors  supplying  a  total  of  7,500 
horsepower.  Most  of  these  motors  are  direct  connected  and  the  balance  have  Morse 
silent  chain  drive  transmission,  a  total  for  the  latter  of  2,270  horsepower. 

The  loading-out  facilities  of  the  house  are  as  efficient  as  the  other  features.  As  the 
elevator  is  designed  primarily  for  export  business,  vessel  loading,  naturally,  is  given 
the  principal  consideration.  The  loading  gallery  along  the  pier  is  900  feet  long  and 
contains  six  42-inch  conveyors.  Four  of  these  can  all  load  into  one  vessel  or  into 
different  ones  at  the  same  time.  There  are  about  9  miles  of  belting  and  69  conveyors 
in  the  plant.  All  the  conveyors  have  automatic  take-ups  arranged  with  a  counter¬ 
shaft  and  counterweight  on  the  wall. 

There  is  a  marine  leg  for  handling  grain  from  bay  boats,  with  a  capacity  of  about 
5,000  bushels  per  hour,  equipped  with  Webster  machinery  and  with  its  own  scales 
and  cleaner.  There  are  four  bins  in  the  leg,  so  that  the  grain  here  also  may  be  held 
in  store  until  the  unit  amount  is  accumulated  for  movement. 

Floating  elevators. — At  some  of  the  ocean  ports,  notably  New 
York  and  Philadelphia,  floating  elevators  are  operated  for  transfer 
purposes.  These  are  needed  especially  to  serve  liners  at  points  where 
the  vessels  can  not  be  loaded  alongside  a  stationary  elevator  plant, 
and  the  grain  must  be  carried  to  the  vessels  in- barges.  Since  grain 
can  not  be  transferred  economically  with  ship’s  gear  from  barges,  the 
floating  elevator  is  employed.  It  consists  mainly  of  a  hull  which 
carries  a  ‘^marine  leg”  and  a  system  of  discharge  spouts.  Grain 


WAREHOUSING  AND  STORAGE. 


115 


barges  are  towed  to  the  ship’s  side  and  the  floating  elevator  runs  or  is 
towed  alongside  and  transfers  the  grain  over  the  side  of  the  ship.® 

Section  2.  Utilization  of  capacity. 

Variations  in  capacity  turnover. — There  are  wide  variations  in 
the  quantities  of  grain  handled  by  individual  elevators,  depending 
upon  location  and  the  services  customarily  performed.  The  elevator 
operated  by  a  private  dealer  at  a  large  primary  market  is,  as  a  rule, 
used  largely  for  storage  purposes,  and  the  yearly  turnover  of  grain 
per  bushel  of  capacity  is  frequently  much  less  than  that  of  a  house  of 
similar  construction  operated  at  some  break-bulk  point  relatively 
more  distant  from  the  producing  areas;  that  is,  the  yearly  turnover 
varies  according  to  location  in  the  transportation  scheme.  Further¬ 
more,  especially  for  public  elevators,  there  are  marked  variations  in 
the  quantity  handled  as  between  crops — variations  resulting  from 
differences  in  the  availability  of  the  crop  for  milling  or  other  convert¬ 
ing  purposes,  and  differences  in  the  surplus  available  for  export,  as 
well  as  from  general  changes  in  traffic  conditions. 

These  variations  in  capacity  turnover  are  indicated  W  an  examina¬ 
tion  of  a  few  figures  for  specific  elevators  located  at  different  markets 
and  operated  for  somewhat  different  purposes. 

Storage  elevators. — Analysis  of  the  records  of  28  elevators  at 
Minneapolis  showed  that  the  highest  average  capacity  turnover 
for  the  5-year  period  1913-1917  was  6,  i.  e.,  the  total  quantity  han¬ 
dled  during  the  year  was  six  times  the  total  capacity.  This  capacity 
turnover  was  made  by  an  elevator  of  600,000  bushels  capacity  oper-, 
ated  primarily  for  private  account  (although  licensed  by  the  State) . 
The  lowest  turnover  was  0.5.  This  latter  figure  represents  the 
capacity  turnover  of  a  house  rated  at  500,000  bushels  capacity  and 
also  used  primarily  for  private  account  of  the  operator.  The  average 
capacity  turnover  for  the  28  elevators,  aggregating  32,325,000  bushels 
capacity,  was  1.99.  This  figure  indicates  very  clearly  that  the  ele¬ 
vators  at  Minneapolis  haveheen  used  largely  for  storage  for  subse¬ 
quent  consumption  or  in  anticipation  of  shipping  demand. 

At  Coffeyville,  Kans.,  there  is  an  elevator  bonded  under  the  laws 
of  Kansas  which  does  a  general  storage,  cleaning,  clipping,  sacking, 
mixing,  and  transfer  business  in  grain.”  The  rated  storage  capacity 
is  175,000  bushels.  There  were  such  variations  in  the  quantity  han¬ 
dled  as  between  specified  crop  years  that  a  5-year  average  would  be 
misleading.  The  yearly  turnover  was  as  follows: 


Year. 

Bushels 
loaded  out. 

Capacity 

turnover. 

Year. 

Bushels 
loaded  out. 

Capacity 

turnover. 

1  Q1  Q 

300  000 

1.70 

1916 . 

300,000 

1.70 

1  m  /4 

1  ooo’ooo 

5.  70 

1917 . 

860,000 

4, 90 

. 

1915 . 

''450' 000 

2. 60 

Transfer  elevators  in  the  interior. — The  figures  above  are  in  sharp 
contrast  with  those  for  two  small  private  terminal  elevators  operated 
atPekin,Ill.,andforoneatCedar Rapids,  Iowa.  The  first  of  the  two 
Pekin  houses,  with  a  rated  capacity  of  270,000  bushels,  handled  as  a 


6  See  Joint  Report  of  the  New  York,  New  Jersey  Port  and  Harbor  Development  Commission,  1920, 
p.416. 


116 


TERMINAL  GRAIN  MARKETING. 


yearly  average  (1913-1917)  2,513,270  bushels  of  grain,  a  capacity 

^ liouse,  with  a  rated  capacity  of 
100,000  bushels,  made  an  average  capacity  turnover  of  about  11  for 
the  same  period.  The  third  house  (at  Cedar  Kapids),  with  a  rated 
capacity  of  175,000  bushels,  loaded  out  2,800,000  bushels  as  a  yearly 
average,  which  was  a  capacity  turnover  of  16  for  the  same  period. 

Elevators  at  export  points.~The  port  elevators  at  various  points 
have  exhibited  wide  vimations  in  quantity  handled  v.early,  regardless 
ol  war  conditions.  This  appears  in  the  figures  for  three  plants  located, 

rGSDBCtlVGlV.  flitr  NgW  IVToxxra  ^ 


A  .  ’  Orleans,  Newport  News,  and  PorUand,  Me. 

(1)  The  quantities  unloaded  by  the  Trans-Mississippi  Terminal 
Kailroad  Co.  at  New  Orleans,  aggregating  (in  houses  and 
1,350,000  bushels  rated  capacity,  were  as  follows: 


Year. 

Bushels 

unloaded. 

Capacity 

turnover. 

Year. 

Bushels 

unloaded. 

Capacity 

turnover. 

1912-13 . 

8, 565,051 
7,892,592 
13,866, 536 

6.3 

1 91 5-1 6 

6,113,574 
10,612, 616 

1913-14 . 

5.8 

1 91 6-1 7 

4. 5 

1914-15 . 

10.3 

7.  9 

(2)  At  Newport  News  the  Chesapeake  &  Ohio  Railway  Co.  operates 
an  export  elevator  of  1,000,000  bushels  rated  capacity.  The  quan¬ 
tities  loaded  out  yearly  for  three  years  ^  and  the  figures  for  capacity 
turnover  were  as  follows : 


Year. 

Bushels 

unloaded. 

Capacity 

turnover. 

Year. 

Bushels 

unloaded. 

Capacity 

turnover. 

1915 . 

62, 812,440 
50,993,331 

62.8 

51.0 

1917 . 

32,344,430 

32.3 

1916 . 

(3)  At  Portland,  Me.,  the  Grand  Trunk  Railway  Co.  operates  two 
export  elevators  aggregating  2,500,000  bushels  rated  capacity.  The 
quantities  loaded  out  (largely  Canadian  transit  grain)  were  as  follows: 


Year. 

Bushels 
loaded  out. 

Capacity 

turnover. 

Year. 

Bushels 
loaded  out. 

Capacity 

turnover. 

1913 . 

12, 635, 868 
9, 105,301 
15, 772,374 

5.1 

1916 

37,842,841 

12,171,779 

1914 . 

3.6 

6.3 

1917 

15. 1 

1915 . 

4.  9 

Variations  in  stocks  at  terminal  points. — The  utilization  of 
the  elevator  capacity  of  a  given  market  necessarily  varies  with  the 
rapidity  of  rnovement  from  the  producing  areas  and  with  transpor¬ 
tation  conditions  generally. 

Thus  the  average  combined  stocks  of  wheat  in  store  at  the  15 
largest  terminal  markets  showed  a  range  from  69,000,000  bushels 
during  the  first  six  months  of  1919  to  26,000,000  bushels  during  the 
last  six  months  of  1920.  (See  Appendix  Table  4.)  The  average  com¬ 
bined  stocks  of  all  grains  in  store,  as  between  these  periods,  ranged 
from  117,000,000  bushels  to  57,000,000  bushels.  Whereas  about  50 


7  Records  for  1913  and  1914  destroyed  by  fire.' 


WAREHOUSING  AND  STORAGE. 


117 


per  cent  of  the  rated  storage  capacity  at  these  points  was  utilized  ® 
during  the  first  half  of  1919  0^anuary  to  June),  the  average  utilization 
during  thelast  half  of  1920  (July  to  December)  was  less  than  25  per  cent.® 

During  the  two  years  1919  and  1920  the  high  point  for  all  grain 
stocks  in  Chicago  commercial  elevators  was  31,000,000  buSiels, 
reported  on  February  22,  1919.  The  next  highest  was  29,000,000 
bushels  on  November  15,  1919.  The  high  point  for  1920  was 
22,000,000  bushels  on  January  3  (Appendix,  Table  5). 

The  low  points  for  the  two  years  were  reached  on  June  26  and 
July  3,  1920,  when  the  stocks  of  all  grains  were  reported  as  about 
4,000,000  bushels.  The  low  points  for  1919  were  6,000,000  bushels 
on  June  14  and  9,500,000  bushels  on  July  5  (Appendix,  Table  5). 

At  Minneapolis  the  high  point  reached  for  stocks  of  grains  for  the 
years  1919  and  1920  was  31,000,000  bushels  on  February  1,  1919. 
The  high  point  for  1920  was  20,000,000  bushels  on  January  3.  The 
low  point  for  1919  was  9,000,000  bushels  on  August  3,  and  for  1920 
was  about  1,000,000  bushels  on  August  21  (Appendix,  Table  5). 

At  Chicago  the  ratio  of  average  stocks  of  all  grains  to  elevator 
capacity  for  the  two  years  was  about  40  per  cent;  at  Mmneapolis  it 
was  about  36  per  cent. 

At  the  highest  point  reached  by  elevator  stocks  at  Chicago  in  1919 
the  bins  were  loaded  to  about  73  per  cent  of  total  rated  capacity; 
and  at  the  high  point  in  1919  the  utilization  was  about  52  per  cent. 
When  stocks  reached  their  lowest  ebb  at  Chicago  in  1920,  the  ratio 
of  capacity  utilization  was  about  9  per  cent.  At  Minneapolis 
capacity  utilization  in  1919  ranged  from  about  72  per  cent  to  22  per 
cent,  and  in  1920  from  46  per  cent  to  about  3  per  cent. 

At  Buffalo,  which  is  primarily  a  transshipment  point,  utilization 
of  elevator  capacity  was  lower  in  1920  than  in  1919,  but  the  difference 
was  not  so  great  as  at  Chicago  and  Minneapolis.  The  high  point  for 
Buffalo  stocKs  in  1919  was  19,000,000  bushels  (78  per  cent  of  capacity) 
on  November  8,  and  the  low  point  about  3,000,000  bushels  (12  per 
cent  of  capacity)  on  July  12.  The  high  point  for  1920  was  15,()00,000 
bushels  (61  per  cent  of  capacity),  the  low  point  being  1,000,000 
bushels  (4  per  cent  of  capacity)  on  August  21.  From  the  figures 
examined  it  is  clear  that  terminal  stocks  normally  reach  a  low  ebb 
at  the  close  of  each  crop  year.  As  between  1919  and  1920  there  was 
a  marked  difference  in  the  utilization  of  elevator  capacity  during  the 
season  of  heavy  movement.  The  slackening  of  the  movement  from 
country  points  which  followed  the  price  recessions  of  1920  and,  espe¬ 
cially  as  regards  wheat,  the  steady  flow  of  terminal  receipts  into 
export  trade  resulted  in  a  much  lower  utilization  of  elevator  capacity 
at  all  the  larger  terminal  points  (Appendix  Tables  3-5) . 

Elevator  services  enumerated. — In  Volume  II  (pp.  273  and 
274)  are  shown,  in  tabular  form,  the  customary  services  and  charges 
of  terminal  grain  elevators.  In  addition  to  the  services  of  storing 

®  The  capacity  utilization  figures  in  this  section  are  maximum  figures,  since  stocks  in  mill  elevators  are 
appareiitly  often  included  in  the  published  statistics  of  “the  visible  supply”  at  specified  terminals.  The 
distinction  between  commercial  elevator  stocks  and  mill  stocks  does  not  seem  to  be  carefully  drawn  by 
statisticians  in  the  trade.  In  reply  to  an  inquiry  from  the  Commission  one  well-known  commercia  1  agency 
stated:  “The  statistics  referred  to  are  received  by  the  Chicago  Board  of  Trade  and  posted  on  the  black¬ 
board,  and  we  copy  them.  W e  know  of  no  particulars  regarding  them.”  Another  prominent  commercial 
journal  repUed:  “We  aim  to  report  what  we  call  stocks  in  first  hands,  that  is,  stocks  that  are  not  designed 
lor  purely  local  consumption,  and  I  presume  your  ‘storage  and  shipping'  designation  would  cover  the 
greater  part  of  our  stocks  except  perhaps  where  big  wheat  millers  have  stocks  which  are  to  be  ground  and 
shipped  in  the  form  of  flour.  I  would  say  that,  generally  speaking,  they  do  not  cover  purely  local  stocks.” 

®  It  should  be  noted  that  a  100  per  cent  utilization  of  capacity  is  only  theoretically  attainable,  since 
most  elevators  require  a  part  of  the  rated  storage  capacity  for  working  space. 


118 


TERMINAL  GRAIN  MARKETING. 


and  transferring  grain  there  are  several  technical  operations  referred 
to  in  general  as  mixing  and  conditioning. 

The  conditioning  services  of  elevators  are  economically  useful  and 
beneficial  to  the  extent  that  they  prepare  the  grain  to  meet  milling 
requirements,  render  it  merchantable,  and  remove  the  dockage  which 
otherwise  would  increase  the  freight  costs.  Failure  to  clean  the  grain 
in  or  near  to  producing  territory  may  lead  to  congestion  and  of^n 
retards  the  movement  at  export  points.  It  is  said  that  ‘^cleaning 
and  blowing’’  decreases  the  fire  hazard.  However,  conditioning  as 
performed  by  the  private  elevator  operator  is  based  on  merchandis¬ 
ing  considerations,  and  the  services  are  usually  performed  with  a  view 
to  securing  incidental  profits  from  the  sale  of  screenings,  and  im¬ 
provement  of  the  average  grade  through  mixing  various  lots,  as  well 
as  the  enhancement  in  value  resulting  from  the  removal  of  actually 
objectionable  features. 

The  specific  services  performed  by  terminal  elevators  may  be  de¬ 
fined  as  follows : 

(a)  Storage, — ^This  term  refers  to  storing  in  elevator  tanks  or  bins  in 
bulk  with  other  grain  of  the  same  variety  and  grade.  When  stored 
separately  it  is  ‘^special  binned.”  Usually  ‘Uree  storage”  is  allowed 
for  an  initial  period  varying  from  5  to  20  days  as  between  markets — 
that  is,  the  initial  storage  cost  for  grain  temporarily  held  to  be 
unloaded  to  another  carrier  is  included  in  the  service  known  as 
elevation.” 

(5)  Unloading  and  loading — receiving  and  loading — elevation. — The 
service  described  by  these  various  terms  is  a  traffic  operation  and  is 
performed  largely  as  a  transportation  matter.  It  involves  the  trans¬ 
fer  of  grain  from  car,  barge,  or  vessel  to  another  connecting  carrier 
but  presupposes  that  the  grain  can  be  loaded  out  within  a  specified 
p^eriod  after  being  placed  in  the  elevator’s  bins,  e.  g.,  20  days. 
Otherwise  a  ‘^storage”  charge  will  accrue. 

(c)  Direct  transfer. — This  refers  to  the  operation  of  transferring 
from  car  to  car,  irom  car  to  vessel  or  barge,  or  vice  versa,  in  one 
operation;  i.  e.,  without  unloading  the  grain  into  a  storage  tank.  For 
example,  the  charge  in  Kansas  City  for  ‘^receiving  and  loading,  in¬ 
cluding  first  10  days’  storage”  (effective  Nov.  5,  1918),  was  1  cent 
per  bushel,  while  the  charge  for  a  ‘‘direct  transfer”  was  one-half 
cent  per  bushel. 

(d)  Cleaning. — When  cleaning  involves  screening  only,  the  charge  is 
usually  established  and  published.  At  times  it  is  necessary  to  em¬ 
ploy  special  machinery,  as  an  oats  separator,  to  remove  that  grain 
from  wheat,  or  a  needle  machine  to  remove  oats  from  barley  or  flax 
from  wheat.  In  such  a  case  the  process  may  require  more  time  than 
for  screening  and  charges  are  often  a  matter  of  private  arrangement. 
Several  of  the  elevators  on  the  seaboard,  however,  publish  regular 
charges  for  these  services. 

(e)  Cooling  —  blowing  —  turning  —  running  to  condition.  — These 
terms  relate  to  similar  and  sometimes  identical  services  performed 
to  prevent  deterioration  of  grain  from  heating.  Grain  may  be  cooled 
by  conveying  it  out  of  the  bin  or  car  and  passing  it  through  a  cooler. 
The  principal  mechanisms  of  the  cooler  are  the  fans  which  subject 
the  grain  to  drafts  of  cool  air.  The  operation  of  merely  running 
the  grain  from  one  bin  to  another  may  be  sufficient  to  overcome  a 


In  this  connection,  see  descriptions  of  plant  facilities  in  sec.  1  above. 


WAREHOUSING  AND  STORAGE.  119 

heating  condition.  Some  elevators  have  thermometer  systems  for 
registering  the  temperature  of  all  the  bins. 

(/)  Mixing}^ — As  a  warehousing  service  mixing  is  performed  to 
combine  lots  of  grain  of  different  grades,  in  bulk,  so  as  to  release  bin 
space,  make  up  an  average  grade  out  of  the  several  lots,  improve  the 
condition  of  damp  grain  by  mixing  it  with  dry  lots,  or  for  other  reasons. 
When  performed  for  public  account  mixing  operations  are  more  closely 
regulated  than  when  performed  by  a  private  elevator  company. 

{g)  Drying. — This  service  usually  involves  special  machinery  and 
may  be  aliighly  technical  operation.  As  is  well  known,  moisture  con¬ 
tent  is  now  a  factor  in  the  determination  of  the  grade,  and  maximum 
percentages  of  moisture  for  the  various  grades  of  wheat,  corn,  and 
oats  are  prescribed  in  regulations  of  the  Secretary  of  Agriculture 
under  the  Federal  grain  standards  act.  By  employing  a  drying 
machine— which  forces  dry  air  through  the  moving  grain — each  lot 
of  grain  can  be  conditioned  to  precisely  the  moisture  content  desired. 

Qi)  Clipping — Smutting. — Special  machines  are  employed  to  scour 
off  sprouts,  smut,  must,  beard,  etc.,  from  wheat  and  oats  and  for 
increasing  the  test  weight  through  the  clipping  or  scouring  process. 
The  use  of  oats  clippers  to  increase  the  test  weight  is  illustrated  by 
the  following  extract  from  the  interoffice  correspondence  of  a  Chicago 
elevator  company: 

We  are  clipping  some  30  and  32  pound  oats,  50  per  cent  No.  4  whites  and  50  per  cent 
No.  3  whites,  and  with  the  clippers  set  as  light  as  possible,  they  clipped  up  34|  pounds, 
so  it  will  require  some  27  or  28  pounds  oats  to  get  us  down  to  34  pounds.  These  oats 
clipped  to  34f  pounds  cost  us  f  cent  per  bushel  to  clip  them,  so  it  would  look  as  though 
by  using  lighter  oats  with  the  heavier  oats  and  clipping  down  to  34  pounds  we  ought 
to  do  it  for  i  cent  per  bushel.  This  is  encouraging,  as  it  looked  for  awhile  as  though 
we  would  not  be  able  to  do  anything. 

Just  heard  from  C.  on  the  lot  of  oats  that  he  clipped  to  34  pounds.  He  advises  that 
he  used  4  M  bushels  of  oats  and  that  there  was  a  shrink  in  this  lot  of  128  bushels, 
practically  3^  per  cent.  This  shrinkage  is  for  clipping  only,  the  oats  not  being  cleaned. 

In  making  this  test  he  used  75  per  cent  No.  3  white  and  25  per  cent  No.  4  white, 
averaging  in  weight  27^  pounds.  C.  has  at  the  elevator  oats-that  weigh  30  to  32  pounds, 
but  these  are  of  better  quality  and  presume  would  be  too  good  to  use  for  export. 

We  had  a  talk  with  M.  and  he  tells  us  that  if  our  oats  test  out  33^  pounds  they  will 
pass  muster  all  right.  We  will  clip  some  of  those  good  oats  and  then  run  in  enough 
light  oats  to  bring  down  the  weight.  After  mixing  the  oats  50-50,  No.  4  and  No.  3 
white  did  before,  so  I  don’t  think  there  will  be  any  trouble  about  inspection  out  on 
the  color,  and  on  the  basis  of  33^  pounds  it  won’t  take  but  a  very  little  clipping  to  put 
them  in  that  class,  so  I  think  if  you  could  sell  50  M  bushels  more  on  the  same  basis  as 
the  others  it  might  be  good  idea  to  sell  them. 

{i)  Bleaching. — The  sulphur  process  is  sometimes  used  to  bring 
damaged  grain  back  to  its  natural  color  and  to  remove  foreign  odors. 
Bleached  oats  are  considerably  lighter  in  color  than  those  of 
natural  color.  Under  existing  laws,  bleached  oats  or  other  grains 
must  be  so  marked  when  loaded.  Elevator  men  claim  that  oats 
which  are  discounted  as  stained  or  off-color  and  grade  No.  4  white, 
for  example,  can  often  be  bleached  and  sold  at  the  price  paid  for 
higher  grades,  even  when  it  is  known  to  all  parties  that  they  have 
been  bleached  byj^he  sulphur  process. 

Mixing  and  conditioning  under  railroad  operation.— Grain 
may  “be  conditioned  by  railroad  operated  elevators  (1)  to  render  it 
merchantable  and  to  protect  the  carrier  against  damage  claims,  or 
(2)  upon  specific  order  from  the  merchant  subject  to  the  conditions 
of  the  published  tariffs.  For  example,  if  corn  arrives  with  an  18^ 


“  See  Chap.  V,  see.  2. 


120 


TERMINAL  GRAIN  MARKETING. 


per  cent  moisture  content  it  may  be  considered  unmerchantable  and, 
if  so,  must  be  dried  before  it  can  be  stored  in  the  railroad  elevator. 
However,  if  a  dealer  has  sold  No.  2  corn  and  the  lot  received  grades 
No.  3  because  of  a  17^  per  cent  moisture  content,  it  rests  with  the 
dealer  to  order  the  elevator  to  dry  it  down  to  15^  per  cent  moisture 
with  a  view  to  securing  a  No.  2  grade  on  reinspection. 

Grain  of  different  grades  may  be  mixed  in.  railroad-operated 
elevators  under  the  supervision  of  disinterested  parties  in  order  to 
release  additional  bin  space. If  mixing  were  not  permitted  at  an 
export  elevator  it  would  not  only  be  impossible  to  utilize  the  bin 
capacity  (except  in  large  block  shipments)  but  there  would  be  a 
further  complication  in  unloading  a  great  variety  of  grades  into  a 
vessel.  In  general  practice,  export  grain  has  been  mixed  several 
times  before  it  reaches  the  hold  of  the  vessel. 

Elevator  operating  records. — Form  13  below  shows  the  record 
kept  on  each  car  of  grain  of  any  description  received  at  the  Western 
Maryland  (Port  Covington)  Elevator  at  Baltimore. 

Form  13.— UNLOADING  RECORD,  WESTERN  MARYLAND  (PORT  COVINGTON)  GRAIN 

ELEVATOR,  BALTIMORE. 

Form  Elv.  5-B.  5m-9-19-19 

No .  United  States  Railroad  Administration. 

.  DIRECTOR  GENERAL  OF  RAILROADS. 

Date . 

Western  Maryland  Railroad  Port  Covington  Elevators. 


Baltimore.  RECEIVED. 


Leg. 

Track. 

Initial. 

Number. 

Bin. 

Grade. 

Net 

weight. 

Bushels. 

Cap. 

Remarks. 

1 

1 

1 

2 

1 

3 

1 

4 

- 

..C.  of  a  Weigher . El.  Weigher. 

C.  of  C.  Trackman . El.  Trackman. 


12  For  example,  the  following  regulation  has  been  in  effect  at  Baltimore  since  Nov.  24, 1919,  as  a  means  of 
utilizing  a  maximum  of  bin  space  in  the  elevators  and  to  expedite  the  unloading  of  cars: 

On  and  after  Nov.  24, 1919,  in  mixing,  the  following  proportions  will  have  to  be  used  to  make  the  respective 
grades: 


Mix  for  1  red  winter — 
li  parts  of  special  1. 

1  part  of  special  2. 

Mix  for  1  red  winter — 

3  parts  of  special  1. 

1  part  of  specials. 

Mix  for  1  red  winter — 

4  parts  of  special  1. 

1  part  of  special  4. 

Mix  for  2  red  winter — 

2  parts  of  special  2. 

1  part  of  special  3. 

Mix  for  2  red  winter — 

3  parts  of  special  2. 

1  part  of  special  4. 

Mix  for  2  red  winter — 

5  parts  of  special  2. 

1  part  of  special  5. 

These  same  proportions  apply  to  garlicky  wheat. 


Mix  for  3  red  winter — 

3  parts  of  3. 

1  part  of  4. 

Mix  for  3  red  winter— 

•  4  parts  of  3. 

1  part  of  5. 

Mix  for  3  red  winter — 

parts  of  3.  ' 

1  part  of  sample  Gd.  red  winter. 
Mix  for  4  red  winter — 

3  parts  of  4. 

1  part  of  5. 

Mix  for  5  red  winter — 

3  parts  of  4. 

1  part  of  sample  Gd.  red  winter. 
Mix  for  5  red  winter — 

4  parts  of  5  red  winter. 

1  part  of  sample  Gd. 


rules  regarding  mixtures  of  wheat.  , 

Mixing  orders  to  show  quantity  of  each  grade  of  wheat  to  be  mixed  in  conformity  with  formula  to  be 
furnished  by  the  chief  inspector  of  the  Baltimore  Chamber  of  Commerce. 

Certificates  covering  the  quantities  of  wheat  to  be  mixed  to  accompany  the  orders,  and  as  soon  as  prac¬ 
ticable  the  elevator  offices  willr eissue  new  certificates  for  the  grade  the  mixture  is  ordered  for,  deducting 
from  the  gross  amount  ofthe  mixture  ordered  an  amount  equal  to  the  average  losses*  sustained  in  mixing 
at  Port  Covington  and  Elevator  No.  Iduringthepastsix  weeks  beforeissuingthenew  certificates. 

The  actualmixing  to  be  done  ■mthout  weighing  before  and  after  mixing  atthetime  ofdelivery  to  the 
ship  or  at  times  suiting  the  convenience  ofthe  elevators.  The  grain  is  weighed  but  once  imder  this  arrange- 
ment,  since  the  railroads  willassume  an  average  mixing  loss.  The  usual  mixing  charge  to  be  made. 

*Loss  of  50  poimds  per  1,000  bushels  mixed  is  the  average  for  six  weeks  previous  to  Aug.  23, 1918,  and  will 
be  used  on  all  mixtures. 


WAREHOUSING  AND  STORAGE. 


121 


It  will  be  noted  that  representatives  of  the  chaniber  of  commerce 
as  well  as  of  the  elevator  make  a  check  on  the  operations  at  the  receiv¬ 
ing  track  and  on  the  weighing  floor. 

In  receiving  grain  from  vessels  at  the  Western  Maryland  elevator 
a  pneumatic  marine  tower  is  usually  employed  and  complete 
data  is  recorded  to  show  the  costs  and  net  revenue  of  each  operation. 
This  appears  in  Form  14  below. 


Form  14 — OPERATING  RECORD,  PNEUMATIC  MARINE  TOWER,  WESTERN  MARYLAND 
(PORT  COVINGTON)  GRAIN  ELEVATOR,  BALTIMORE. 


United  States  Railroad  Administration. 

DIRECTOR  GENERAL  OF  RAILROADS. 


Western  Maryland  Railroad. 


Operation  of  the  pneumatic  marine  tower  at  Port  Covington  elevator. 


Name  of  boat . 

Began  unloading,  date . 

Finished  unloading,  date . 

Total  bushels  unloaded . 

Grade  of  grains. 


hour . 

hour . 


Bushels. 


Number  of  K.  W.  H.  consumed . . ;  •  •  •  V . '• - :  * ' 

Number  of  men  in  charge  of  marine  tower  and  raising  and  lowering  the  suction  pipe 

Number^of  men  moving  grain  to  suction  end  of  conveyor  in  hold  of  boat,  cleaning-up 

boat,  etc . 

When  varying  number  of  men  were  used  during  unloading: 


Laborers.  What  doing.  Cost  per  hr.  Total  hrs. 


Total  cost. 


Total  cost  of  labor  $ 


Total  cost  of  labor .  ^ 

Total  cost  of  power . hours  at  $1.25  KW . . .  $ 

Total  cost  of  unloading .  $ 

Average  cost  per  1,000  bushels .  $ 

Revenue  for  unloading,  2<t!  per  bu .  $ 

Extra  labor  S.  G.  grain,  H  per  bu . $ 

Extra  labor  other  grain,  per  bu . $ 

Total  revenue . .  $ 

Total  cost  of  unloading .  I 

Net  revenue.  .  .  $ 


The  following  are  specimens  of  warehouse  receipts  issued  for 
yain  received  for  storage  by  a  private  elevator  company  at  Duliith- 
)uperior : 


13  A  device  for  elevating  grain  by  air-suction  through  a  tube  inserted  in  the  hold  of  the  vessel. 


122 


TERMINAL  GRAIN  MARKETING. 


Form  15. — WAREHOUSE  RECEIPT  ISSUED  FOR  SPECIAL-BINNED  GRAIN. 

No.  . 

Date . 


Globe  Elevator, 

SUPERIOR,  WISCONSIN. 


.bush . 

Grade. 


.,  192 
_ lbs. 


GLOBE  ELECTOR  COMPANY,  has  received  in  store  in  its  ELEVATOR  No.  3,  situated 
at  bUPERiOR,  WISCONSIN,  for  storage. 


From 

Of.'.;;; 


3 


From. 


. .  owner 
busheis 


All  of  said  grain  is  in  special  bin  No . and  said  special  bin  contains  no  other  grain. 

put  into,  and  no  grain  shall  be  taken  from,  said  bin. 
until  this  receipt  has  been  duly  surrendered.  ' 

Said  grain  is  deliverable  upon  the  return  of  this  receipt,  properly  indorsed  by  the  o^vner,  the  partv  to 
wnose  order  it  was  issued  and  the  payment  of  our  advertised  rates  of  storage.  Loss  bv  fire  or  the  ele¬ 
ments  at  owner’s  risk.  j  t  c 


Not  valid  unless  countersigned  by  accountant. 

_ ,  Accountant. 


Globe  Elevator  Company, 

Ry . ,  Secretary. 


Form  16.— “ORDINARY”  WAREHOUSE  RECEIPT  ISSUED  BY  A  PRIVATE  ELEVATOR 

COMPANY. 

Globe  Elevator  Company  No . 

Duluth,  Minn . ’.  'ibV.  W 

. Bush . Lbs* 

The  Globe  Elevator  Company  on  this  date  has  received  from .  ^ner . 

for  storage  in  its  Peavey  Duluth  Terminal  Elevator  situated  in  Duluth,’ Mi’nii. ' ’  ’bus'he'fs*  "of  ’  ’  ’ 
. which  has  duly  been  inspected  and  graded  as. . . 

by  a  duly  authorized  inspector  appointed  by  the  State  Railroad  and  W^ehoiise ’Commission  of 'Minnesota 
and  which  is  of  that  grade.  An  equal  amount  of  grain  of  the  same  kind  and  grade  by  i  nspection  will  be 
delivered  to  said  owner,  or  order,  on  surrender  of  this  receipt,  properly  endorsed,  and  payment  of  charges 
as  herein  specified.  It  is  agreed  that  said  grain  may  be  stored  or  mingled  with  other  grain  of  the  same  kind 
and  quality  by  inspection.  The  storage  charges  on  said  grain  from  this  date  will  be:  Elevation,  including 
15  dap  storage,  1^  cents  per  bushel;  storage  thereafter,  one-thirtieth  of  1  per  cent  per  bushel  per  dav 
Loss  by  fire  or  the  elements  IS  at  owner’s  risk.  ^ 

This  receipt  is  issued  against  grain  owned  by  the  undersigned  warehousemen,  either  solely  or  iointlv 
or  in  common  with  others.  This  receipt  is  issued  pursuant  to,  and  said  storage  shall  be  governed  bv  ' 
chapter  161,  laws  of  1913,  of  Minnesota,  relative  to  uniform  warehouse  receipts.  ^ 

Not  valid  unless  countersigned.  Globe  Elevator  Company. 

. Accountant.  By . Secretary. 


It  will  be  noted  that  the  first  receipt  is  for  grain  to  be  stored  in  a 
special  bin,  i.  e.,  preserving  the  identity,  and  that  the  second  receipt 
is  for  grain  placed  in  general  storage  whereby  the  elevator  com¬ 
pany  agrees  to  deliver  out  grain  of  the  same  kind  and  grade,  on 
inspection,  under  the  general  law  relating  to  uniform  warehouse 
receipts  and,  in  this  case,  subject  to  the  supervision  of  the  register 
of  the  Duluth  Board  of  Trade. 

A  form  of  notification  used  by  a  Peoria  elevator  upon  transferring 
grain  for  others  is  shown  below. 

Form  17.— NOTICE  OF  TRANSFER  FROM  CAR  TO  CAR. 


Unloaded  at  Central  City  Elevator. 


For— 

Car  No. 

Initial. 

Weight, 

pounds. 

Loss  by  f 
Through 

re  or  heati 
billed  grail 

ng  at  own 
1  for  transf 

sr’srisk. 

er. 

Peoria,  Ill., . 191..  Central  City  Elevator  Co. 

(Mueller  Grain  Co.,  Lessee.) 
Per . 


WAREHOUSING  AND  STORAGE. 


123 


'iiie  loading  record  kept  on  export  grain  presents  a  comprehensive 
statement  of  every  step  in  the  process  from  the  arrival  of  the  vessel 
until  its  departure,  with  the  initials  of  all  responsible  parties  engaged 
in  the  work.  This  appears  in  Form  18  below. 


Form  18.— LOADING  RECORD,  WESTERN  MARYLAND  (PORT  COVINGTON)  GRAIN 

ELEVATOR,  BALTIMORE. 

Western  Maryland  Railway  Company 

PORT  COVINGTON  ELEVATORS 


Vessel 


Weather  Berthed  at 

Vessel’s  draft  on  entering  port  Astern 
Tug  handling  vessel  light 
Shipper’s  agent 
Started  loading  in  hulk  at 
Direction  of  wind 
Grade  of  grain  in  hulk 

H  II  II  II  II 


Time  of  arrival  at  elevators 


C.  of  C.  weigher 


Docked  at 
Ahow 


Tonnage 


Elevator  weigher 
Date 

Tide  high  or  low 
In  holds 


(( 

4( 

(( 

44 

44 

i4 

(t 

(( 

44 

44 

(( 

H 

(t 

44 

<4 

U  U 

n  a 

((  a 


Finished  loading  in  hulk  at 
Started  loading  in  hags  at 

Grade  of  grain  in  hags 
((  ((  (< 


Date 


In  holds 

((  i( 


in  holds 
Date 


Date 
How  docked 

Length 
Stevedore 
C.  of  C.  inspector 
Weather 

Acet.  of 

t(  a 
a  ti 

i(  (( 

ti  a 


Weather 
Acet.  of 

(I  U 


44 

<4 

44 

44 

44 

44 

44 

(4 

44 

44 

44 

44 

44 

44 

44 

44 

44 

44 

44 

44 

44 

44 

44 

44 

44 

44 

44 

Finished  loading  in  hags  at 
Number  of  men  sacking 
Time  consumed  in  sacking 
Delays  on  account  of  weather 
“  “  “  “  elevator 

Finished  loading  grain  at 
Total  bushels  in  hags 
Did  boat  take  coal? 

How  long  coaling? 

Name  of  company  coaling 
Vessel’s  draft  on  leaving  port 
Tug  handling  vessel  leaving  elevators 
Elevator  Foreman. 


Date  In  holds 

Number  of  men  trimming 
Delays  in  sacking 

Was  vessel  delayed  on  account  of  ice  in  harbor?  How  long? 


Date 

Total  bushels  in  hulk  Grand  total  cargo 

How  much?  Date 

Was  elevator  delayed  on  account  of  coaling? 

Coal  barge  name 

Astern  Ahow  Tonnage 

Elevator  Chief  Clerk.  Dock  Foreman. 


Such  a  detailed  record  is  essential  in  the  case  of  export  grain,  since 
a  cargo  of  wheat,  for  example,  is  frequently  worth  several  hundred 
thousand  dollars.  Any  error  in  the  unloading  process  or  any  delay 
of  the  vessel  may  result  in  costly  claims  or  in  a  net  loss  to  the  exporter. 

Section  3.  Ownership  and  control  of  terminal  elevators. 

Railroad  elevators. — Grain  elevators  at  terminal  points  were, 
as  already  stated,  built  by  the  railroads  as  part  of  their  terminal  facil¬ 
ities  in  the  early  days  of  the  terminal  markets.  This  policy  was 
followed  by  the  Illinois  Central,  the  Chicago,  Rock  Island  &  Pacific, 
the  Great  Northern,  the  Union  Pacific,  and  the  Atchison,  Topeka  & 
Santa  Fe  Railway  Cos.,  and  other  lines  penetrating  the  newly  devel¬ 
oping  grain  areas,  as  well  as  by  the  trunk-line  railroads  running  east 
from  Chicago.  To-day  35  per  cent  of  the  terminal  elevator  capacity 
of  the  country  is  owned  by  railroads. 

The  railroad-owned  elevators  at  interior  terminal  points  are  mostly 
leased  to  private  dealers  and  subject  to  the  operating  control  of 
the  lessees  (Chap.  Ill,  sec.  4).  At  the  seaboard  points  railroads  own 
about  69  per  cent  of  the  rated  storage  capacity  and  in  most  instances 
retain  the  operating  control,^®  there  being  a  distinct  contrast  in  rail¬ 
road  policy  as  between  water  terminal  and  interior  terminal  points. 


Based  on  reports  from  52  points.  Millers’  and  converters’  elevators  excluded  (Appendix  Table  8). 
The  railroad  elevators  leased  at  interior  points  comprise  about  27  per  cent  of  the  interior  terminal 
market  storage  capacity  (Appendix  Table  8). 

15  Sixty-four  per  cent  of  the  seaboard  capacity  is  railroad  owned  and  operated  (Appendix  Table  8). 


124 


TERMINAL  GRAIN  MARKETING. 


I 


Municipal  elevators. — During  the  past  few  years  at  least  four 
large  terminal  grain  elevators  have  been  constructed  by  public  ! 
authorities  as  port  terminal  facilities  for  the  use  of  the  shipping  ! 
public.  These  are  the  municipal  elevators  operated  by  the  port  of 
Seattle,  the  board  of  conimissioners  of  the  port  of  New  Orleans,  the  i 
port  of  Astoria  commission  (Oreg.),  and  the  commission  of  public 
docks  of  Portland  (Oreg.).^^  These  facilities  were  financed  by 
publicly  authorized  bond  issues  and  are  located  on  the  waterfront 
and  connected  in  each  case  with  belt  railroads  or  spur  tracks  with  a 
view  to  serving  the  respective  ports  without  preference  to  any  carrier 
or  individual  shipper.  In  method  of  operation  and  services  offered 
to  the  public  they  closely  resemble  the  public  elevators  of  the 
Dominion  of  Canada.^®  Tne  figures  of  capacity  and  investment  of 
these  elevators  are  as  follows: 


City. 

Operator. 

Rated 

capacity. 

Year  con¬ 
structed. 

Investment 

(capital 

outlay). 

New  Orleans . 

Board  of  commissioners  of  the  port  of 
New  Orleans. 

Port  of  Astoria . 

2,622,000 

1,250,000 
1,033,850 
1, 026, 870 

1915-1917 

1919 

1920 

1915-1918 

1  $2, 773, 378. 21 

503, 889. 10 
1,400,000.00 
485, 514. 25 

Astoria,  Oreg . 

Portland,  Oreg . 

Port  of  Portland . 

Seattle... _ 7 . 

Port  of  Seattle  enTnmissioo 

5, 932, 720 

1  Includes  building,  machinery,  and  other  construction  cost  as  listed  in  Annual  Report  of  the  Board 
of  Commissioners,  1918,  p.  11.  •  ^ 


These  municipal  elevators  provide  the  customary  warehousing  I 
facilities  for  the  elevation,  storage,  handling,  and  conditioning  of  | 
grain  at  rates  established  by  the  port  authorities.  The  rules  and 
tariff  (Feb.  29,  1920)  applying  to  the  public  grain  elevator  at  the 
port  of  New  Orleans  will  illustrate  the  scope  of  these  services. 

Grain  will  be  received,  stored,  conditioned  and  handled  in  the  public  grain  ele¬ 
vator  of  the  board  of  commissioners  of  the  Port  of  New  Orleans,  subject  to  the  fol¬ 
lowing  rates,  rules  and  regulations: 

INSPECTION  AND  WEIGHING. 

Rule  1 .-  Grain  shall  be  weighed  into  and  out  of  elevators,  also  inspected  and  graded 
before  being  received  into  and  discharged  from  elevator,  in  accordance  with  the  rules 
of  the  New  Orleans  Board  of  Trade  weighing  and  inspection  departments  at  expense 
of  pie  owner.  ^  The  elevator  company  reserves  the  right  to  refuse  any  grain  which, 
in  its  opinion,  is  unmerchantable  or  in  unfit  condition  for  storage,  transfer  or  handling. 

FIRE  INSURANCE. 

Rule  Ample  fire  insurance  will  be  provided  by  the  public  grain  elevator  of  the  : 
board  of  commissioners  of  the  port  of  New  Orleans  to  at  all  times  cover  the  full  mar¬ 
ket  value  of  all  grain  and  containers  stored  in  this  elevator  and  in  cars  on  railroad 
tracks  within  100  yards  of  said  elevator  building.  Loss  by  fire  shall  be  at  the  ele¬ 
vator’s  risk. 


w  Construction  has  been  be^n  on  a  State-owned  terminal  elevator  in  the  port  of  New  York  to  cost 
approxunately  $2,5{XW00.  This  elevator  is  planned  as  a  part  of  the  State  barge  canal  system  and  will  be 
located  at  Gowanus  Bay,  Brooklyn.  An  act  of  the  New  York  Legislature,  passed  in  1920,  authorized  in 
admtion  to  the  above  a  terminal  grain  elevator  at  Oswego  to  cost  approximately  $1,000,000.  (Monthlv 
Bulletin,  American  Association  of  Port  Authorities,  January,  1921,  p.  39.) 

^5'*  tlie  Dominion  at  Port  Arthur,  Vancouver,  Moose  Jaw,  Calgary,  Port  Colborne,  HaUfax 
and  St.  J ohns  and  elsewhere;  and  by  the  harbor  commissioners  at  Montreal.  In  this  connection  see  the 
American  Elevator  and  Grain  Trade  (monthly,  Chicago),  May  15, 1921,  p.  837. 


WAREHOUSING  AND  STORAGE. 


125 


GRAIN  AT  owner’s  RISK. 

Rule  3. — Grain  is  at  owner’s  risk  of  depreciation  in  grade  from  heating  or  other 
causes  from  time  receiyed  into  elevator  until  discharged  therefrom.  The  elevator 
company  reserves  the  right  on  all  grain  after  using  due  diligence  to  preserve  condi¬ 
tion,  to  send  it  to  the  dryers,  the  necessity  of  this  action  being  decided  by  board  of 
trade  inspector  in  charge,  owner  paying  drying  charge  and  standing  shrinkage,  as 
provided  herein  under  Rule  9. 

POSTING  GRAIN  OUT  OP  CONDITION. 

Rule  4- — Grain  on  storage  which  becomes  out  of  condition  from  heating  will  be 
posted  on  the  bulletin  of  the  New  Orleans  Board  of  Trade,  prior  to  2  p.  m.,  and  if 
not  removed  from  elevator  before  5  p.  m.  of  the  second  day  after  posting,  a  charge 
of  one-fourth  (i)  cent  per  bushel  per  day,  or  part  thereof,  will  be  made  until  grain 
IS  ordered  out.  Grain  out  of  condition  will  be  charged  against  the  oldest  outstanding 
cars  or  barges  of  like  grade  and  color. 

STORING  REGARDLESS  OF  OWNERSHIP. 

Rule  5. — Grain  will  be  stored  in  bins  containing  the  same  kind  and  grade  regard¬ 
less  of  ownership,  but  when  stored  in  special  bins  at  request  of  owner,  a  charge  of, 
one-fourth  (i)  cent  per  bushel  for  each  thirty-day  period,  or  fraction  thereof,  will 
be  made  in  addition  to  the  regular  storage  charges,  as  provided  herein  by  Rule  14. 

TRANSFERRING  FROM  BIN  TO  BIN. 

Rule  6. — Grain  will  be  transferred  from  bin  to  bin  whenever,  in  opinion  of  Super¬ 
intendent  of  Elevator,  such  action  is  necessary  to  obtain  benefit  of  full  storage  capac¬ 
ity  of  elevator. 

ELEVATION  AND  SACKING  CHARGES. 

Rule  7. — 1.  Grain  for  export  will  be  handled  as  follows; 

(a)  Into  elevator  from  cars  or  river  barges  in  bulk,  and  thence  into  vessels  at  ele¬ 
vator’s  wharf  in  bulk,  or  into  cars,  in  bulk  for  delivery  to  other  export  elevators  at 
rate  of  one  and  one-fourth  (l^)  cents  per  bushel  for  all  grain. 

(&)  Into  elevator  from  cars  or  river  barges  in  bulk  and  delivery  into  sacldng  hop¬ 
pers  on  wharf,  in  bulk,  and  there  sacked  for  delivery  to  ship  or  loaded  into  cars  for 
delivery  to  ship  at  rate  of  one  and  three-fourths  (If)  cents  per  bushel  for  all  grain; 
owners  to  furnish  sacks  and  twine. 

(c)  Into  elevator  from  cars  or  river  barges  in  bulk,  there  sacked  and  loaded  into 
cars  for  delivery  to  ship  at  rate  of  one  and  three-fourths  (1|)  cents  per  bushel  for  all 
grain;  owners  to  furnish  sacks  and  twine. 

2.  Grain  for  local  or  domestic  delivery  will  be  handled  as  follows: 

(а)  Into  elevator  from  cars  or  river  barges  in  bulk  and  there  sacked  at  rate  of  one 
and  one-fourth  (If)  cents  per  bushel  for  all  grain;  owners  to  furnish  sacks  and  twine. 
Charge  for  loading  into  cars  provided  in  Rule  12  will  be  in  addition. 

(б)  Into  elevator  from  cars  or  river  barges  in  bulk  and  delivery  into  sacking  hop¬ 
pers  on  wharf,  in  bulk,  and  there  sacked  at  rate  of  one  and  one-fourth  (If)  cents  per 
bushel  for  all  grain;  owners  to  furnish  sacks  and  twine.  Cdiarges  for  loading  into 
cars  provided  in  Rule  12  will  be  in  addition. 

3.  Grain  imported  from  foreign  countries  will  be  handled  as  follows: 

(а) _  Into  elevator  from  cars  in  bulk  or  from  hold  of  vessel  in  bulk,  and  thence  into 
cars  in  bulk  at  rate  of  one  and  one-fourth  (If)  cents  per  bushel  for  all  grain. 

(б)  Into  elevator  from  cars  in  bulk  or  from  hold  oi  vessel  in  bulk,  and  thence  into 
vessel  or  into  river  barge  at  elevator’s  wharf  in  bulk  at  rate  of  one  and  one-fourth 
(If)  cents  per  bushel  for  all  grain. 

(c)  Into  elevator  from  cars  in  bulk  or  from  hold  of  vessel  in  bulk,  and  delivery 
into  sacking  hoppers  on  wharf  in  bulk,  and  there  sacked  for  delivery  to  ship,  river 
barges,  or  for  loading  into  cars  at  rate  of  two  (2)  cents  per  bushel  for  all  grain;  owners 
to  furnish  sacks  and  twine.  Charge  for  loading  into  cars  provided  in  Rule  12  will 
be  in  addition. 

(d)  Into  elevator  from  cars  in  bulk  or  from  hold  of  vessel  in  bulk,  and  there  sacked 
for  loading  into  cars  for  local  or  domestic  delivery  or  for  delivery  to  ship  or  river 
barge  at  rate  of  two  (2)  cents  per  bushel  for  all  grain;  owners  to  furnish  sacks  and 
twine.  Charge  for  loading  into  cars  provided  in  Rule  12  will  be  in  addition. 

4.  In  addition  to  the  foregoing,  all  grain  will  be  subject  to  storage  charges  provided 
in  Rule  14  and  charge  for  emptying  sacks  provided  in  Rule  13. 


56976°— 22 - 10 


126 


TERMINAL  GRAIN  MARKETING. 


CLEANING,  COOLING,  BLOWING,  SCREENING,  SCOURING,  CLIPPING,  MIXING,  TURNING, 

ETC.,  TO  PRESERVE  CONDITION. 

A  charge  of  one-fourth  (i)  cent  per  bushel  will  be  made  for  cleaning' 
cooling,  blowing,  screening,  clipping,  mixing  or  turning  and  one  (1)  cent  per  bushel 
for  scouring  or  smutting  grain  to  improve  its  condition.  The  actual  loss  in  weight 
will  be  charged  against  owner  of  the  grain.  No  charge  will  be  made  for  mixing  grain 
while  handling  from  elevator  to  ship  for  export. 

DRYING. 

Rule  9.-— The  following  charges  will  be  assessed: 

.  For  drying  number  1,  2,  3,  4,  and  5  grain,  one  and  one-half  (1§)  cents  per  bushel. 
For  drying  No.  6  grain,  two  (2)  cents  per  bushel.  For  drying  sample  grain  two  (2) 
cents  per  bushel  for  5  per  cent  or  less  moisture  extraction  and  one-half  (^)  cent  per 
bushel  additional  for  each  1  per  cent  moisture  extraction  above  5  per  cent. 

For  drying  salvage  or  other  unmerchantable  grain,  four  (4)  cents  per  bushel  for  5 
per  cent  or  less  moisture  extraction  and  one-half  (^)  cent  per  bushel  additional  for 
each  1  per  cent  moisture  extraction  above  5  per  cent. 

For  drying  beans,  peas  or  other  articles  not  otherwise  specified  herein  six  (6)  cents 
per  bushel.  In  all  instances  the  actual  loss  in  weight  will  be  charged  against  the  owner 
of  the  grain. 

The  grade  of  “Rejected  ”  grain  shall  be  considered  No.  5  and  “ No  grade  ”  as  sample. 

All  grain  containing  above  19.5  per  cent  moisture  will  be  dried  unless  within  48 
hours  after  inspection  it  is  ordered  held  in  special  bins,  as  provided  under  Rule  No.  5 
at  owner’s  risk  of  depreciation  in  grade  from  heating  and  other  causes  and  avoirdupois 
loss  incidental  thereto. 

SEPARATING. 

Rule  10. — A  charge  of  one  (1)  cent  per  bushel  will  be  made  for  separating  mixtures 
of  two  kinds  of  grain  or  other  foreign  substances.  The  actual  loss  in  weight  will  be 
charged  against  owner  of  the  grain. 

RECEIVING. 

Rule  11. — A  charge  of  $9  per  car  will  be  assessed  for  receiving  into  elevator  when 
such  grain  is  delivered  locally,  provided  no  storage  or  other  charges  (except  loading 
charge)  have  accrued. 

LOADING. 

Rule  12. — A  charge  of  $3  per  car  will  be  assessed  for  loading  bulk  or  sacked  grain 
into  cars  when  for  local  or  domestic  delivery. 

RECEIVING  GRAIN  IN  SACKS. 

Rule  13. — When  grain  in  sacks  is  unloaded  from  cars  into  elevator  a  charge  of  three- 
fourths  (I)  cent  per  bushel  will  be  made  for  emptying  sacks,  which  includes  cost  of 
baling  the  empty  sacks. 

STORAGE  CHARGES. 

Rule  14^ — When  for  local  or  domestic: 

For  first  five  calendar  days,  free  storage. 

For  next  succeeding  ten  calendar  day  period,  or  fraction  thereof,  after  free  time, 
one  (1)  cent  per  one  hundred  pounds. 

For  each  succeeding  ten  calendar  day  period,  or  fraction  thereof,  three-fourths 
(I)  cent  per  one  hundred  pounds. 

When  for  export: 

For  first  ten  calendar  days,  free  storage.  (See  note.) 

For  each  succeeding  calendar  day,  or  fraction  thereof,  one  twenty-fifth  (^V)  cent 
per  bushel. 

Note — Storage  charges  on  grain  for  export  will  be  reckoned  from  date  of  arrival  of 
car  or  river  barge  at  the  port  of  New  Orleans,  La. ,  or  from  date  car  stopped  at  the  differ¬ 
ent  railroad  yards  within  the  switching  limits  of  the  port  of  New  Orleans,  when  con¬ 
ditions  at  the  port  prevent  unloading  into  elevator.  Any  free  time  consumed  by 
such  cars  on  tracks  or  river  barges  at  wharf  will  be  deducted  from  free  time  allowance 
in  elevator.  The  public  grain  elevator  will  reckon  the  date  of  the  railroad  manifest 


WAREHOUSING  AND  STORAGE.  127 

covering  the^  car  as  being  the  arrival  date,  and  the  arrival  of  river  barges  within  the 
limits  of  parish  of  Orleans  as  being  the  arrival  date. 

When  imported  from  foreign  countries  for  local  or  domestic  use  of  for  export: 

For  first  ten  calendar  days,  free  storage. 

For  next  succeeding  ten  calendar  day  period,  or  fraction  thereof,  after  free  time, 
one  (1)  cent  per  one  hundred  pounds. 

For  each  succeeding  ten  calendar  day  period,  or  fraction  thereof,  three-fourths 
(f)  cent  per  one  hundred  pounds. 

SURRENDER  OR  RELEASE  AGAINST  SHIPMENT. 

Rule  15. — Surrender  of  warehouse  receipts,  or  receipt  for  shipment  issued  by  rail¬ 
road  local  freight  agent,  or  local  agent  of  barge  line,  accompanied  by  delivery  order 
must  represent  the  total  amount  of  each  grade,  class,  and  color  of  grain  discharged 
from  elevator. 

DELIVERY  OF  GRAIN. 

Rule  15.-— Grain  will  be  delivered  from  the  elevator  only  upon  surrender  of  ware¬ 
house  receipts  properly  endorsed,  or  receipt  for  shipment  issued  by  railroad  local 
freight  agent  or  local  agent  of  barge  line,  accompanied  by  delivery  order  showing 
original  lading  has  been  lifted  and  all  freight  charges  paid. 

UNLOADING  GRAIN  INTO  ELEVATOR. 

Rule  IT. — The  public  grain  elevator  is  primarily  intended  for  the  transfer  of  grain 
from  railroad  cars  and  river  barges  to  ships  and  to  be  used  for  storage  of  grain  only  to 
the  extent  required  for  such  primary  purposes.  The  elevator,  therefore,  reserves  the 
right,  whever  it  deems  it  desirable  to  facilitate  the  prompt  movement  of  grain  from 
cars  and  river  barges  to  ships,  or  to  prevent  blockade  of  the  elevator,  or  for  any  other 
reason,  by  it  deemed  sufficient,  without  notice,  to  apply  the  following  rule:  In  the 
event  of  a  blockade  in  the  elevator  and  a  congestion  of  cars  or  river  barges,  upon  the 
blockade  being  relieved  by  outward  shipment,  preference  will  be  given  in  the  un¬ 
loading  of  cars  or  river  barges  to  the  cars  or  river  barges  for  which  vessel  room  is 
engaged  and  first  available  for  loading. 

Prior  to  the  erection  of  the  municipal  elevator  at  Astoria  there  was 
no  elevator  for  bulk  grain  in  the  port,  either  railroad  or  private.  The 
increase  in  bulk  handling  in  the  Pacific  Northwest  led  to  a  demand 
for  bulk-handling  facilities  at  the  ocean  terminals,  which  was  met  in 
this  case  b;^  the  port  authority  itself. 

The  municipal  elevator  at  Portland  was  constructed  for  similar 
purposes.  A  bond  issue  of  $3,000,000  was  authorized  by  vote  of  the 
city  electorate  primarily  for  the  purpose  of  constructing  a  municipal 
elevator  for  handling  bulk  grain.  It  is  reported  that  the  elevator  has 
.  a  storage  capacity  of  1,050,000  bushels  and  that  the  total  investment 
(August,  1920)  is  $1,323,480.45.  This  would  indicate  a  construction 
cost  of  about  $1.26  per  bushel  of  capacity.  The  general  purpose  and 
function  of  the  elevator  is  described  as  follows : 

This  elevator  was  constructed  on  account  of  the  development  of  bulk  handling  of 
grain  in  the  Pacific  Northwest  and  is  intended  to  perform  all  the  functions  of  a  terminal 
elevator,  including  receiving,  storing,  cleaning,  scouring,  mixing,  and  shipping  bulk 
grain.  It  will  be  operated  in  connection  with  a  1,000,000-bushel  grain  dock  for  sacked 
grain,  and  all  cleaning  of  grain  stored  on  the  dock  will  be  performed  in  the  elevator, 
and  in  the  event  such  sacked  grain,  after  cleaning,  or  any  grain  received  in  bulk  is 
intended  for  shipment  in  sacks  the  necessary  sacking  will  be  performed  on  the  dock, 
where  facilities  have  been  provided. 

Elevators  operated  by  dealers. — ^A  tabulation  of  the  elevators 
cmerated  by  railroads,  public  agencies,  and  public  warehousemen  not 
dealing  in  grain,  made  up  from  Appendix  Table  11,  shows  an  aggre¬ 
gate  capacity  of  about  53,000,000  bushels  storage  (largely  at  sea- 


128 


TERMINAL  GRAIN  MARKETING. 


board  points) ;  which  is  about  20  per  cent  of  the  total  terminal 
storage  capacity  in  the  United  States.^®  Probably  80  per  cent  of 
the  terminal  elevator  capacity,  excluding  that  of  millers  and  con¬ 
verters,  is  therefore  operated  by  private  dealers  in  grain. 

A  survey  of  52  points  in  1920  showed  172  private  companies  to  be 
operating  terminal  elevators  for  the  purpose  of  storing,  conditioning, 
and  shipping  grain  on  their  own  account,  i.  e.,  not  as  public  ware¬ 
housemen.  The  elevators  so  operated  for  private  account  comprised 
nearly  50  per  cent  of  the  terminal  storage  capacity  of  the  country  in 
that  year.^^  (Appendix  Table  6.) 

In  a  commercial  sense,  however,  the  aggregate  elevator  capacity 
controlled  by  private  dealers  includes  also  a  majority  of  the  elevators 
licensed  as  public  warehousemen  by  the  States.  The  30  elevators 
licensed  by  the  State  of  Minnesota  to  do  a  public  warehousing  business 
at  Minneapolis  and  St.  Paul  are  owned  and  operated,  for  the  most 
part,  by  private  merchants,  and  the  grain  handled  for  public  account 
IS  usually  inconsiderable  in  comparison  with  the  quantities  handled 
for  account  of  the  operators  themselves.  None  of  the  elevator  com¬ 
panies  at  Duluth  now  operate  as  public  warehousemen.  In  Kansas 
City  a  majority  of  the  public  elevators — comprising  fully  85  per  cent 
of  the  storage  capacity  of  the  market — are  owned  by  railroads  and 
leased  to  the  larger  dealers  of  the  market  who  utilize  them  primarily 
for  handling  their  own  grain.  In  Chicago,  while  the  public  ware¬ 
house  operators  are  forbidden  by  Illinois  law  from  storing  their  own 
grain  in  the  public  bins,  the  operators  are  in  every  instance  large 
merchandisers  of  grain,  and  by  a  technical  compliance  with  the 
statutes  are  able  to  derive  appreciable  benefits  from  the  operation  of 
these  houses.^^  That  is,  over  30  per  cent  of  the  total  capacity  in 
the  United  States  is  operated  under  State  license  but  in  practice  is 
used  primarily  for  private  account. 

/  This  situation  is  in  marked  contrast  with  that  in  Canada,  where 
'  the  bulk  of  the  terminal  elevator  storage  capacity  is  operated  by 

Eublic  warehousemen^^  who,  under  the  Canada  grain  act,  are  for- 
idden  to  deal  in  grain although  bin  space  may  be  leased  subject 
^Jo  the  approval  of  the  board  of  grain  commissioners  for  Canada. 

Section  4.  Public  elevators  as  defined  by  State  laws. 

Twelve  of  the  principal  grain-producing  States,  in  the  exercise  of 
their  police  power,  have  passed  laws  declaring  that  the  elevation  and 

Excluding  the  storage  capacity  of  millers  and  converters. 

Excluding  the  storage  plants  of  millers  and  converters  of  grain. 

See  sec.  7. 

23  The  capacity  figures  for  public  and  private  terminal  elevators  at  Fort  William  and  Port  Arthur  are 
shown  in  Appendix  Table  10. 

2<  2  Geo.  V,  chap.  27,  sec.  123: 

“  123.  N o  person  owning,  managing,  operating,  or  otherwise  interested  in  any  terminal  elevator  shall  buy 
or  sell  grain  at  any  point  in  the  eastern  or  western  inspection  division. 

“2.  Subsection  1  of  this  section  shall  not  apply  to  any  i)erson  who  owns,  manages,  operates,  or  is  other¬ 
wise  interested  in  any  terminal  elevator— 

“(o)  which,  with  the  approval  of  the  governor  in  council,  has  been  leased  to  the  board  for  operation  or 
has  been  leased  to  any  person  for  operation  with  the  approval  of  the  board  or  is  managed  and  operated 
by  persons  approved  oy  the  board;  or 

“(b)  which  is  used  or  operated  in  connection  with  any  flour  mill  situate  at  the  same  terminal  point  as 
such  elevator:  Provided,  however,  That  such  elevator  shall  be  subject  to  suchrestrictionsandregulations 
as  are  imposed  by  the  board,  with  the  approval  of  the  governor  in  council. 

"3.  Subsection  1  of  this  section  shall  not  apply  to  any  person  by  reason  only  of  the  fact  that  he  is  an 
owner  or  holder  of  stock  or  shares  in  a  railway  company  which  owns  or  operates  a  terminal  elevator  which 
does  not  as  a  business  buy  or  sellgrain. 

“4.  If  the  person  mentioned  in  subsection  2  hereof  owns,  manages,  oi)erates,or  is  otherwise  interested 
in  any  terminal  elevator  other  than  a  terminal  elevator  coming  under  the  provisions  of  subsection  2  hereof, 
he  shall  not  be  exempted  from  the  provisions  of  subsection  1  hereof.” 


WAREHOUSING  AND  STORAGE. 


129 


storage  of  grain  under  certain  conditions  is  a  business  affected  with 
such  a  public  interest  as  to  require  license  and  regulation. 

The  history  of  such  warehouse  legislation  was  reviewed  in  1912  by 
the  Supreme  Court  of  Kansas  in  State  v.  A.,  T.  &  S.  F.  Ry. 
Co.^^  In  this  case,  construing  the  Kansas  statute,  it  was  held  that 
in  order  to  be  public  an  elevator  must  be  one  in  which  grain  is  stored 
in  bulk,  doing  Dusiness  for  a  compensation,  and  in  whidi  the  grain  of 
different  owners  is  mixed  together.^®  The  court  while  reviewing  the 
history  of  grain-warehouse  legislation  pointed  out  that  the  definition 
of  this  class  of  warehouse  as  first  established  in  Illinois  by  the  act 
of  1871  had  been  substantially  followed  in  subsequent  statutes  of 
Kansas,  Indiana,  Missouri,  Nebraska,  Wisconsin,  and  Minnesota. 

Since  1912,  however,  the  progress  of  legislation  shows  a  departure 
from  this  uniformity  of  definition, particularly  in  Kansas,  Nebraska, 

*5  87  Kansas,  348;  125  Pacific  Reporter,  98. 

*6  Idem.  The  court  said  that  this  definition  or  its  substantial  equivalent,  had  “been  incorporated  in 
statutes  in  Indiana  (section  10,  484,  Ann.  Code  ofind.  1908;  acts  of  1879,  p.  230);  in  Missouri  (section  6775, 
Rev.  Stat.  No.  1909);  in  Nebraska  (Laws  1891,  c.  55,  sec.  5a);  andin  Canada  (Rev.  Stat.  of  Canada  1906, 
c.  85,  pt.  2,sec.48).  The  Nebraska  act  was  repealed  in  1909.  (Law'sof  1909,  c.  152.)  The  Canadian  act  was 
amended  in  1908,  these  words  being  omitted  from  the  amended  statute.  (Chapter  45,  sections  3, 7,  and  8, 
Edw.  Vll.)  The  words  were  used  ina  Wisconsinstatutepassedin  1905  (c.  19, sec.  6),  but  at  a  special  session 
in  the  same  year  the  section  containing  them  was  amended  so  as  to  express  with  clearness  what  we  have 
held  to  be  the  true  meaning  originally  intended;  the  new  phraseology  befng:  ‘  In  which  the  grain  of  different 
owners  is  stored  in  bulk  or  mixed  together,  or  stored  in  such  manner  that  the  identity  o  f  different  lots  and 
parcels  can  not  be  accurately  preserved.’  (Laws  of  Wis.,  Special  Session,  1905,  c.  12,  sec.  74.)  A  Minnesota 
statute  passed  in  18^,  modeled  upon  that  of  Illinois,  contained  the  words  referred  to.  (Laws  of  Minn.  1885, 
c.  144,  sec.  1.)  Commissioners  appointed  to  propose  such  revision  and  codification  of  the  public  statutes 
of  the  State  as  should  ‘simplify,  harmonize,  and  complete’  them,  presented  a  report  in  the  form  of  a  single 
bill,  which  was  enacted  in  1905.  In  defining  ‘public  warehouse,’  the  revised  act  used  these  words,  which 
we  regard  as  a  rearrangement  ofthose  of  the  original  statute,  witn  a  puri)ose  to  avoid  ambiguity  and  make 
the  meaning  clear:  ‘In  which  grain  is  received  for  storage  in  bulk  and  that  of  different  owners  mixed 
together  or  so  stored  that  identity  of  the  different  lots  or  parcels  is  not  preserved.’  (Rev.  Laws,  of  Minn. 
1905,  sec.  2047.)  The  Minnesota  and  Wisconsin  statutes  distinctly  snow  that  the  legislatures  of  those 
States  thought  it  desirable  to  use,  in  addition  to  the  word  ‘mixed,’  which  might  be  thought  to  imply  an 
actual  commingling  and  stirring  together  of  the  grain  of  different  owners,  an  expression  covering  any 
manner  of  storage  which  did  not  accurately  preserve  the  identity  of  each  lot.’’ 

The  definitions  applicable  to  terminal  grain  elevators  in  the  more  important  grain  States  are  as  follows: 

Illinois. — Public  warehouses  of  class  A  shall  embrace  all  warehouses,  elevators,  and  granaries  in  which 
grain  is  stored  in  bulk,  and  in  which  the  grain  of  different  owners  is  mixed  together,  or  in  which  grain  is 
stored,  in  such  a  manner  that  the  identity  of  different  lots  or  parcels  can  not  be  accurately  preserved,  such 
warehouses,  elevators,  or  granaries  being  located  in  cities  having  not  less  than  100,000  inhabitants.  (Laws 
of  Illinois,  1871-72,  p.  762,  sec.  2;  Rev.  Stat.,  Ill.,  1912,  ch.  114,  sec.  135.) 

Minnesota. — All  elevators  and  warehouses  located  within  the  switching  limits  of  St.  Paul,  Minneapolis, 
and  Duluth,  and  other  points  in  the  State  which  are  now,  or  may  hereafter  be,  designated  as  terminal  points 
in  which  grain  is  received  for  storage  in  bulk,  and  that  of  different  owners  mixed  together  or  so  stored  that 
the  identity  of  the  different  lots  or  parcels  is  not  preserved,  shall  be  public  warehouses  known  as  “terminal 
warehouses,”  provided  that  the  storage  space  in  any  elevator  or  warehouse  built  by  any  State  may  be  used 
exclusively  by  the  citizens  of  such  State,  unless  the  State  so  building  and  owning  the  same  shall  otherwise 
provide.  (Laws  of  Minn.,  1915,  ch.  349.) 

North  Dafcoto.— The  term  “  Public  warehouse”  within  the  meaning  of  this  act  is  defined  as  all  buildings, 
elevators,  or  warehouses,  and  all  grist  and  flom  mills  doing  a  shipping  business  in  this  State,  erected  or  oper¬ 
ated  or  which  may  hereafter  be  erected  or  operated  by  any  person,  association,  copartnership,  corporation, 
or  trust  for  the  purpose  of  buying,  selling,  storing,  shipping,  or  handling  grain  for  profit.  (North  Dakota 
Laws,  1919,  ch.  138,  sec.  7.) 

South  Dakota.— A.\\  elevators  and  warehouses  in  this  State  wherein  and  whereat  grain  is  purchased,  re¬ 
ceived,  or  handled  are  hereby  declared  to  be  pubUc  warehouses.  (Revised  Code  of  South  Dakota,  1903, 
sec.  483.) 

A/ofltona.— The  term  “Public  warehouses”  includes  any  elevator,  mill,  warehouse,  or  structure  in  which 
grain  is  received  from  the  public  for  storage,  shipment,  or  handling,  whenever  such  grain  is  carried  or  in¬ 
tended  to  be  carried  to  or  from  such  warehouse,  elevator,  mill,  or  structure  by  common  carrier.  (Session 
Laws,  1919,  ch.  209,  sec.  8.) 

.Kansas.— That  all  elevators  or  warehouses  located  or  situated  on  or  adjacent  to  the  property  of  any  rail¬ 
road  company,  owned  or  operated  by  any  railroad  company,  or  owned  or  operated  by  any  person,  firm, 
corporation,  or  copartnership,  or  operated  by  any  person,  firm,  corporation,  or  copartnership  under  con¬ 
tract  or  lease  with  the  owner  thereof  in  which  grain  is  received  for  storage  or  transfer  for  a  compensation, 
and  all  elevators  or  warehouses  located  in  this  State  in  which  grain  is  stored  in  bulk  and  doing  business 
for  the  public  for  a  compensation,  are  hereby  declared  to  be  public  elevators  or  warehouses.  (Laws  of 
Kansas,  1907,  ch.  222,  sec.  19,  as  amended  by  laws  1915,  ch.  229,  sec.  11.) 

Nebraska. — That  allelevators  or  storehouses  where  grain  or  other  property  is  stored  for  compensation, 
whether  the  property  stored  be  kept  separate  or  not,  are  declared  to  be  public  warehouses.  (Nebraska 
Laws,  1891, ch. 55, sec. la.)  ^  .  ,  _  ,  x  ^ 

Missouri. — All  buldings,  elevators,  or  warehouses  wherever  State  gram  inspection  may  be  established 
by  the  commissioner  and  naving  a  capacity  of  not  less  than  50,000  bushels,  erected  and  operated,  or  which 
hereafter  may  be  erected  or  operated,  by  any  peison  or  persons,  association,  copartnership,  or  corporation 
for  purpose  ofstoring  the  grain  of  different  owners  for  a  compensation  are  hereby  declared  public  ware¬ 
houses.  (Missouri  Laws,  1913,  p.  357.)  . 

Oklahoma.— Ml  persons,  firms,  companies,  or  corporations  who  shall  receive  cotton,  tobacco,  wheat,  fats, 
oats,  rice,  or  any  kind  of  produce,  wares,  merchandise,  of  any  description  or  personal  property  in  store  for 


TERMINAL  GRAIN  MARKETING. 


130 


and  Missouri.  As  a  result  there  is  now  no  uniform  definition  of  a 
public  elevator  which  would  apply  to  all  jurisdictions.  The  Missouri 
law,  for  example,  restricts  public  warehouses  to  those  which  have  a 
capacity  of  not  less  than  50,000  bushels  and  are  operated  for  the 
purpose  of  storing  the  arain  of  different  owners  for  a  compensation; 
while  in  South  Dakota  the  term  public  warehouse  includes  all  elevators 
and  warehouses  wherein  and  TOereat  grain  is  purchased,  received,  or 
handled. ’’28  Moreover,  Illinois  and  Minnesota  have  adopted  statutes 
specially  applicable  to  the  large  terminal  markets.  It  appears  that 
in  some  States,  although  an  elevator  handling  grain  for  others  is  sub¬ 
ject  to  State  license  and  regulation,  such  license  and  regulation 
furnishes  no  assurance  that  the  entire  business  conducted  by  the  oper¬ 
ator  is  predominantly  for  public  account. 

Section  6.  Constitutionality  of  grain  warehouse  laws. 

Munn  V.  Illinois. — ^As  already  noted,^^  the  legal  obligations  of  a 
public  grain  warehouseman  in  Illinois  were  prescribed  in  the  Illinois 
warehouse  act  of  1871,  which  was  passed  pursuant  to  specific  direction 
contained  in  the  Illinois  constitution  of  1870.  This  legislation  was 
intended  to  remedy  certain  evils  alleged  to  exist  in  the  operation  of 
public  grain  storage  facilities  in  Chicago.  There  had  been  recurrent 
complaints  voiced  by  independent  shippers  for  many  years,  and  as 
the  United  States  Supreme  Court  later  said : 

*  *  *  duringthetwenty  years  in  which  this  peculiar  business  had  been  assuming 
its  present  “immense  proportions,  ’ ’  something  had  occurred  which  led  the  whole  body 
of  the  people  to  suppose  that  remedies  such  as  are  usually  employed  to  prevent  abuses  t 
by  virtual  monopolies  might  not  be  inappropriate  here. 

Accordingly  all  operators  of  public  grain  warehouses  such  as  those 
operated  in  Chicago  (i.  e.,  ‘‘warehouses,  elevators,  or  granaries  in 
which  grain  is  stored  in  bulk,  and  in  which  the  grain  of  different  owners 
is  mixed  together,  or  in  which  grain  is  stored  in  such  a  manner  that 
the  identity  of  different  lots  or  parcels  can  not  be  accurately  preserved 
*  *  *”)  were  required  (1)  to  procure  a  license  from  the  circuit  court  i 

of  the  county  wherein  they  are  located,  (2)  to  file  a  bond  running  to  i 

the  people  oi  the  State  of  Illinois  in  the  penal  sum  of  $10,000  condi¬ 
tioned  upon  the  faithful  performance  of  their  duties,  (3)  to  publish 

hire  under  the  provisions  of  this  act,  shall  be  deemed  and  taken  to  be  public  warehousemen.  (Oklahoma. 

1919,  Laws,  p.  383.)  ’ 

Washington.— The  rerm  public  warehouse,  when  used  in  this  act,  includes  any  elevator,  mill,  warehouse, 
or  structure  in  which  grain,  hay,  or  peas  are  received  from  the  public  for  storage,  shipment,  or  handling, 
whenever  such  grain,  hay,  or  peas  are  carried  or  intended  to  be  carried  to  or  from  such  warehouse,  elevator, 
mill,  or  structure  by  a  common  carrier.  (Washington  Laws,  1919,  ch.  189,  sec.  1.) 

Wisconsin. — All  elevators  and  warehouses  located  in  the  city  of  Superior,  doing  business  for  a  compen¬ 
sation,  and  all  elevators  and  warehouses  located  in  said  city  in  which  the  grain  of  different  oivners  is  stored  in 
bulk  or  mixed  together,  or  stoied  in  such  manner  that  the  identity  of  different  lots  and  parcels  can  not  be 
accurately  preserved,  and  all  elevators  and  warehouses  located  in  said  city  which  issue  warehouse  receipts 
for  grain  received  or  stored  are  hereby  declared  to  be  public  warehouses.  (Wisconsin  Stats.,  Revision  of 
1919,  sec.  1747-6.) 

Oregon.— The  tenn  public  terminal  warehouse  wherever  used  in  this  act  shall  be  held  and  construed  to 
mean  any  elevator,  mill,  or  warehouse  located  in  such  cities  in  the  State  as  may  hereafter  be  designated  as 
inspection  points  by  the  public  service  commission  of  Oregon,  in  which  grain  is  received  from  the  public 
for  storage  and  the  grain  of  different  owners  mixed  together  or  stored  in  special  piles  or  bins  and  for  which 
receipts  are  issued  covering  the  grain  received. 

Public  terminal  grain  warehouses  shall  be  of  two  classes  to  vidt: 

“Class  A"  grain  warehouses  and  “Class  B”  grain  warehouses.  Class  A  grain  warehouses  shall  include  all 
warehouses  the  proprietors  of  which  shall  elect  to  take  licenses  under  the  provisions  of  this  act  relative  to 
grain  warehouses  issuing  registered  grain  warehouse  receipts.  All  other  public  teiminal  warehouses  shall 
be  known  as  class  B  grain  warehouses. 

The  term  warehousemen  when  used  in  this  act  includes  any  firm,  peison,  company,  cori)oration,  or 
association  of  persons  owning,  operating,  or  controlling  any  public  warehouse.  (Oregon  Laws,  1917,  ch. 

333,  p.  38.) 

28  Both  of  these  definitions  obviously  include  many  comurv  elevators. 

22  Vol.  II,  Chap.  Ill,  sec.  7. 

80  Munn  V.  Illinois,  94  U.  S.,  113  (1872);  24  Lawyers’  Edition,  77. 


WAREHOUSING  AND  STORAGE. 


131 


during  the  first  week  of  January  of  each  year  their  rates  for  the 
storage  of  grain,  and  (4)  in  no  case  to  exceed  a  maximum  charge  for 
storing  and  handling  grain  of  2  cents  per  bushel  for  the  first  30  days  or 
part  thereof,  and  1  cent  per  bushel  for  each  15  days  after  the  first 
30  days. 

In  June  of  1872  it  appeared  that  a  certain  well-known  firm  engaged 
in  operating  a  public  grain  warehouse  in  Chicago  had  failed  to  comply 
with  the  law  in  the  first,  second,  and  fourth  particulars  enumerated 
above.  Suit  was  thereupon  brought  to  test  the  constitutionality  of 
these  provisions  in  the  Illinois  State  courts;  and  the  judgment  of  the 
Supreme  Court  of  Illinois  (affirming  the  judgment  of  the  criminal 
court  of  Cook  County  which  had  sustained  the  validity  of  the  Illinois 
warehouse  law)  was  carried  to  the  Supreme  Court  of  the  United 
States  by  a  writ  of  error.^^ 

The  latter  court  in  affirming  the  judgment  indicated  that  although 
the  Illinois  law  was  without  exact  precedent  in  the  United  States, 
the  principle  of  regulation  involved  was  well  established.-  In  this 
connection  the  court  said: 

Neither  is  it  a  matter  of  any  moment  that  no  precedent  can  be  found  for  a  statute 
precisely  like  this.  It  is  conceded  that  the  business  is  one  of  recent  origin,  that  its 
growth  has  been  rapid,  and  that  it  is  already  of  great  importance.  And  it  must  also  be 
conceded  that  it  is  a  business  in  which  the  whole  public  has  a  direct  and  positive  inter¬ 
est.  It  presents^  therefore,  a  case  for  the  application  of  a  long-known  and  well-estab¬ 
lished  principle  in  social  science,  and  this  statute  simply  extends  the  law  so  as  to  meet 
this  new  development  of  commercial  progress.  There  is  no  attempt  to  compel  these 
owners  to  grant  the  public  an  interest  in  their  property,  but  to  declare  their  obligations, 
if  they  use  it  in  this  particular  manner. 

In  describing  the  principles  upon  which  this  power  of  regulation 
rests  the  court  said : 

* *  *  *  Property  does  become  clothed  with  a  public  interest  when  used  in  a  manner 
to  make  it  of  public  consequence  and  affect  the  community  at  large.  When,  there¬ 
fore,  one  devotes  his  property  to  a  use  in  which  the  public  has  an  interest,  he,  in  effect, 
grants  to  the  public  an  interest  in  that  use,  and  must  submit  to  be  controlled  by  the 
puWic  for  the  common  good,  to  the  extent  of  the  interest  he  has  thus  created.  He  may 
withdraw  his  grant  by  discontinuing  the  use;  but,  so  long  as  he  maintains  the  use,  he 
must  submit  to  the  control. 

Budd  V.  New  York. — The  doctrine  of  the  Munn  case  was  attacked 
in  1888  when  the  manager  of  a  Buffalo  elevator  was  proved  to  have 
deliberately  violated  an  act  of  the  Legislature  of  the  State  of  New 
York  which  had  prescribed  a  maximum  charge  of  five-eights  of  1 
cent  per  bushel  for  elevating,  receiving,  weighing,  and  discharging 
grain  by  means  of  floating  and  stationary  elevators.”  The  elevator 
manager  was  indicted,  found  guilty,  and  sentenced  in  the  superior 
court  of  Buffalo  for  exacting  charges  for  elevating  grain  in  excess  of 
the  statutory  rates.  The  defendant  contended  that  the  prosecu¬ 
tion  was  founded  on  a  statute  which  was  an  unwarranted  exercise  of 
the  police  power  and  in  conflict  both  with  the  Constitution  of  the 
United  States  and  with  that  of  the  State  of  New  York.  Upon  appeal 
to  the  court  of  appeals  of  the  State  of  New  York  the  judgment 
was  affirmed  and  (with  other  cases  involving  similar  questions)  was 
finally  brought  before  the  Supreme  Court  of  the  United  States  upon 
a  writ  of  error.^^ 


31  Munn  V.  Illinois,  94  U.  S.,  113;  24  Lawyers  Edition,  77. 

32  Laws  of  New  York,  1888,  ch.  581. 

*3  Budd  V.  New  York,  143  U.  S.,  517;  36  Lawyers  Edition,  247. 


132 


TEKMINAL  GRAIN  MARKETING. 


In  affirming  the  judgments  already  entered  the  court  said: 

We  must  regard  the  principle  maintained  in  Munn  v.  Illinois  as  firmly  established! 
and  we  think  it  covers  the  present  cases  in  respect  to  the  charge  for  elevating,  receiv¬ 
ing,  weighing,  and  discharging  the  grain,  as  well  as  in  respect  to  the  charge  for  trimming 
and  shoveling  to  the  leg  of  the  elevator  when  loading,  and  trimming  the  cargo  when 
loaded.  *  *  *  On  the  testimony  in  the  cases  before  us  the  business  of  elevating 
grain  is  a  business  charged  with  a  public  interest,  and  those  who  carry  it  on  occupy  a 
relation  to  the  community  analogous  to  that  of  common  carriers.  The  elevator  owner, 
in  fact,  retains  the  grain  in  his  custody  for  an  appreciable  period  of  time,  because  he 
receives  it  into  his  custody,  weighs  it,  and  then  ffischarges  it,  and  his  employment  is 
thus  analogous  to^  that  of  a  warehouseman.  In  the  actual  state  of  the  business  the 
passage  of  the  grain  to  the  city  of  New  York  and  other  places  on  the  seaboard  would, 
without  the  use  of  elevators,  be  practically  impossible.  The  elevator  at  Buffalo  is  a 
link  in  the  chain  of  transportation  to  the  seaboard,  and  the  elevator  in  the  harbor  of 
New  York  is  a  like  link  in  the  transportation  abroad  by  sea.  The  charges  made  by 
the  elevator  influence  the  price  of  grain  at  the  point  of  destination  on  the  seaboard, 
and  that  influence  extends  to  the  prices  of  grain  at  the  places  abroad  to  which  it  goes. 
The  elevator  is  devoted  by  its  owner,  who  engages  in  the  business,  to  a  use  in  which  the 
public  has  an  interest,  and  he  must  submit  to  be  controlled  by  public  legislation  for 
the  commoi;  good. 

Brass  v.  North  Dakota. — ^The  foregoing  decisions  established  the 
power  of  the  States  to  regulate  the  business  of  public  grain  elevators, 
especially  at  the  larger  centers  of  trade,  such  as  Chicago,  Buffalo, 
New  York  City,  and  Brookl3m,  to  which  the  statutes  in  question  had 
^ecifically  applied.  In  1891  an  act  was  passed  by  the  State  of  North 
Dakota  purporting  to  regulate  the  business  of  all  elevators  and 
warehouses  in  the  State  which  were  erected  or  operated  “  for  the  pur¬ 
pose  of  buying,  selling,  storing,  shipping,  or  handling  grain  for  profit, 
and  these  institutions  were  by  the  act  declared  to  be  public  ware¬ 
houses.  Among  other  things  those  operating  elevators  were  required 
to  give  surety  bond  to  the  State,  conditioned  for  the  faithful  per¬ 
formance  of  their  duties  as  public  warehousemen;  and  certain 
maximum  charges  were  prescribed  for  storing  and  handling  grain. 
In  the  fall  of  that  year  a  farmer  named  Stoeser  came  into  the  village  of 
Grand  Harbor,  N.  Dak.,  and  applied  to  a  local  elevator  owner  for 
storage  of  a  part  of  his  wheat  crop  at  the  rate  fixed  by  the  above 
statute,  namely,  2  cents  per  bushel.  The  elevator  owner  refused  to 
do  this,  insisting  that  2  J  cents  was  the  customary  rate.  Stoeser  filed 
a  petition  for,  and  procured,  an  alternative  writ  of  mandamus  in  the 
district  court  of  the  county.  To  this  the  elevator  owner  answered 
(among  other  things) — 

That  respondent’s  principal  business  is  that  of  buying  wheat  at  Grand  Harbor, 
N.  Dak. ,  and  shipping  the  same  to  and  selling  it  at  Minneapolis  and  Duluth,  Minn., 
to  which  business  that  of  storing  grain  for  third  persons  has  been  a  mere  incident. 

That  all  grain  purchased  by  respondent  at  his  said  elevator  is  purchased  for  the  sole 
purpose  of  being  shipped  to  and  sold  at  ahd  is  shipped  to  and  sold  at  Minneapolis  and 
Duluth,  Minn. 

That  respondent  in  the  conduct  of  his  said  business  contracts  with  millers  and 
other  purchasers  of  grain  at  said  Minneapolis  and  Duluth  to  sell  and  deliver  to  said 
persons  at  a  future  and  fixed  date  certain  quantities  of  wheat,  and  operates  and  main¬ 
tains  his  said  elevator  for  the  exclusive  purpose  of  purchasing  grain  to  fill  said  contract. 

That  in  seasons  when  the  grain  yield  is  light  and  railroad  fa'cilities  are  such  as  to 
enable  grain  to  be  moved  rapidly  there  is  space  and  storage  capacity  in  respondent’s 
elevator  in  excess  of  that  used  by  respondent’s  grain,  and  particularly  when  re¬ 
spondent’s  contracts  for  the  sale  of  grain  are  small,  while  at  other  times,  when  the 
yield  is^  enormous,  as  in  the  present  year,  respondent’s  contracts  are  large,  and  the 
quantities  of  grain  presented  for  shipment  are  beyond  the  capacity  of  the  railroads  to 


Laws  of  North  Dakota,  1891,  ch.  126. 


WAREHOUSING  AND  STORAGE. 


133 


move,  there  is  not  sufficient  storage  capacity  in  respondent’s  elevator  to  hold  and  store 
the  grain  purchased  by  respondent  in  the  conduct  of  his  said  business. 

That  there  are  located  in  Minneapolis  and  Duluth,  Minn.,  a  great  many  corpora¬ 
tions,  persons,  and  copartnerships  engaged  in  a  business  known  as  the  “grain  commis¬ 
sion”  business. 

That  those  grain  commission  houses  have  swarms  of  agents  traveling  throughout  the 
State  of  North  Dokota,  going  from  town  to  town  and  farm  to  farm,  purchasing  grain 
from  farmers  in  some  instances  and  in  others  soliciting  farmers  to  ship  their  grain  to 
said  houses  at  Minneapolis  or  Duluth,  Minn.,  to  be  by  the  latter  sold  on  commission. 

That  none  of  said  grain  commission  houses  have  or  own  any  storage  capacity  in 
North  Dakota. 

That  if  chapter  126  of  the  Laws  of  1891  is  valid  and  its  effect  is  to  compel  respondent 
to  receive  all  grain  that  may  be  tendered  to  him  for  storage  by  grain  commission  men, 
farmers,  grain  speculators,  and  others,  without  reference  to  the  necessities  or  condi¬ 
tion  of  respondent’s  business  at  any  particular  time,  the  entire  storage  capacity  of 
respondent’s  elevator  will  be  exhausted  in  storing  grain  for  third  persons,  and  the 
principal  business  of  the  respondent,  to  conduct  which  his  capital  was  invested  in  said 
elevator,  will  be  utterly  ruined  and  annihilated  for  want  of  storage  capacity  to  contain 
wheat  purchased  by  him  to  fill  contracts  made  by  him  in  the  conduct  of  his  said  busi¬ 
ness,  and  respondent  subjected  to  suits  for  damages  for  nonfulfillment  of  his  said 
contracts. 

That  the  relator  only  offered  to  pay  respondent  for  the  service  which  he  requested 
him  to  perform  at  the  rate  fixed  by  chapter  126  of  the  Laws  of  1891 — that  is,  2  cents  per 
bushel;  that  respondent  refused  to  perform  the  service  for  less  than  2^  cents  per  bushel. 

That  respondent  refuses  to  comply  with  the  provisions  of  said  chapter  126  on  the 
ground  that  it  abridges  his  privileges  and  immunities  as  a  citizen  of  the  United  States; 
that  it  deprives  him  of  his  liberty  and  property  without  due  process  of  law,  and  denies 
to  him  the  equal  protection  of  the  laws,  and  amounts  to  a  regulation  of  commerce 
among  the  States. 

On  Stoeser’s  demurrer  a  peremptory  writ  of  mandamus  was  allowed 
and  appeal  was  taken  to  the  Supreme  Coiu*t  of  North  Dakota,  which 
affirmed  the  judgment.  The  case  then  went,  on  writ  of  error,  to  the 
Supreme  Court  of  the  United  States.^^  It  was  claimed  that  the  facts 
in  this  case  differed  materially  from  those  in  either  Munn  v.  Illinois  or 
Budd  V.  New  York.  The  court  said: 

It  is  argued  that  the  statutes  of  Illinois  and  New  York  are  intended  to  operate 
in  great  trade  centers,  where  on  account  of  the  business  being  localized  in  the  hands 
of  a  few  persons  in  close  proximity  to  each  other  great  opportunities  for  combinations 
to  raise  and  control  elevating  and  storage  charges  are  afforded,  while  the  wide  extent 
of  the  State  of  North  Dakota  and  the  small  population  of  its  country  towns  and  vil¬ 
lages  are  said  to  present  no  such  opportunities.  *  *  *  Again,  it  is  said  that  the 
modes  of  carrying  on  the  business  of  elevating  and  storing  grain  in  North  Dakota 
are  not  similar  to  those  pursued  in  the  eastern  cities;  that  the  great  elevators  used 
in  transshipping  grain  from  the  lakes  to  the  railroads,  and  that  those  who  own  them, 
if  uncontrolled  by  law,  could  extort  such  charges  as  they  pleased;  and  great  stress  is 
laid  upon  expressions  used  in  our  previous  opinions,  in  which  this  business,  as  carried 
on  at  Chicago  and  Buffalo,  is  spoken  of  as  a  practical  monopoly,  to  which  shippers  and 
owners  of  grain  are  compelled  to  resort.  The  surroundings  in  an  agricultural  State, 
where  land  is  cheap  in  price  and  limitless  in  quantity,  are  thought  to  be  widely  differ¬ 
ent  and  to  demand  different  regulations. 

In  the  view  of  the  court,  however,  these  were  arguments  for  legis¬ 
lative  rather  than  judicial  consideration,  viz,  “  that  the  facts  rehearsed 
are  matters  for  those  who  make,  not  for  those  who  interpret,  the  laws.” 
It  was  pointed  out  that  there  was  under  the  statute  no  compulsion 
upon  any  elevator  operator  to  become  a  warehouseman  for  others, 
the  court  saying: 

We  do  not  understand  this  law  to  require  the  owner  of  a  warehouse,  built  and  used 
by  him  only  to  store  his  own  grain,  to  receive  and  store  the  grain  of  others.  Such  a 
duty  only  arises  when  he  chooses  to  enter  upon  the  business  of  elevating  and  storing 


*5  Brass  v.  North  Dakota,  ex  rel  Stoeser,  153  U.  S.,  391;  38  Lawyers’  Edition,  757. 


It 


TERMINAL  GRAIN  MARKETING. 

the  grain  of  other  persons  for  profit.  Then  he  becomes  subject  to  the  statutory  regu¬ 
lations  and  he  can  not  escape  them  by  asserting  that  he  also  elevates  and  stores  his 
o^  grain  in  the  same  warehouse.  As  well  might  a  person  accused  of  selling  liquor 
without  a  license  urge  that  the  larger  part  of  his  liquors  were  designed  for  his  own 
consumption,  and  that  he  only  sold  the  surplus  as  a  mere  incident. 

The  prevailing  opinion,  which  affirmed  the  judgments,  recited  that 
no  solid  distinction  could  be  found  between  the  cases  in  which  tWe 
questions  have  been  heretofore  determined  by  this  court  and  the 
present  one.” 

Four  justices  dissented  to  this  opinion,  maintaining  inter  alia 
that  by  this  decision  a  party  is  compelled  by  the  mandate  of  the 
court  to  engage  in  a  business  which  he  never  intended  to  engage  in, 
and  which  he  does  not  desire  to  engage  in,  to  wit,  the  business  of  main¬ 
taining  a  public  elevator.” 

Section  6.  Statutory  requirements  of  public  elevators. 

In  general. — On  the  principles  established  by  this  class  of  cases 
public  terminal  elevators  in  the  producing  States  have  been  subjected 
to  the  following  requirements: 

(1)  To  procure  a  license  from  State  authority.^^ 

(2)  Upon  applying  for  a  license  to  file  a  surety  bond  to  be  duly 
approved  by  competent  State  author! ty.^* 

(3)  To  receive  so  far  as  the  capacity  of  the  warehouse  will  permit 
all  grain  tendered  it  in  the  usual  course  of  business  without  discrimina¬ 
tion  of  any  kind.^® 

(4)  To  keep  a  record  of  all  grain  received,  stored,  and  delivered  for 
public  account  and  to  make  periodical  or  special  reports  of  such  busi¬ 
ness  to  a  designated  State  authority  (such  as  chief  inspector  of  grain 
or  warehouse  registrar) and 

(5)  To  see  that  grain  is  inspected  by  a  duly  authorized  inspector 
before  placing  it  in  storage  and  before  delivering  it  from  the  ware- 
house.'^^ 


36  Idem,  p.  405. 

37  7«i«ois.— Warehouse  act  of  1871,  as  amended  by  Illinois  laws,  1907,  p.  491  “Revision  of  act  of  1871”- 

Kansas.— Session  laws,  1907,  ch.  222,  sec.  20;  Minnesota.— General  Statutes  1913,  section  4436,  as  amended 
by  session  laws  of  Minnesota  for  1919,  ch.  474;  Missouri.— J^aws  of  Missouri,  1913,  p.  357;  Montana.— 
Sessionlaws  1919,  ch.  209,  sec.  29,  as  amended  by  extraordinary  session  laws  1919,  ch.  3,  sec.  1;  Nebraska  — 
Laws  of  Nebraska,  1917,  ch.  15^  sec.  2;  North  Dafcofa.— Session  la w^  1919,  p.  222;  Oregon.— Laws  of  1917 
ch.  333,  sec.  18;  Washington.— Session  laws,  1919,  ch.  189,  sec.  18;  m'seormw.— Wisconsin  Statutes,  Revi¬ 
sion  of  1919,  sec.  1747-6.  ’ 

38  Illinois.— haws,  1907,  p.  491;  Eomas.— Session  laws,  1907,  ch.  222,  sec.  21;  Minnesota.— ReYised  laws 

of  Minn.,  Supp  - ,  ,  ......  —  .  _ 


1919,  ch.  3,  sec. 

p.  221;  Oregon.-  _  _  _ 

accepted  as  svueties  for  it.  To  find  the  basis  of  the  bond  ad'd  to  the  capacity  of  the  wardrorTsein  biishels  the 
niunber  of  bushels  of  grain  actually  handled  the  previous  year  and  take  one-half  this  sum.  For  the  first 
60,000  bushels  the  bond  will  be  $1,000,  and  for  each  additional  50,000  bushels,  or  fraction  thereof,  the  bond 
shall  be  increased  by  $1,000.  A  new  warehouse  or  one  not  operated  during  preceding  year  will  have  for 
its  basistwo-thirdsofitscapacityin bushels.”  Washington.— Session  laws,  1919,  ch.  189,  sec.  18;  Wiscon¬ 
sin. — Wisconsin  Statutes,  Revision  of  1919,  sec.  1747-7. 

3»7«»«ots.— Laws,  1907,  p.  491;  FTcTOsas.— Session  laws,  1907,  ch.  222,  sec.  22;  Tlfmncsofa.— Revised  laws  of 
1905,  as  amended  by  generallaws  of  Minnesota  for  1907,  ch.  303;  Missouri.— haws,  1913,  p.  359;  Montana.— 
Sessionlaws,  1919,  sec.  26;  Nebraska.— haws  of  1891,  ch.  55,  sec.  4a;  Oregon.— haws  of  1917,  ch.  333,  sec  22* 
Washington.— Session  laws  of  1919,  ch.  189,  sec.  22;  TFfsconsm.— Wisconsin  Statutes,  Revision  of  1919  sec! 
1747-10.  ’ 

«  7Hmois.— Hurd’s  Revised  Statutes  of  Illinois,  1915-16,  p.  2099;  Kansas.— Session  laws,  1907,  ch.  222,  secs. 
29-30;  Jfmmesote.— Revised  laws,  1905,  sec.  2056,  as  amended  by  general  laws  of  Minnesota  for  1913,  ch.  533* 
Jlfissoun.— Laws  of  1913,  p.  363;  Nebraska.— haws  of  1917,  ch.  155,  sec.  4;  Oregon.— haws  oi  1917,  ch.  333  sec’ 
22;  Was/imi^on.— Sessionlaws,  1919,  ch.  189,  sec.  24;  TFfscowsin.— Wisconsin  Statutes,  Review  of  1919,  sec! 
1747-15,  16.  ' 

« Illinois.— Rurd’s  Revised  Statutes  of  Illinois,  1915-16,  p.  2098;  Kansas.— Session  laws,  1907,  ch.  222,  sec. 
23;  Jlfmngsofa.— Revised  laws,  1905,  sec.  2053,  “All  grain  received  at  a  terminal  warehouse  shall  be  inspected 
and  graded  by  a  State  inspector,  and  reinspected  in  like  manner  upon  delivery  from  such  warehouse.  The 
charges  for  such  inspections  shall  be  paid  by  the  warehouseman  and  added  to  the  storage,  and  the  chief 
inspector  may  recover  such  charge  from  the  warehouseman.”  Missouri.— haws  of  1913,  p.  359;  Oregon. — 
19i7^s^  ^1747  72*  Laws,  1919,  ch.  189,  sec.  17;  W7«co7wm.— Wisconsin  Statutes, 


4 


WAREHOUSING  AND  STORAGE. 


135 


(6)  Another  important  requirement  prescribed  in  certain  States 
relates  to  the  preservation  of  grades  of  grain  in  store.  The  operators 
of  public  elevators  in  such  States  are  required  to  keep  the  different 
grades  of  grain  in  different  bins,  i.  e.,  without  mixing  different  grades. 
These  statutes  exist  in  Illinois, Minnesota, Kansas,'^^  Missouri, 
and  Wisconsin.'^® 

Warehouse  receipts. — A  primary  purpose  in  State  regulation  of 
elevators  and  warehouses  is  to  insure  the  validity  and  negotiability 
of  warehouse  receipts.  The  warehouse  laws  of  the  grain  States 
invariably  include  certain  provisions  with  reference  to  the  form  and 
substance  of  such  receipts  and  the  manner  of  issuing  and  canceling 
them,  and  the  obligations  of  the  warehouseman  thereby  assumed. 
The  statutes  contemplate  that  the  receipt  issued  by  a  public  terminal 
elevator  shall  be  evidence  of  title  to  grain  of  a  certain  established 
grade  and  certified  weight.  Since  it  is  usually  contemplated  that  the 
warehouse  receipt  will  be  free  and  unencumbered  at  date  of  issue  the 
owner  or  consignee  of  grain  delivered  for  store  is  required,  prior  to 
the  issuance  of  receipts,  to  present  evidence  that  transportation 
charges,  inspection  and  weighing  fees,  and  other  charges  which  may 
be  a  lien  upon  such  grain,  have  been  paid.^^  When  grain  is  stored  in 
special  or  private  bins — i.  e.,  not  mixed  with  that  of  other  owners  of 
like  grade — this  fact  is  usually  stated  on  the  receipt.  In  certain 
States  the  nature  or  contents  of  the  receipt  is  left  largely  to  the 
administrative  discretion  of  the  State  public  utilities  commission  or 
other  executive  board,  while  in  Illinois,^®  Minnesota,^®  Kansas,®® 
Missouri,®^  and  Wisconsin,®^  the  statutes  specify  the  language  of  the 
receipt,  which  is  substantially  uniform  in  these  States.  The  following 
is  the  provision  of  the  Illinois  law: 

418.  Manner  of  issuing  receipts. 

Sec.  7.  Upon  application  of  the  owner  or  consignee  of  grain  stored  in  a  public  ware¬ 
house  of  class  A,  the  same  being  accompanied  with  evidence  that  all  transportation 
or  other  charges  which  may  be  a  lien  upon  such  grain,  including  charges  for  inspec¬ 
tion,  have  been  paid,  the  warehouseman  shall  issue  to  the  person  entitled  thereto 
a  warehouse  receipt  therefor,  subject  to  the  order  of  the  owner  or  consignee,  which 
receipt  shall  bear  date  corresponding  with  the  receipt  of  grain  into  store,  and  shall 
state  upon  its  face  the  quantity  and  inspected  grade  of  the  grain,  and  that  the  grain 
mentioned  in  it  has  been  received  into  store,  to  be  stored  with  grain  of  the  same  grade 
by  inspection,  received  at  about  the  date  of  the  receipt,  and  that  it  is  deliverable 
upon  the  return  of  the  receipt,  properly  indorsed  by  the  person  to  whose  order  it  was 
issued,  and  the  payment  of  proper  charges  for  storage.  All  warehouse  receipts  for 
grain,  issued  from  the  same  warehouse,  shall  be  consecutively  numbered;  and  no 
two  receipts,  bearing  the  same  number,  shall  be  issued  from  the  same  warehouse 
during  any  one  year,  except  in  the  case  of  a  lost  or  destroyed  receipt,  in  which  case 
the  new  receipt  shall  bear  the  same  date  and  number  as  the  original,  and  shall  be 


«  Sec.  17.  It  shall  not  be  lawful  for  any  public  warehouseman  to  mix  any  grain  of  different  grades  together 
or  to  select  different  qualities  of  the  same  grade  for  the  purpose  of  storing  or  delivermg  the  same,  nor  shall  he 
attempt  to  deliver  grain  of  one  grade  for  another,  or  in  any  way  tamper  with  grain  while  in  his  possession 
or  custody,  with  a  view  of  securuig  any  profit  to  himself  or  any  other  person;  and  in  no  case,  even  of  grain 
stored  in  a  separate  bin,  shall  he  be  permitted  to  mix  grain  of  different  grades  together  while  in  store. 
(Hurd,  Revised  Statutes  of  Illinois,  1915-16,  p.  2103.) 

« Revised  laws,  1905,  sec.  2050.  . 

(Laws  1907,  ch.  222,  sec.  23);  such  grain  to  be  in  all  cases  inspected,  weighed,  and  graded  by  a  duly 
authorized  inspector  and  weigher  (but  to  be  stored  with  grain  of  a  similar  grade). 

«  Laws  of  1913,  p.  359. 

«WiseonsinStats.,  Revision  of  1919,  sec.  1747-19.  .  n  t  -/i  v. 

«  The  Minnnesota  statute,  however,  provides  that  inspection  charges  “shall  be  paid  by  the  warehouse 
man  and  added  to  the  storage.”  ReAused  Laws,  1905,  sec.  4442. 

<8  Hurd’s  Revised  Statutes,  1917,  ch.  114.  ^  • 

<9  R.  L.,  1905,  sec.  2049,  as  amended  1907,  ch.  303,  sec.  1.  Prescribes  form  of  receipt. 

60  Laws,  1907,  ch.  222,  sec.  24,  Mar.  2. 

61  Laws  of  1913,  sec.  20. 

6*  Wis.  Stats.,  Revision  of  1919,  sec.  1747-11. 


136 


TERMINAL  GRAIN  MARKETING. 


plainly  marked  on  its  face  ‘ ‘  duplicate.  ’  ’  If  the  grain  was  received  from  railroad  cars, 
the  number  of  each  car  shall  be  stated  upon  the  receipt,  with  the  amount  it  con¬ 
tained;  if  from  canal  boat  or  other  vessel,  the  name  of  such  craft;  if  from  teams  or  by 
other  means,  the  manner  of  its  receipt  shall  be  stated  on  its  face. 

The  Minnesota  terminal  w:arehouse  receipts  are  in  the  following 
form: 


Form  19.— PUBLIC  WAREHOUSE  RECEIPT  AS  ISSUED  AT  MINNEAPOLIS,  MINN. 


O 


to 


Electric  Steel  Elevator  Co. 


ELECTRIC  STEEL  ELEVATOR. 


Warehouse  receipt  No.  2264.  Minneapolis,  Minn . 191  . 

The  Electric  Steel  Elevator  Company,  has  received  in  store,  in  its  elevator  known  as  electric 
steel  situated  at  26th  Avenue  SE.  and  5th  Street,  in  the  city  of  Minneapolis,  Minnesota,  for 
storage  from . owner, 

. Bushels 

of . 


Which  has  been  duly  inspected  by  a  duly  authorized  inspector  of  grain  appointed  by  the  State 
Railroad  and  Warehouse  Commission  of  Minnesota,  and  has  been  graded  by  said  inspector  as 

No. - and  is  that  grade.  Said  grain  or  an  equal  amount  ofgrainofthe  same  kind  and  grade 

is  deliverable  upon  the  return  of  this  receipt  properly  indorsed  by  the  owner  above  named  and 
the  payment  of  all  lawful  charges;  in  case  of  grain  stored  separately  in  a  special  bin,  at  the 
request  of  the  owner  or  consignee,  the  identity  of  such  grain  will  be  preserved  while  in  store  and 
said  grain  will  be  delivered  as  such  separate  lot  or  parcel,  in  accordance  with  law,  upon  surrender 
of  the  receipt.  Loss  by  fire,  heating,  or  the  elements  is  at  owner’s  risk. 

The  Electric  Steel  Elevator  Company  conducts  said  elevator  as  a  public  terminal  warehouse 
and  receives  and  stores  therein  grain  of  others  for  hire.  Electric  Steel  Elevator  Co. 
. bushels . grade.  By . 


Railroad  elevators. — Under  the  laws  of  Wisconsin  every 
elevator  at  Superior  operated  directly  or  indirectly  by  a  railroad 
company  or  by  its  lessee  is  declared  to  be  a  public  warehouse  so  far 
as  to  require  it  to  receive  and  store  without  discrimination  all  grain 
carried  over  the  line  of  the  railway  company,  viz : 

Every  elevator  or  warehouse  located  in  the  city  of  Superior  owned  or  held  by  any 
railway  company,  either  in  its  own  name  or  in  the  name  of  any  other  person,  persons, 
or  corporation,  for  its  use,  is  hereby  declared  and  shall  be  deemed  to  be  a  public 
warehouse  within  the  meaning  of  this  act  so  far  as  to  require  the  railway  company 
owning  or  holding  the  same,  or  any  lessee  thereof,  to  receive  and  store,  without  dis- 
crinunation,  and  subject  only  to  the  charges  provided  in  said  chapter  19,  of  all  grain 
carried  over  the  line  of  such  railway  company  whether  by  said  company  directly  or 
by  any  other  railway  company  operating  its  line  whether  as  lessee  or  otherwise,  and 
delivered  at  Superior. 

In  case  any  person,  firm,  or  corporation  has  heretofore  leased,  or  shall  hereafter  lease, 
or  become  the  lessee  or  occupant  in  any  manner  whatsoever  of  any  elevator  or  ware¬ 
house  located  in  the  city  of  Superior  belonging  to  any  -railway  company,  said  lessee 
or  occupant  shall  immediately  upon  the  passage  of  this  act,  or  upon  the  commence¬ 
ment  of  his  leasehold  term,  if  created  subsequently  to  the  passage  hereof,  become  a 
public  warehouseman  and  subject  to  all  of  the  provisions  of  chapter  10  except  so  far 
that  if  unable  to  furnish  storage  for  all  persons  applying  for  the  same  he  shall  give 
preference  to  the  storage  of  all  grain  received  in  Superior  over  the  line  of  the  railroad 
company  owning  said  elevator  or  warehouse. 

Statutes  of  the  other  States  examined  do  not  specifically  include 
railroad  operated  elevators  as  public  elevators. 

Grain  owned  by  the  operator  in  a  public  warehouse. — None 
of  the  statutes  under  discussion  specifically  prohibits  the  operator 
from  storing  his  own  grain  in  the  public  warehouse  operated  by  him, 


railroad  elevators  on  the  seaboard  are  regarded  as  public  houses  by  the  trade  for  the  reason 
that  they  are  operated  by  the  carriers  as  terminal  facilities  for  transshipment  purposes  and  automatically 
receive  and  handle  the  pain  shipped  on  export  bilhng.  The  railroad  elevator  is  not  obligated,  however, 
to  handle  grain  shipped  over  other  lines  and  differs  to  that  extent  from  the  public  municipal  elevators 

such  as  have  been  operated  by  public  authority  at  New  Orleans,  Seattle,  Portland  (Oreg.),  and  Astoria 
(Oreg.).  '  o  /> 

64  Wisconsin  Statutes,  Revision  of  1919,  secs.  1747-1768  and  1747-1770.  This  appears  to  be  the  only 
State  which  has  specifically  declared  that  railroad  elevators  are  public  warehouses. 


WAREHOUSING  AND  STORAGE. 


137 


although  in  three  States  he  is  forbidden  to  ‘‘tamper  with  the  grain 
with  a  view  to  securing  a  profit  to  himself  or  any  other  person.’’ 

It  should  be  noted  that  the  Canada  grain  act,  on  the  other  hand, 
forbids  the  owner,  manager,  or  operator  of  a  public  terminal  elevator 
to  deal  in  grain  or  to  store  his  own  grain  m  any  such  warehouse 
operated  by  him. 

A  prohibition  similar  to  that  of  Canada  has  been  applied  in  Illinois, 
where  the  courts  have  construed  the  State  warehouse  act,  in  its  appli¬ 
cation  to  Chicago,  so  as  to  prohibit  operators  of  public  warehouses 
from  storing  their  own  grain  in  the  public  warehouses  operated  by 
them  except  in  special  bins,  on  the  theory  that  their  interests  as 
private  dealers  should  not  be  allowed  to  conflict  with  their  duties  to 
the  public.  This  principle  was  expressed  by  the  Illinois  Supreme 
Court®®  in  1898  as  follows: 

*  *  *  It  would  be  idle  to  expect  a  warehouseman  to  perform  his  duty  to  the 
public  as  an  impartial  holder  of  the  grain  of  the  different  proprietors  if  he  is  permitted 
to  occupy  a  position  where  his  self-interest  is  at  variance  with  his  duty .  In  exer¬ 
cising  the  public  employment  for  which  he  is  licensed^  he  can  not  be  permitted  to 
use  the  advantage  of  his  position  to  crush  out  competition^  and  to  combine  in  estab¬ 
lishing  a  monopoly  by  which  a  great  accumulation  of  grain  is,  in  the  hands  of  the 
warehouseman,  liable  to  be  suddenly  thrown  upon  the  market  whenever  they,  as 
speculators,  see  profit  in  such  course. 

This  rule  has  been  evaded  in  practice,®^  however,  and  has  not  been 
adopted  in  the  other  grain  States.  In  the  United  States  generally  a 
person  may  hold  himself  out  to  be  a  public  warehouseman  and  at  the 
same  time  utilize  his  plant  for  the  storage  of  his  own  grain. 

Section  7.  Evasion  of  the  warehouse  law  in  Chicago. 

Method  of  evasion. — The  public  interest  in  maintaining  public 
grain  warehouses  in  Chicago,  subject  to  regulation  under  the  Illinois 
warehouse  act,  was  pointed  out  in  a  concurring  opinion  in  the  case- 
of  People  V.  Illinois  Central  R.  R.  Co.  (1908) :  ®® 

The  fact  that  anyone  shipping  grain  to  Chicago  can  store  it  in  a  public  warehouse 
prevents  private  elevators  having  a  monopoly  in  the  purchase  of  grain,  and  thus  has 
a  very  strong  tendency  to  increase  the  selling  price  of  grain.  It  is  a  well-kno\Yi 
that  if  one  railroad  reduces  freight  rates  all  other  competing  roads  must  meet  such 
reduction.  The  great  argument  in  favor  of  pub  he  canals  and  waterways  generally  is 
the  effect  they  have  upon  shipping  and  freight  rates.  Applying  this  saine  hne  of 
reasoning  to  pub  he  warehouses  in  a  great  grain  center  as  to  the  storing  and  wading 
of  grain,  it  is  self-evident  that  the  existence  of  such  warehouses  regulated  by  oiir 
present  warehouse  act  must  necessarily  have  a  salutary  effect  upon  the  price  of  grain 
and  the  conduct  of  the  grain  trade,  with  a  resultant  benefit  to  the  pubhc  at  large. 

However,  as  already  shown  above  and  in  Volume  II®®  of  this  report, 
the  decrees  of  the  Illinois  courts  (1897-98)  granted  a  perpetual  in¬ 
junction  against  Chicago  warehousemen  frorn  storing  their  own  gram 
in  the  public  bins;  and  subsequent  to  this  ruling  there  was  a  consider¬ 
able  decline  in  the  elevator  storage  space  operated  for  public  account. 
The  operators  of  public  warehouses,  however,  instituted  practices 
whereby  the  ruling  of  the  courts  has  been  effectively  evaded  ever 
since  the  final  decision  (1898).  The  principal  method  employed  has 


55  Hurd’S  Illinois  Revised  Statutes,  1915-16,  p.  2103;  Minnesota  Revised  Laws,  1905,  sec.  2050;  Wis.  Stats. 

^57SSrarE^e4ltor  174  lU.,  203;  51  Northwestern  Reporter,  254;  followed  in  Hannah  r. 

People,  198  Ill.,  77;  64N.W.,  776. 

57  See  next  section. 

5*  233  Ul.  400. 


«cSalEfeoiCo.  t;.  People,  174  Ill.,  203;  51  Northwestern  Reporter,  254;  followed  in  Hannah  v. 
People,  198  lU.,  77;  64  N.  W.,  776, 


138 


TERMINAL  GRAIN  MARKETING. 


been  for  the  operator  to  sell  grain  from  his  private  elevator  to  another 
trader  under  the  agreement  that  the  grain  is  ‘^to  go  to  store in  the 
public  warehouse  which  the  seller  operates;  deducting  from  the  pre¬ 
vailing  future  price  a  margin  sufficient  to  cover  the  buyer’s  expenses 
for  storage  and  to  allow  him  a  small  brokerage  in  compensation. 
The  following  testimony  presents  a  record  of  an  early  example  of 
this  practice  : 

Mr.  Marble,  Have  you  had  any  dealings  of  the  sort  testified  to? 

Mr,  Wetmore.  Yes,  sir. 

Mr.  Marble.  When? 

Mr,  Wetmore.  At  various  times. 

Mr.  Marble.  When?  When  did  you  have  the  first  one,  if  you  can  remember? 

Mr.  Wetmore.  I  had  the  first  one  at  the  beginning,  after  the  law  was  passed,  and  I 
took  the  grain  in  Charles  Counselman’s  elevator  the  next  day. 

Commissioner  Prouty.  How  long  ago,  about,  was  that? 

Mr.  Wetmore.  That  was  either  four  or  five  years  ago;  it  was  after  the  decision  was 
handed  down.  Mr.  Counselman’s  president  came  to  see  me  and  told  me  that  Mr. 
Counselman  wanted  to  see  me,  and  he  wanted  me  to  take  the  grain.  I  took  what  was 
in  their  store  there,  and  there  was  somewhere  in  the  neighborhood  of  $280,000  worth. 
It  was  sold  to  rne  at  that  time,  I  think,  about  a  cent  and  a  half  under  the  market, 
and  we  carried  it  through  until  the  next  delivery  in  the  future,  whenever  it  was.  I 
know  that  it  included  the  storage  and  the  interest  and  the  insurance,  and  it  was 
something  like  a  cent  and  a  half  a  bushel  under  the  market.  There  was  three-quarters 
of  a  cent — no;  that  was  about  what  it  was,  a  cent  and  a  half  under  the  market. 

Mr.  Marble.  You  mean  your  compensation  was  about  a  cent  and  a  half  a  bushel 
for  the  transaction? 

Mr.  Wetmore.  No,  sir;  I  mean  my  compensation  was  one-eighth,  but  they  de¬ 
ducted  a  cent  and  a  half  off  the  market,  below  the  spot  [future?]  price  for  the  grain. 

Commissioner  Prouty.  That  is,  they  sold  it  to  you  for  a  cent  and  a  half  below  the 
cash  market — sold  the  wheat  to  you? 

Mr.  Wetmore.  Yes;  they  sold  me  all  the  grain  they  had  in  the  house.  I  think  it 
was  something  like  a  cent  and  a  half.  We  figured  the  storage  and  the  insurance,  and 
the  interest  on  the  money,  and  one-eighth  profit  to  me,  and  the  grain  was  sold  on  that 
basis. 

Commissioner  Lane.  Did  that  gentleman  tell  you  what  the  purpose  of  this  trans¬ 
action  was? 

Mr.  Wetmore.  He  told  me  that  the  law  had  been  passed,  and  they  did  not  want 
to  carry  the  grain  in  their  own  house  there,  and  I  took  it  for  an  eighth  of  a  cent,  and 
I  sold  them  back  the  future. 

Commissioner  Lane.  The  purpose  was  to  evade  the  *injiinction  that  had  been 
granted  by  Judge  Tuley? 

Mr.  Wetmore.  Well,  I  can  not  say.  I  inferred  so,  although  there  was  nothing  said 
about  it. 

That  is,  the  elevator  operator  being  forbidden  from  storing  his  own 
grain  in  the  public  warehouse  which  he  operates,  employs  a  buyer, 
who  in  effect  acts  as  a  broker,  to  purchase  the  cash  grain  ^Ho  go  to 
store.”  With  this  understanding,  the  elevator  operator  sells  such  a 
buyer  50,000  bushels  of  cash  wheat,  for  example,  at  one-eighth  of  .a  cent 
and  carrying  charges  (storage,  insurance,  etc.)  under  the  market  for 
the  prevailing  option  and  at  the  same  time  buys  from  him  a  future 
for  the  same  quantity  of  grain  at  the  market  price  of  the  same  option. 
All  elevating  and  carrying  charges  attaching  to  the  grain  prior  to 
date  of  delivery  on  the  future  are  in  effect  paid  by  the  elevator 
operator.  But  the  elevator  will  earn  a  carrying  charge  if  the  spread 
between  cash  and  future  prices  shows  the  latter  at  a  premium.  It  is 
only  under  such  circumstances  that  the  elevator  has  an  inducement 
to  send  grain  to  store  for  a  considerable  period.  The  elevator  opera- 


«  Relations  of  the  Common  Carriers  to  the  Grain  Trade,  Sen.  Doc.  278,  59th  Cong.,  2d  sess.,  p.  212. 

/  4^^^  T?  that  other  methods  have  been  recently  employed  in  such  sales  ‘Ho  go  to  store because 

Qi  the  Federal  tax  on  futures. 


WAREHOUSING  AND  STORAGE. 


139 


tor  recovers  the  grain  for  merchandising  purposes  by  taking  delivery 
on  the  future  contract  and  removing  the  grain  from  store;  or  he  may 
accept  the  warehouse  receipts  on  ddivery  and  pass  them  on  in  fulfill¬ 
ment  of  sales  of  futures  just  as  if  he  had  previously  been  the  legal 
owner  of  the  grain  in  public  store.®^ 

Illustrations  of  go-to-store  sales. — Transactions  of  this 
kind  are  described  in  great  detail  in  the  record  in  Lichtstern  v. 
Rosenbaum  Grain  Co.  (Appellate  Court  of  Illinois,  1912).  The 
following  extract  from  the  examination  and  cross-examination  of 
one  of  the  defendant’s  witnesses  is  in  point: 

*  *  *  I  have  bought  cash  grain  from  the  J.  Rosenbaum  Grain  Co.,  and  have 
made  immediate  sales  of  futures  to  the  seller  against  those  purchases.  In  August, 
1911,  we  bought  50,000  bushels  of  wheat  to  go  to  store,  and  sold  them  50,000  bushels 
of  September  wheat.  The  warehouse  receipt  was  delivered  to  us  on  the  29th  or  30th 
of  August.  The  transaction  we  had  was  practically  taking  off  a  hedge.  In  December, 
we  made  a  similar  transaction  in  oats  with  the  defendants.  We  used  to  do  some  of 
this  business  for  the  Armour  Grain  Co.  There  are  two  sides  of  a  hedge.  To  start 
with,  we  might  buy  from  the  dealer  in  the  country  a  certain  amount  of  grain,  and 
we  would  sell  a  future  against  it.  When  the  grain  had  arrived  in  Chicago  we  would 
sell  the  grain  and  buy  back  the  future,  which  is  taking  off  a  hedge,  as  we  call  it.  When 
the  grain  arrives  in  Chicago  and  we  sell  the  cash  grain  to  the  dealer  here,  then  we  put 
back  the  future.  That  winds  up  the  future  trade.  Our  cash  grain  which  has  arrived 
we  sell  out  in  the  market,  and  that  closes  the  transaction.  WTien  I  bought  the  50,000 
bushels  from  the  Rosenbaum  Grain  Co.  I  protected  myself,  in  order  to  avoid  gambling 
or  speculation,  by  selling  the  future.  Otherwise,  the  trade  would  have  been  open, 
and  I  would  have  had  a  loss  or  profit  according  as  the  wheat  went  up  or  down.  That 
would  have  been  a  speculation. 

The  practice  to-day  follows  closely  that  described  in  1906  in  the  following  testimony: 

Q.  "VOiere  does  the  grain  come  from  that  goes  into  your  public  elevators— the  bulk  of  it?— A.  The  bulk 
of  the  grain  is  forced  into  the  public  elevators  through  our  efforts. 

Q.  Into  your  public  elevators? — A.  Yes,  sir. 

Q.  Out  of  your  privateelevators?— A.  Some  out  of  private  elevators  and  contract  grades  originally  from 
the  country.  We  are  compelled  to  sell  that  before  it  goes  into  the  public  elevators. 

Q.  Explain  what  you  mean  by  “  forced  ”  into  the  public  elevators.— A.  We  generally  buy  grain  on  basis 
of  futures.  The  price  of  the  future  is  established  on  the  floor  and  we  base  the  price  of  the  cash  on  the 
futmes,  so  when  we  send  out  our  bids  to  the  country  any  acceptance  we  get  we  sell  for  future  delivery. 
Wlien  the  grain  comes  in,  if  it  grades  we  sell  it  out  and  buy  back  the  future.  If  it  does  not  grade,  we  put 
it  into  the  cleaning  house,  and  if  we  can  ship  it  to  better  advantage  we  ship  it  without  putting  it  into  the 
public  house.  If  we  can  not,  we  make  it  into  contract  grade  and  sell  to  a  member  of  the  board  to  go  into 
a  public  house,  immediately  buying  back  our  future. 

Q.  From  the  same  man? — A.  As  a  rule. 

Q.  Do  you  sell  to  him  at  the  current  market  price  of  cash  grain  that  day?— A.  We  usually  have  to  allow 
about  one-eighth  of  a  cent  a  bushel  profit  to  the  buyer. 

Q.  You  select  this  man  to  be  the  holder  of  the  grain  in  the  house?— A.  Not  necessarily.  We  sell  the 
grain  to  Jones,  for  instance,  at  one-eighth  of  a  cent  under  the  current  option.  Take  October  corn,  we 
calculatethat  willmakeus  aprofltifwesellat44i.  We  will  go  to  Jones  and  say,  “We  will  sell  you  50,000 
corn  at  44j  and  then  buy  50,000  October  corn  at45  cents.”  Under  the  rules  of  our  exchange  that  corn  can 
be  delivered  to  us,  but  we  can  not  retain  it.  In  other  words,  the  first  50,000  October  corn  we  sold  when 
we  bought  the  corn  in  the  country  may  be  settled  against  the  October  corn  bought  against  the  party  we 
sell  to  to  go  to  store. 

Q.  Why  do  you  sell  grain  worth  45  cents  for  445  cents?— A.  We  discount  one-eighth  of  a  cent  of  the 
earnings,  because  there  is  three-quarters  of  a  cent  elevation  that  follows  the  grain.  If  the  grain  remains 
in  store  the  elevator  interests  earn  the  second  storage  after  the  first  10  days.  The  first  10  days  carries  a 
charge  for  loading  and  unloading.  Then  there  is  a  storage  charge. 

Q.  Suppose  the  broker  buys  at  one-eighth  of  a  cent  below,  and  instead  of  ordering  it  into  your  house 
he  orders  it  into  some  other  house?  Do  you  insure  that  it  goes  into  your  house?— A.  The  purpose  of  buying 
the  grain  is  to  try  and  get  it  into  the  house.  I  could  not  sacrifice  three-quarters  of  a  cent  a  bushel  and 
put  It  in  somebody  else’s  house. 

Q.  Are  public  elevator  operators  in  the  city  engaged  in  the  grain  business?— A.  Well,  indirectly.  The 
public  elevators,  as  a  rule,  are  operated  by  a  corporation. 

0,.  And  the  sameinterests  are  engaged  in  the  grain  business?— A.  Yes,  sir. 

Q.  Are  the  public  elevator  proprietors  really  the  great  grain  merchants  of  the  city? — Take  the  interests 
that  control  the  public  elevators  of  the  city,  what  portion  of  the  grain  trade  of  the  city  would  you  say  they 
do?  Take  Armour,  Peavey,  Bartlett-Frazier,  etc.,  are  they  the  great  grain  merchants  of  the  city?— 
A.  Yes,  sir. 

Q.  Is  there  anybody  not  owning  a  public  elevator  that  would  rank  with  the  pubhc  elevator  operators 
as  a  grain  man — a  receiver  and  shipper  of  grain?  I  do  not  mean  a  speculator. — A.  No;  I  would  not  say 
that  there  is  any  that  would  rank  with  an  elevator,  because  they  have  not  the  facilities  for  storing. 

Q.  Would  you  say  that  the  greatness  of  the  elevator  interests  in  the  grain  trade  comes  from  the  fact  that 
the  elevator  charge  is  frequently  used  in  the  buying? — A.  Yes,  sir.  (Senate  Doc.  278,  59th  Cong.,  2d 
sess.,  pp.  50-53.) 


140 


TERMINAL  GRAIN  MARKETING. 


(Answering  the  court:)  It  is  a  fact  that  merchants,  millers,  very  often  who  buy 
grain  for  delivery  in  the  future  take  an  option  for  protection;  make  a  hedge.  The  ; 
men  who  are  consuming  grain  do  that.  ^ 

The  Court.  What  is  the  use  of  going  into  that  any  further?  There  is  no  question 
about  it. 

Mr.  Mayer.  I  am  content,  except  one  or  two  questions.  ; 

Mr.  Robbins.  Everybody  understands  the  ordinary  practice  of  hedging,  and  its  ' 
purpose. 

The  Court.  Yes. 

Mr.  Robbins.  It  is  a  species  of  insurance. 

Cross-examination : 

The  reason  that  I  made  the  sale  of  the  50,000  bushels  was  I  wanted  to  make  a  profit. 

I  could  not  assure  myself  of  the  one-eighth  profit  without  making  a  sale  at  the  same 
time  I  made  the  purchase.  That  is  a  certain  species  of  hedging.  We  frequently  buy 
grain  and  sell  it  at  a  profit.  If  we  could  have  bought  this  grain  of  Rosenbaum  and 
sold  it  to  some  one  else  at  the  one-eighth  or  any  premium  we  would  have  done  so. 

We  are  there  to  make  money  in  that  way. 

The  Court.  Suppose  you  conceded,  Mr.  Robbins,  that  when  Mr.  Rosenbaum  came 
to  him  and  offered  him  this  grain  at  this  price,  that  he  would  sa>^,  “  I  do  not  want  grain  ' 
at  that  price,  ’  ’  and  Rosenbaum  would  have  replied,  ‘  ‘  I  will  buy  it  of  you  at  an  advance  i 
of  one-eighth  a  bushel  for  future  delivery”?  i 

Mr.  Robbins.  Yes. 

The  Court.  Suppose  you  concede  that  to  be  the  fact.  He  says,  “All  right,  I  will 
buy  the  grain  at  that;  I  will  make  an  eighth  of  a  cent  a  bushel,  and  get  the  interest 
on  the  money I  will  go  into  that  transaction.”  Now,  that  was  really  the  proposi¬ 
tion  as  it  rests  in  my  mind,  but  is  it  not  regular?  Both  transactions  are  regular  under 
the  rules  of  the  board  of  trade  and  at  law,  as  far  as  I  know. 

(Witness  resumes.) 

The  proposition  between  Mr.  Rosenbaum  and  myself  on  the  50,000  bushels,  I  think 
that  we  were  asked — that  is  that  we  had  a  certain  amount  of  cash  grain  offered  to  us  i; 
at  a  price,  and  then  took  the  future  at  the  one-eighth  premium.  Both  propositions  ll 
were  made  at  the  same  time.  I  remember  more  distinctly  about  the  oats  delivery  " 
than  about  the  wheat  transactioh.  We  delivered  the  oats  right  out,  as  soon  as  they 
were  delivered  to  us.  We  closed  the  future  sale  either  with  deliveries  of  other  grain  1; 
that  might  be  delivered  to  us,  or  it  might  be  settled  direct.  We  could  not  tell.  It  ji 
might  be  a  ring  up.  .  ' 

The  practice  of  selling  grain  ‘'to  go  to  store”  in  this  manner  has 
been  recognized  by  the  board  of  trade  to  the  extent  that  a  place  on 
the  floor  was  at  one  time  designated  for  such  trading.  It  is  reported 
that  there  was  little  bidding,  however,  so  that  the  trading  soon 
resolved  itsefl  into  a  matter  of  private  arrangements. 

It  appears  that  the  practice  of  selling  “to  go  to  store”  sometimes 
enables  an  elevator  operator  to  make  delivery  on  sales  of  futures 
to  better  advantage  than  if  he  were  obliged  to  bid  for  contracts  in 
the  pit. 

The  following  statements  are  typical  specimens  of  sales  “to  go  to 
store’  ’  made  by  the  Armour  Grain  Co.,  which  operates  both  public 
and  private  elevators.  The  first  sale  was  to  Bartlett-Fraz-ier  Co., 
which  also  operates  public  and  private  warehouses  as  well  as  a  future 
commission  business  at  Chicago,  and  the  second  to  Jackson  Bros. 

&  Co.,  who  were  engaged  in  the  futures  commission  business. 


WAREHOUSING  AND  STORAGE. 


141 


Chicago,  March  29,  1916. 

816.68 

Armour  Grain  Company  to  Bartlett  Frazier  Co.  Dr.,  Offices  111  W.  Jackson,  Western 
Union  Bldg. 

E3281 

Date  sale  2/25/,  3/7,  3/13,  3/20. 

Pro.  No.  Cont.  Wht.  On  Track  to  go  to  Store  Less  Chgs.  to  5/1. 


Car  No. 

Weight,  bushels.  Kind  of  grain. 

Price. 

Amount.  Total. 

Receipts. 

2/25 

100,  000  2  hd.  wht. 

118  1/4 

118,  250.  00 

3/7 

100,000 

113  1/4 

113,  250. 00 

3/13 

.  50,000 

107 

53,  500.  00 

3/20 

5,736.50  “ 

109 

6,  253. 15 

255,  736.  50 

291, 253. 15 

Stge.  Nat.  Ele.  as  per  memo .  3, 101.  59 

“  CalB .  911.79 

Insurance .  1,317.87 

Interest .  1,453.32 

-  6,  784.  57 


284,  468.  58 

As  billed  255, 000  283,  645.  79 


736. 50  bushel .  .  822.79 

Int.  822.79  32  days,  @3^% . 2.55 

Ins.  800  38  days  175/2546  . 3.56  6. 11 


816.  68 
Total . 816.  68 

Wheat  736.50  (Red  checking  pencil) 

(Handwritten) 

(Stamped):  Armour  Grain  Company,  Paid  March  30,  1916. 

May  25,  1916. 

Jackson  Bros.  &  Co.,  city,  wheat  sales  to  go  to  store. 


Receipts. 

Jan.  11.  200,000  bus.  2  hd.  wheat,  125f .  250,  750.00 

Jan.  17.  200,000  “  @127^ .  255,000.00 

Feb.  29.  100,000  “  111| .  111,750.00 


617, 500.  00 

Less  storage  (per  memo.) .  12, 193.  44 

“  insurance  “  .  4,673.77 

‘  ‘  interest  “  .  5, 152. 87 

-  22,020.08 


595,479.92  - 

As  billed  (see  memo.)  500,000  bus .  595,456.06 


23.  86 

Add  a/c  error  3/3/16  our  bill  2,679.20  as  we  allowed  59  days  interest  on 
$3,000  in  error* .  19.67 


43.53 

Wheat  money  only. 

(Handwritten,  carbon  copy.) 

*( Original  writing.) 

Checked. 

E.  S.  L.  Rt. 

10-14-20. 

The  first  statement  shows  that  the  Armour  Grain  Co.  on  the  above 
date  sold  4  lots  of  contract  wheat  inspection  No.  2  hard,  at  a  price 


56976°— 22 - 11 


142 


TERMINAL  GRAIN  MARKETING. 


based  on  the  May  future  (5/1)  with  the  understanding  that  such 
grain  go  into  storage  in  the  Armour  public  warehouses  and  that  they 
deducted  from  the  purchase  price  the  storage  charges  from  the  dates 
of  sale  to  May  1.  The  original  transaction  involved  the  sale  of 
255,000  bushels  of  cash  wheat  and  purchase  of  an  equal  quantity  of 
May  (presumably  at  a  fraction  over  the  cash  price) .  The  statement 
shows  the  account  when  adjusted  to  weights  as  received  at  the 
Armour  public  elevators. 

The  second  statement  comprises  a  similar  transaction  and  is  self- 
explanatory. 

Public  storage  is  sometimes  used  by  the  public-elevatoT  operators 
by  mutual  exchange  of  storage,  each  operator  storing  a  certain 
quantity  in  the  other’s  public  warehouse.  This  is  apparently  not 
commonly  practiced,  however. 

The  president  of  the  Armour  Grain  Co.  stated  that  they  had  sold 
1,855,000  pounds  of  wheat  screenings  in  1916-17  to  their  own  treasurer, 
who  stored  them  in  their  public  elevators  A  and  B. 

In  summary,  it  is  generally  understood  and  admitted  by  the  trade 
in  Chicago  that  the  public  storage  facilities  at  that  center  for  many 
years  have  been  largely  utilized  by  the  operators  either  directly  or 
indirectly  for  their  own  private  merchandising  purposes.  This  does 
not  mean  that  they  have,  strictly  speaking,  a  proprietary  interest  in 
the  grain  sold  to  be  stored  in  their  public  elevators;  but  rather  that 
they  are  able  to  arrange  for  and  direct  the  movement  of  their  own 
cash  grain  into  the  public  warehouses  which  they  operate. 

Section  8.  Exchange  regulation  of  elevators. 

Regular  elevators. — The  term  ‘^regular  warehouse”  (or  regular 
elevator)  refers  to  those  houses  operating  under  the  regulations  of 
the  exchanges  conducting  trading  in  futures  and  which  are  declared 
to  be  regular  for  the  storage  and  delivery  of  grain  deliverable  on 
future  contracts.  Grain  in  such  houses  is  registered  and  subjected  to 
inspection  by  exchange  officials.  The  practice  of  declaring  certain 
elevators  ‘^regular”  seems  to  have  originated  in  Chicago  in  the  early 
seventies.  (See  Vol.  II,  Ch.  Ill,  sec.  7.)  The  requirements  generally 
made  of  regular  elevators  to-day*^"^  indicate  that  the  term  has  no 
specific  relation  to  the  elevation  and  storage  of  cash  grain.  However, 
merchants  operating  houses  which  have  been  declared  regular  are  in 
a  position  of  advantage  for  hedging  and  other  operations  in  the 
futures  market.  In  Chicago  and  Minneapolis  the  regular  warehouse 
must  under  the  exchange  rules  be  a  public  warehouse  in  conformity 
with  State  laws.  In  Kansas  City  and  Duluth,  on  the  other  hand, 
the  exchanges  do  not  require  that  the  regular  warehouse  hold  a 
State  license,  and  houses  operated  wholly  for  private  account  have 
been  declared  regular  and  placed  under  exchange  supervision  for 
handling  contract  grain. 

The  requirements  of  regular  elevators  operated  under  exchange 
regulation  in  the  principal  terminal  markets  are  enumerated  in  Vol¬ 
ume  II  (pp.  245-248).  Reference  should  be  made  to  that  volume  for 
a  description  of  the  custodian  system  (pp.  104-105)  of  the  Chicago 
Board  of  Trade  whereby  exchange  officials  assume  trusteeship  for 

See  Vol.  II,  p.  244. 

«  See  Vol.  II,  pp.  244-248. 


WAREHOUSING  AND  STORAGE.  143 

^ain  stored  in  private  elevators  and  police  the  movement  of  grain 
into  and  out  of  the  houses  operating  under  the  custodian  rule. 

Section  9.  Status  of  the  public  warehousing  business. 

Decline  of  public  warehousing. — The  elimination  of  public 
warehousing  has  been  especially  apparent  in  the  history  of  forwarding 
markets  such  as  Chicago  and  Duluth.  A  Chicago  grain  merchant 
stated  the  case  in  1918  as  follows: 

When  I  first  engaged  in  the  grain  business  of  Chicago,  about  1890,  there  were  three 
distinct  classes  engaged  in  the  trade:  First,  the  cash  commission  man  doing  a  strictly 
receiving  business;  second,  the  public  elevators,  in  which  the  receivers  stored  their 
grain  until  they  had  an  opportunity  to  merchandise  it;  and,  third,  the  shippers  who 
had  their  eastern  connections  which  they  supplied  by  purchases  from  the  receivers 
and  shipment  out  of  public  elevators. 

The  entrance  of  the  public  elevator  proprietors  into  the  grain  merchandising  business 
has  had  several  effects.  First,  it  has  destroyed  the  ability  of  grain  receivers  to  store 
grain  in  public  elevators  in  competition  with  the  proprietor-merchandiser  who  has 
no  storage  to  pay  except  to  himself  and  in  many  cases  has  practically  no  costs  of  storage 
due  to  the  very  favorable  leases  of  elevator  property  from  railroads.  This  situation 
has  developed  to  such  an  extent  that  I  believe  over  99  per  cent  of  the  grain  stored  in 
public  elevators  is  owned  by  proprietors  of  such  elevators.  In  reality  the  so-called 
public  elevators  have  become  private,  but  with  all  the  privileges  given  to  public 
elevators  under  the  law. 

It  is  contended  by  the  operators,  however,  that  operation  wholly 
for  public  account  has  not  been  a  dependable  source  of  income  and  is 
therefore  impracticable  in  most  instances.  One  Chicago  operator 
stated  that  ‘4f  you  were  operating  a  public  elevator  and  depended 
upon  the  public  to  put  grain  in  there,  it  would  not  pay.”  Another 
operator,  commenting  upon  the  decline  of  public  warehouse  storage, 
said: 

It  is  principally  caused  by  the  fact  that  the  public,  as  soon  as  they  own  any  grain, 
as  a  general  rule,  they  want  to  get  rid  of  it  and  they  usually  take  it  out  of  store  and 
ship  it  away— dispose  of  it.  The  result  is,  public  elevators  have  to  lie  idle  such  a 
large  share  of  the  time  that  their  expenses,  going  right  on  all  the  time,  run  them  into 
a  loss,  and  the  only  way  that  the  public  elevator  man  in  Chicago  can  get  any  of  that 
money  to  pay  expenses,  as  a  general  rule,  is  to  put  some  special  bin  stuff  in  there  and 
carry  it  himself.  If  he  does  that  he  has  got  his  stuff  in  an  undesirable  position,  because 
if  he  has  to  make  it  up  into  certain  grades  he  has  to  retransfer  it  back  into  his  private 
house  at  an  expense. 

At  Kansas  City  commission  merchants  and  dealers  (not  operating 
elevators)  state  that  the  storage  rates  and  the  general  operating  con¬ 
ditions  of  the  elevators  licensed  to  do  a  public  business  have  rendered 
it  unprofitable  in  recent  years  to  carry  grain  in  public  storage.®® 
Furthermore,  it  is  maintained  by  the  elevator  operators  that  it  is 
unprofitable  to  operate  for  public  account  except  in  the  slack  seasons, 
because  the  independent  shippers  do  not  care  to  have  their  grain 
mixed  with  that  of  others,  with  the  result  that  large  bins  must  be 
used  to  store  comparatively  small  quantities  of  grain.  Whatever 
reasons  be  assigned,  it  is  a  fact  that  the  public  storage  business  in  that 
market  in  recent  years  has  amounted  to  but  a  small  proportion  of  the 
total  volume  of  grain  handled.  For  example,  a  Kansas  City  elevator, 
which  appears  to  have  done  a  larger  percentage  of  public  business 
than  any  other  of  the  licensed  houses  in  that  market,  utilized  its 
storage  capacity  in  the  5-year  period,  1913-14  to  1917-18,  in  the  fol¬ 
lowing  manner: 


«6  See  Chap.  Ill,  secs.  4  and  9. 


144 


TERMINAL  GRAIN  MARKETING. 


Bushels. 

Percent. 

For  their  own  account . 

32,696,000 
12, 963, 900 
488,800 
9,697,000 

58.55 
23. 21 
.88 
17.36 

For  other  dealers . 

For  Food  Administration . 

Railroad  transfers . 

Total . 

55, 845, 700 

100.00 

That  is,  out  of  an  average  yearly  handling  of  over  11,000,000 
bushels  going  through  the  house  about  59  per  cent  was  handled  for 
their  own  account,  about  23  per  cent  for  other  dealers,  and  the 
remainder  consisted  largely  of  through  shipments  transferred  by  this 
house. 

At  Duluth  ‘^up  until  1897  or  thereabouts”  the  main  function  of  the 
terminal  elevators  was  to  store  grain  for  account  of  others.  Then- 
only  sources  of  income  were  the  established  charges  for  storing,  han¬ 
dling,  and  cleaning,  and  these  operations  were  subject  to  the  super¬ 
vision  of  the  railroad  and  warehouse  commission  of  Minnesota. 
About  1897  the  competition  of  the  mills  at  Minneapolis  for  cash 
grain  began  to  influence  prices  so  largely  that  dealers  and  shippers 
could  see  no  profit  for  themselves  in  buying  the  cash  grain  under 
such  competitive  conditions  unless  purchasers  from  them  were  in 
sight.  They  had  formerly  been  able  to  hedge  and  send  the  grain  to 
store  while  waiting  for  such  purchasers,  but  null  buying  so  narrowed 
the  spread  between  cash  and  future  prices,  even  at  the  season  of 
heaviest  receipts,  that  the  holding  of  grain  by  a  merchant  with  no 
elevator  and  the  paying  of  storage  charges  for  any  considerable 
period  involved  a  loss  on  the  hedge  not  compensated  by  any  oppor¬ 
tunity  to  find  meanwhile  a  better  market  for  the  cash  grain.  This 
caused  a  decline  in  the  volume  of  grain  placed  in  storage  by  dealers 
without  their  own  elevators  so  that  the  terminal  elevators  were 
unable  to  make  a  profit  from  storage  charges  on  grain  handled  for 
the  account  of  others.  The  elevator  companies  therefore  went  into 
the  market  themselves  as  buyers  of  gram,  contenting  themselves 
with  earning  on  a  larger  quantity  of  grain  a  carrying  charge” 
smaller  per  unit  than  the  public  rate  supplemented  by  opportunities 
for  profit  from  mixing,  conditioning,  and  spreading. 

There  have  been  no  public  elevators  in  Duluth  since  1916.®^  The 
elevator  companies  are  the  predominant  buyers  on  the  market  and 
there  is  very  little  grain  placed  in  store  by  other  concerns. 

The  tendency  since  1900  is  indicated  by  the  situation  at  Omaha, 
where  there  was  hardly  an  organized  market  prior  to  1905.  Here  the 
elevator  facilities  were  developed  largely  by  private  grain  dealers  in 
accordance  with  the  tendency  in  recent  years  in  other  markets. 
When  the  grain  exchange  was  incorporated  in  1904  it  appears  that 
there  were  only  three  considerable  terminal  elevators  in  the  market. 
The  largest  house  was  that  of  the  Omaha  Elevator  Co.,  with  1,500,000 
bushels  rated  capacity,  which  was  operated  on  a  merchandising  basis 
in  conjunction  with  a  line  of  country  elevators.  At  Council  Bluffs 
the  Union  Elevator  Co.  (whose  stock  was  held  by  six  railroads)  had 
constructed  a  750,000-bushel  house  and  leased  the  same  to  the 
Trans-Mississippi  Grain  Co.  under  an  agreement  to  transfer  grain.®® 


67  There  is  one  public  house  at  Superior,  Wis. 

68  See  10  I.  C.  C.,  318. 


WAREHOUSING  AND  STORAGE. 


145 


The  third  elevator  was  that  of  the  Merriam  &  Holmquist  Co.  (A), 
which  was  operated  as  a  ‘'regular  public  storage  warehouse.’’  There 
was  also  a  small  private  house  of  40,000  bushels  rated  capacity.  In 
January,  1907  (three  years  later),  the  secretary  of  the  exchange  re¬ 
ported  that  the  total  capacity  of  terminal  elevators  in  active  operation 
was  6,040,000  bushels,  but  that  only  thr,ee  elevators  were  operated 
as  “regular  public  warehouses”  with  an  aggregate  capacity  of  1,600,000 
bushels.®^ 

The  number  of  elevators  now  operated  at  interior  terminal  points 
by  companies  which  do  not  buy  or  sell  grain  is  relatively  small,  as 
the  following  schedule  shows: 


Grain  elevators  at  specified  interior  points^  operated^  exclusively  for  public  account  hy 

concerns  not  engaged  in  the  grain  traded 


Market. 

Name  of  operator. 

Capacity. 

Bushels. 

Electric  Steel  Elevator  C0.2 . 

4,000,000 

Victoria  Elevator  Co . 

500,000 

Cragin  Elevator  Co . 

600,000 

Frisco  Elevator  Co . 

950,000 

Tin 

Wabash  Railway  Co . 

442,000 

Burlington  PubUc  Elevator  Co . 

413,000 

Tho  Wilson  Elevator  Co . 

175,000 

Michigan  Central  R.  R.  Co . 

500,000 

East  Side  Iron  Elevator  Co . 

1,640,000 

Fostoria  Storage  &  Transfer  Elevator  Co . 

325,000 

Rentucky  Public  Elevator  Co . 

650;000 

Erie  &  Western  Transportation  Co . 

1, 156, 400 

Mutual  TerminalCo- . 

2,500,000 

rtn 

Connecting  Terminal R.  R.  Co . 

2,000,000 

r>n 

Buffalo  Elevating  Co . 

1,200,000 

Tin 

Marine  Elevator  Co . 

650,000 

Tin 

Wheeler  Elevator  Co . 

650,000 

Tin 

Monarch  Elevator  Co . 

450,000 

Do  . 

Erie  Transfer  Co . 

150,000 

17,951,400 

1  Taken  from  return  made  by  the  operators. 

*  The  majority  of  the  stock  of  this  concern,  however,  is  owned  by  the  Russell-Miller  Millmg  C  o.  oi  Mm' 
neapolis. 


This  table  shows  that  not  more  than  19  of  the  public  elevators  at 
the  more  important  interior  terminal  points  in  the  United  States  are 
operated  by  concerns  not  dealing  in  grain  and  that  9  of  these  are 
water  terminal  facilities  on  the  Great  Lakes. 

There  are,  then,  few  elevators  operated  on  a  strictly  public  utility 
basis  excepting  those  operated  by  railroads  and  public  agencies. 
Higher  utilization  of  plant  has  been  obtained  and  larger  profits  realized 
through  combining  a  merchandising  business  with  the  storage  and 
transfer  functions.^®  At  Chicago  and  Minneapolis  the  necessity  of 
providing  storage  facilities  in  connection  with  the  futures  markets  is 
advanced  as  a  reason  for  operating  on  a  public  basis,  but  such  public 
operation  is  closely  related  to  the  private  merchandising  business  in 
those  markets.  All  the  grain  received  in  the  9  public  warehouses  at 
Chicago  is  technically  held  in  store  for  owners  other  than  the  operators, 
yet  the  bulk  of  the  grain  so  received  customarily  originates  from  stocks 


69  Third  Aimual  Report  of  the  Omaha  Grain  Exchange,  Jan.  31, 1907. 

70  For  example,  the  Fort  Worth  Elevators  Co.,  operating  a  1,000,000-bushel el^tor  at  Fort  Worth,  Tex., 

on  the  Rock  Island  tracks,  solicits  a  public  storage  and  handling  business.  They  rePort,  tha 

they  are  active  traders  in  cash  grain  and  claim  that  through  the  first  nme  months  of 

largest  export  business  in  wheat  through  the  Gulf  of  any  gram  concern  m  the  United  States  in  addition  to 
alarge  domestic  trade. 

71  See  Appendix  Table  6. 


146 


TERMINAL  GRAIN  MARKETING. 


owned  by  such  operators  and  stored  in  their  private  terminal  ele¬ 
vators,  and  the  public  storage  bins  are  little  used  by  other  dealers. 
The  29  licensed  houses  at  Minneapolis  are  operated  predominantly 
for  account  of  the  operating  companies,  and  the  demand  for  public 
storage  appears  to  be  relatively  small. 

A  Minneapolis  operator  .whose  concern  owns  grain  storage  space 
amounting  to  more  than  2,000,000  bushels  rated  capacity,  when 
questioned  as  to  the  percentage  of  capacity  normally  used  for  public 
storage,  made  the  following  statement: 

We  use  it  all  for  our  business.  Up  to  this  year  we  used  it  for  our  own  storage  It  is 
public  storage  in  this  sense:  We  might  buy  up  or  sell  to  some  dutside  mill  a  quantity 
of  grain  and  carry  it  for  them  throughout  the  season,  but  it  is  our  property  until  we 
sen  It,  so  we  are  not  carrying  it  for  the  public;  we  are  carrying  it  for  ourselves.  In 
other  words,  if  the  elevator  should  be  demolished  the  grain  would  be— it  is  held  at  our 
risk.  *  *  * 

It  is  a  public  warehouse  because  we  are  registered  and  licensed.  We  have  all  that 
a  man  can  get  to  keep  tab  on  us.  At  the  same  time  we  are  public.  I  don ’t  know  just 
how  to  classify  it.  If  a  man  wanted  to  store  50,000  bushels  with  us,  if  we  could  agree 
on  the  rate  we  might  take  it  if  we  had  the  room,  and  then  we  would  issue  receipts  for 
It.  He  could  do  as  he  pleased  with  the  receipts.  He  might  sell  them  or  he  could 
hypothecate  them.  We  have  very  little  of  that.  We  really  own  all  the  grain  that  is 
ni  the  house  as  a  rule.  Last  year  we  had  the  house  full.  We  had  30,000  bushels  of 
barley  and  then  we  loaded  that  out  and  the  house  was  chock  full.  It  was  our  wheat. 

This  statement  conforms  largely  to  those  of  other  operators.  There 
is  a  variable  public  storage  business  for  account  of  independent  ship¬ 
pers,  but  this  has  usually  comprised  but  a  small  proportion  of  the 
total  volume  of  business. 

The  transfer  business. — The  business  of  storing  and  transferring 
grain  for  others  is  carried  on  to  a  certain  extent  by  private  operators, 
particularly  those  leasing  elevators  from  railroads,  as  is  shown  in 
another  chapter  (Chap.  Ill,  sec.  6).  Private  elevators  in  the  interior 
may  and  frequently  do  receive  allowances  from  the  railroads  for 
transferring  grain  in  the  course  of  transportation  under  duly  pub¬ 
lished  tariffs  of  the  carriers  (Chap.  Ill,  sec.  3). 

The  Buffalo  market  offers  the  best  example  of  the  transfer  busi¬ 
ness  as  a  principal  source  of  revenue.  Nearly  all  of  the  elevators  at 
that  point,  excluding  mill-owned  storage  plants,  have  been  engaged 
in  the  transfer  business. Prior  to  1916,  for  about  50  years,  under 
various  agreements,  the  transfer  of  ex-lake  grain  received  at  the 
port  was  largely  controlled  by  a  pool  of  elevator  companies  known 
as  the  Western  Elevating  Association.  The  pool,  which  included 
12  companies  under  its  1913  agreement,  was  organized  each  year 
apparently  with  the  purpose  of  stabilizing  elevator  charges  and  in¬ 
suring  an  equitable  and  prompt  distribution  of  the  incoming  grain 
tonnage.  The  nature  of  the  earlier  agreement  appears  in  a  state¬ 
ment  of  facts  by  the  Court  of  Appeals  of  the  State  of  New  York,^^ 
as  follows : 


the  Buffalo  Elevating  Co.  had  entered  into  a  written  agreement  with  a 
number  of  other  proprietors  of  elevators  to  form  the  Western  Elevating  Association, 
to  continue  for  the  term  of  one  year,  and  during  the  insurance  period  of  the  policy 
renewed  the  agreement  for  the  further  term  of  one  year.  Under  this  agreement  be- 
tweeri  the  elevators  the  Western  Elevating  Association  would  collect  the  receipts 
and  the  earnings  of  the  various  elevators  to  a  certain  amount,  which,  in  the  case  of 
the  plaintiff,  amounted  to  80  per  cent  of  its  total  earnings.  The  association  would 


\\  inspection  (no  "in"  inspection)  on  grain  elevated  from  vessel  at  Buffalo. 

73  Michael  v,  Prussian  Nat.  Ins.  Co.,  171  N.  Y.,  25  (1902);  63  N.  E.,  810-11.  -ouumu. 


WAREHOUSING  AND  STORAGE. 


147 


make  payments  or  distributions  from  these  receipts  or  earnings  to  the  various  mem¬ 
bers  of  the  association  at  various  intervals,  as  determined  by  its  executive  committee. 
Each  member  of  the  association  retained  possession  of  its  or  his  elevator,  employed 
and  directed  its  employees,  and  paid  its  own  operating  expenses,  taxes,  and  insur¬ 
ance  premiums.  The  executive  committee  fixed  the  rates  of  elevation  and  storage 
for  all  the  members  of  the  association.  The  individual  rnembers  made  their  o^  con¬ 
tracts  with  the  railroad  companies,  shippers,  and  consignees  for  the  shipping  and 
handling  of  grain  for  their  particular  elevators,  except  as  to  the  price  for  elevating. 
It  was  the  course  of  business  that  consignments  of  grain  to  any  elevator,  upon  ar¬ 
rival,  were  immediately  reported  to  the  secretary  and  treasurer  of  the  association, 
who  issued  warehouse  receipts  for  the  grain.  When  the  grain  was  transferred  out  of 
the  elevator,  such  transfer  was  reported  to  the  same  officer,  and  the  warehouse  re¬ 
ceipt  was  canceled.  This  course  of  business,  as  regulated  and  controlled  by  the 
agreements,  obtained  during  the  seasons  of  navigation. 

The  main  objective  of  most  of  the  Buffalo  elevators  has  been  sim¬ 
ilar  to  that  of  elevators  at  export  points,  i.  e.,  to  move  the  grain  through 
the  terminals  as  rapidly  as  possible.  Storage  has  been  for  the  most 

Eart  on  a  special  bin  basis  without  the  issuance  of  negotiable  ware- 
ouse  receipts.  It  has  been  customary  for  the  railroads  to  absorb 
elevating  and  transfer  charges  (including  five  days’  storage)  on  transit 
grain,  so  that  this  transfer  service  has  been  performed  largely  for 
railroad  account. 

In  1920-21  the  elevator  fees  were — 

Cents  per 
bushel. 


Elevating .  ^ 

Storage,  first  5  days  or  any  part  thereof .  i 

Storage,  thereafter,  for  each  7  days  or  part  thereof .  1 

Running  over  grain . i 

Delivery  to  side  bin .  i 


Section  10.  Remedies  for  the  terminal  elevator  situation. 

The  Commission  is  of  the  opinion  that  grain  merchandising  on  the 
part  of  operators  of  licensed  public  elevators  is  contrary  to  sound 
principles  of  public  warehousing,  leading  to  dissatisfaction  on  the 
part  of  growers  and  millers  and  to  ill  feeling  throughout  the  grain 
trade.  While  the  practice  now  prevailing  at  the  primary  markets 
can  be  defended  on  the  ground  of  larger  turnover  and  lower  handling 
costs  per  bushel  throu^  such  combination  of  merchandising  with 
public  warehousing,  it  is  apparently  contrary  to  the  general  public 
interest.  As  long  as  these  warehouses  are  operated  by  dealers  in 
grain  and  as  long  as  storage  charges  remain  at  the  present  level  the 
natural  result  will  be  concentration  of  the  control  of  actual  grain  in 
the  hands  of  the  elevator  operators  because  only  such  operators  can 
profitably  accumulate  a  large  line  of  grain.  This  situation  gives  to 
the  large  elevator  merchandisers  practical  control  of  deliverable 
grain  at  the  terminal  markets,  facilitates  the  manipulation  of  futures, 
and  has  doubtless  been  at  times  responsible  for  the  failure  of  the  cash 
and  futures  markets  to  move  in  harmony.  The  possible  remedy  for 
this  situation  suggested  by  the  circumstances  is  to  make  it  practicable 
for  grain  dealers  not  operating  elevators  to  store  grain  in  public  ele¬ 
vators  in  competition  with  the  large  merchandisers.  To  accomplish 
this  would  require  a  reduction  in  storage  charges.  But,  as  already 
pointed  out,  the  indications  are  that  even  at  present  storage  rates  a 
purely  storage  and  transfer  elevator  can  not  be  profitably  operated 
at  interior  terminal  points. 

Established  by  the  Lake  Grain  Elevator  Association,  which  was  organized  after  the  dissolution  of 
the  Western  Elevator  Association. 


148 


TEKMINAL  GKAIN"  MARKETING. 


The  problem  in  question  can  be  met  in  either  one  of  two  ways. 
The  railroads  might  be  required  to  operate  elevators  for  the  conven¬ 
ience  of  their  shippers;  or  the  government,  presumably  the  State 
government,  might  operate  storage  elevators  at  rates  sufficiently 
low  to  permit  dealers  without  elevators  to  compete  with  the  elevator 
merchandisers. 

Public  warehousing  has  long  been  recognized  as  a  ‘^business 
aflected  with  a  public  interest.’’  From  the  standpoint  of  the  public 
interest  involved  it  is  doubtless  better,  if  this  economic  service  can 
not  stand  on  its  own  bottom  under  present  conditions,  that  it  be  per¬ 
formed  in  conjunction  with  the  common  carrier  service  which  is 
likewise  affected  with  a  public  interest  than  that  it  be  joined  with 
and  to  a  greater,  or  less  extent  exploited  by  grain  merchandising 

It  is  hardly  necessary  to  repeat  that  in  general  the  grain-carrying 
railroads  already  own  large  terminal  elevators.  At  the  primary 
markets,  however,  they  are  almost  always  leased  to  and  operated  by 
grmn  merchandisers.  It  may  be  objected  that  the  operation  of 
public  warehouses  by  the  railroads  in  such  manner  or  at  such  stor¬ 
age  rates  as  would  restore  the  possibility  of  the  utilization  of  public 
storage  by  cash  ^rain  handlers  generally  would  involve  a  loss  to  the 
railroads.  This  is  not  a  conclusive  objection  and  the  implied  prem¬ 
ise  IS  not  necessarily  true.  Railroad  elevators  are  at  present  and 
have  in  the  past  been  leased  to  their  operators  at  rentals  often  nom¬ 
inal  and  frequently  insufficient  to  afford  an  adequate  return  on  the 
investment.  There  are  collateral  advantages  to  the  railroads  from 
these  facilities  due  to  their  assistance  in  attracting  and  holing 
traffic  which  are  largely  compensatorjr  for  the  direct  losses  in  ques- 
tion.  As  regards  terminal  facilities  in  general  the  charge  for  the 
specific  terminal  service  need  not  cover  and  perhaps  can  not  be 
made  to  coyer  all  the  costs  incurred.  There  is  no  reason  why  the 
same  principle  should  not  be  applied  in  the  public  interest  to  the 
terminal  storage  of  grain,  especially  as  the  railroads  are  already  not 

appreciable  profits  from  this  part  of  their  property. 

I  he  charge  made  for  public  storage  should  of  course  cover  necessary 
opera^^ng^  expenses  but  in  addition  need  include  only  a  minimum 
contribution  to  fixed  charges  instead  of  attempting  to  insure  the 
covering  of  that  element  in  cost. 

impossible  that  railroad  elevators 
could  be  operated  profitably  at  interior  terminals  if  the  storage  rates 
were  xnade  sufficiently  low  to  enable  cash  handlers  generally  to  em¬ 
ploy  these  facilities  in  competition  with  elevator  merchandisers. 
Adequate  profit  from  a  purely  storage  and  transfer  elevator  is 
chiefly  a  question  of  volume  of  business.  If  rates  were  sufficiently 

^ j  enable  dealers  without  elevators  to  use  these  facilities,  there 
should  be  a  vast  increase  in  the  quantity  stored  by  grain  handlers  and 
a  great  increase  in  the  degree  of  utilization  of  capacity,  such  as  to 
mean  possibly  a  direct  profit  as  well  as  an  indirect  advantage  to  the 
railroads  owning  the  elevators. 

It  is  worth  noting  that  30  years  ago  or  so  there  was  less  tendency 
to  a  concentrated  and  possibly  monopolistic  exploitation  of  terminal 
storage  facilities  than  at  present  and  no  economic  obstacle  to  the 
utilization  of  public  storage  by  cash  grain  handlers  generally.  The 
public  storing  of  grain  owned  by  producers  and  handlers  having  no 


WAREHOUSING  AND  STORAGE. 


149 


elevators  was  then  a  regular  incident  of  the  grain  business.  At  that 
time  the  relation  (or  spread)  between  cash  and  future  prices  at 
Chicago  was  much  more  in  conformity  with  economic  requirements 
than  has  recently  been  the  case.  The  existing  situation  tends  to 
choke  the  normal  channel  of  connection  between  the  cash  and  futures 
markets,  to  foster  in  the  latter  market  ‘Aechnicar’  conditions  and 
price  movements  not  related  to  the  demand  and  supply  situation  for 
actual  grain,  to  give  to  powerful  integrated  concerns  additional 
opportunity  for  manipulation,  and  to  impair  the  usefulness  of  the 
futures  market  for  hedging  purposes. 

All  the  incidents  of  terminal  handling  should  be  arranged  so  as  to 
eliminate  incentives  to  unduly  prompt  selling  and  premature  removal 
from  storage  at  the  terminal  elevator  of  the  railroad  on  which  the 
grain  originates  and  to  facilitate  the  continued  ownership  of  the  grain 
by  the  country  shipper  if  his  judgment  of  economic  conditions  sug¬ 
gests  such  a  policy.  Possibly  the  initial  elevation  and  storage  charge 
should  uniformly  be  included  in  the  freight  charge  so  that  only 
through-billed  grain  would  escape  contributing  something  toward  the 
cost  of  storage  facilities  at  the  railroad  elevator.  Such  a  measure 
would  tend  to  prevent  holding  grain  in  cars  and  the  tying  up  of 
railroad  equipment  as  well  as  the  diversion  of  grain  to  private  eleva¬ 
tors  for  speculative  purposes. 

The  restoration  of  a  normal  situation  as  regards  the  use  of  public 
storage  in  the  grain  trade  would  be  so  generally  beneficial  to  the  trade 
and  to  the  public  as  to  warrant  necessary  legal  reforms  and  financial 
expenditures  in  the  directions  suggested  or  whatever  other  steps 
might  be  necessary  to  accomplish  the  object  in  view. 


Chapter  V. 


MERCHANDISING  AND  SHIPPING  BUSINESS  IN  TERMINAL 

MARKETS. 

Section  1.  Operations  of  terminal  elevator  companies. 

Introductory. — The  buyers  in  the  terminal  grain  markets  are 
necessarily  either  consumers  or  shippers,  or  their  agents.  Tables  8 
to  12  in  Volume  II  indicate  that  for  10  primary  markets  taken  as  a 
whole  about  one-third  of  the  wheat  receipts  and  one-third  of  the  corn 
receipts  in  the  five  years,  1913-1917,  were  consumed  locally,  i.  e., 
not  dipped  as  grain;  that  less  than  15  per  cent  of  the  oats  received 
was  retained  for  local  consumption  at  these  points;  that  a  little  more 
than  40  per  cent  of  the  barley  received  and  about  25  per  cent  of  the 
rye  receipts  were  likewise  retained  for  consumptive  purposes.  What¬ 
ever  periods  or  statistics  are  considered,  it  is  conclusive  that  at  many 
of  the  primary  points  the  larger  volume  of  buying  is  for  shipment  out 
of  the  market.  The  predominance  of  local  mill  buying  at  Minne¬ 
apolis  is  exceptional  as  compared  with  other  primary  markets. 

The  terminal  elevator  companies  are  the  largest  merchandisers 
and  distributors  in  the  trade.  At  Duluth,  Chicago,  and  Omaha,  for 
example,  the  terminal  elevator  companies  as  a  group  buy  more 
than  two-thirds  of  the  wheat,  corn,  and  oats  (Appendix  Table  12). 
While  parts  of  the  stocks  purchased  are  later  sold  to  consumers  and 
distributors  in  the  local  market,  the  bulk  is  sold  for  shipment  to  other 
points.  As  was  shown  in  Chapter  IV,  these  private  elevator  mer¬ 
chandisers  have  the  operating  control  of  probably  80  per  cent  of  the 
terminal  elevator-  storage  space  in  the  United  States  (excluding  the 
plants  of  millers  and  converters).  They  are  generally  equipped  to 
handle  grain  in  carload  lots,  or  larger  units,  for  storage,  conditioning, 
and  mixing  purposes.  Their  chief  sources  of  profit  are  as  follows: 
(1)  Mixing,  cleaning,  and  conditioning  for  their  own  account  with  a 
view  to  raising  the  commercial  value  of  their  own  stocks;  (2)  mer¬ 
chandising  grain  for  domestic  consumption  and  foreign  demand, 
immediate  or  deferred;  (3)  sale  of  screenings;  (4)  operations  in  the 
futures  market;  (5)  elevation,  storage,  transfer,  cleaning,  mixing, 
and  conditioning  for  others. 

A  considerable  volume  of  shipping  business  is  also  carried  on  by 
dealers  not  operating  terminal  elevators  and  the  elevator  companies 
themselves  sometimes  apply  cars  on  contract  without  unloading 
them  or  by  merely  transferring  the  grain  through  the  elevator  to 
obtain  the  weights. 

Rules  and  regulations. — The  trade  customs  and  regulations 
relative  to  the  more  important  points  involved  in  contracts  for  ship¬ 
ment  appear  in  the  following  extracts  from  the  rules  of  the  Gram 
Dealers’  National  Association:^ 


1  As  in  force  Nov.  20. 1920. 
150 


MERCHANDISING  AND  SHIPPING.  151 

Rule  3.  Card  bids. — The  acceptance  of  a  card  bid  shall  carry  mth  it  a  full  accept¬ 
ance  of  the  ^vritten  and  printed  conditions  contained  therein. 

Rule  4.  (a)  Confirmation. — It  shall  be  the  duty  of  both  buyer  and  seller,  on  day  of 
trade,  to  mail,  each  to  the  other,  a  confirmation,  in  writing  (the  buyer  a  confirmation 
of  purchase,  and  the  seller  a  confirmation  of  sale),  setting  forth  the  specifications  as 
agreed  upon  in  the  original  articles  of  trade.  Upon  receipt  of  said  confirmation,  the 
parties  thereto  shall  carefully  check  all  specifications  named  therein  and  upon  finding 
any  differences,  shall  immediately  notify  the  other  party  to  the  contract,  by  wire, 
except  in  the  case  of  manifest  errors  and  differences  of  minor  character,  in  which 
event  notice  by  return  mail  will  suffice. 

(6)  When  a  trade  is  made  through  a  broker,  it  shall  be  the  duty  of  the  broker,  on 
the  day  of  trade,  to  send  a  written  confirmation  to  each  of  the  principals  (to  the  buyer 
a  confirmation  of  sale,  and  to  the  seller  a  confirmation  of  purchase),  setting  forth  the 
specifications  of  the  trade  as  made  by  him.  Upon  receipt  of  said  confirmations  th(? 
parties  thereto  shall  carefully  check  all  specifications  named  therein,  and  upon  find¬ 
ing  any  differences,  shall  immediately  notify  the  other  party  to  the  contract,  by  wire, 
In  default  of  such  notice  by  wire  the  contract  shall  be  filled  in  accordance  with  the 
terms  of  the  confirmation  issued  by  the  broker. 

(c)  AU  sales  by  telephone  shall  be  confirmed  on  date  of  sale  by  both  buyer  and 
seller. 

{d)  When  either  of  the  confirmations  contains  provisions  at  variance  with  the  con¬ 
ditions  expressed  in  the  card  bid,  or  other  written  or  printed  bid,  the.  pro  visions  of 
the  said  card,  either  written  or  printed,  bid  shall  govern,  except  when  both  parties 
to  the  contract  shall  waive  the  irregularity  by  signing  the  confirmation,  in  which 
event  the  confirmation  thus  signed  shall  be  understood  to  express  the  terms  of  the 
contract. 

Rule  5.  Time  of  shipment  or  delivery. — In  making  contracts,  a  specific  time  in  which 
shipment  or  delivery  is  to  be  made  shall  be  mentioned.  Any  given  number  of  days 
shall  mean  calendar  days  excluding  date  of  sale  in  which  to  load  and  ship  grain  to 
apply  on  a  sale  for  shipment,  or  to  deliver  at  the  agreed  destination,  grain  sold  for 
delivery. 

The  word  ship  when  used  in  the  rules  shall  mean  that  shipping  instructions  shall 
have  been  filed  with  the  railroad  company  by  the  shipper. 

Grain  to  apply  on  a  sale  for  shipment  must  be  actually  loaded,  and  billing  instruc¬ 
tions  must  be  furnished  the  railroad  company  in  accordance  with  the  custom  then  in 
vogue  at  the  shipping  point. 

When  the  words  immediate,  quick,  and  prompt  are  used  the  following  meanings 
shall  be  implied:  “Immediate,’^’  three  days;  “Quick,”  five  days;  “Prompt,”  ten 
days. 

Where  no  specifications  as  to  time  of  shipment  are  named  in  the  contract,  prompt 
shipment  shall  be  implied.  ** 

First  half  of  the  month  shipment  shall  be  construed  as  meaning  the  first  15  days, 
including  February,  and  last  half  of  the  month  shipment  shall  mean  the  remaining 
days. 

Rule  6.  Billing  instructions. — (a)  In  case  grain  is  sold  for  three  or  five  days’  ship¬ 
ment,  the  buyer  shall  furnish  billing  instructions  by  wire,  unless  said  instructions 
were  embodied  in  the  original  articles  or  trade. 

(b)  The  buyer  shall  be  allowed  three  calendar  days  within  which  to  furnish  billing 
instructions  on  sales  for  deferred  shipment,  and  must  furnish  the  said  billing  instruc¬ 
tions  any  time  after  three  days,  when  requested  by  the  seller.  Should  the  buyer, 
after  the  expiration  of  the  allotted  three  days,  fail  to  furnish  shipping  instructions 
on  demand,  the  seller  shall  have  the  right  to  elect  either  to  ship  the  grain  to  the  post- 
office  address  of  the  buyer  or  to  cancel  the  contract  outright;  24  hours’  notice  having 
been  given  by  the  seller  of  his  intention  and  election. 

Shipping  directions  furnished  by  the  buyer  before  the  expiration  of  said  24  hours 
must  be  accepted  by  the  seller. 

Rule  7.  Incomplete  shipments. — When  the  seller  finds  that  he  mil  not  be  able  to 
complete  a  contract  within  the  agreed  limit,  it  shall  be  his  duty  at  once  to  advise  the 
buyer  by  mail,  telephone,  or  telegraph,  whereupon  it  shall  be  the  duty  of  the  buyer 
at  once  to  elect  either  to  buy  in  or  to  cancel  the  deficit,  or,  with  the  consent  of  the 
shipper,  to  extend  the  contract  to  cover  the  said  deficit. 

If  the  seller  fail  to  notify  the  buyer  of  his  inability  to  complete  his  contract,  as 
above  provided,  the  liability  of  the  seller  shall  continue  until  the  buyer,  by  the 
exercise  of  due  diligence,  can  determine  whether  the  seller  has  defaulted,  when  the 
buyer  shall  immediately  (a)  agree  with  the  seller  upon  an  extension  of  the  contract 
to  cover  the  deficit,  (6)  cancel  the  contract  outright,  or  (c)  buy  in  the  deficit  for  the 
seller’s  account. 


152 


TERMINAL  GRAIN  MARKETING. 


Rule  8.  Incomplete  delivery, — When  the  seller  fails  to  complete  a  contract  for 
delivery  within  the  agreed  time,  it  shall  be  the  duty  of  the  buyer  immediately  to 
extend,  buy  in,  or  cancel  the  deficit,  said  deficit  to  be  determined  by  the  quantity 
already  weighed  up,  plus  sellers’  weights  or  estimates  on  shipments  arrived  but  not 
yet  weighed.  Wherever  sellers’  weights  or  estimates  have  not  been  furnished  on 
shipments  not  yet  weighed,  it  shall  be  the  duty  of  the  buyer  to  estimate  the  weight, 
for  the  purpose  of  fixing  the  deficit. 

Rule  9.  Demurrage. — 'The  seller  shall  be  liable  for  any  demurrage  charges  accruing 
on  grain  billed  to  “shipper’s  order,”  when  such  charges  can  be  shown  to  have  accrued 
by  reason  of  the  inability  of  the  buyer  to  get  possession  of  the  bill  of  lading  whenever 
said  bill  of  lading  is  necessary  to  furnish  disposition. 

Rule  10.  Sample  grain. — It  shall  be  the  duty  of  the  seller  of  grain  by  sample  to 
furnish  grain  fully  up  to  sample.  The  word  “Sample”  used  in  this  connection  shall 
mean  a  portion  of  the  shipment,  or  of  the  lot  from  which  shipment  is  to  be  made,  and 
must  represent  the  identical  grain  shipped  or  to  be  shipped.  The  words  “Type 
.sample  ”  shall  mean  sample  of  like  character  but  not  necessarily  identical  in  all  re¬ 
spects  with  the  grain  shipped  or  to  be  shipped.  Shipments  rejected  on  account  of 
quality  shall  be  compared  mth  the  sale  sample,  by  either  the  inspection  committee 
or  some  other  duly  authorized  or  agreed  committee  of  the  market  in  which  such  rejec¬ 
tion  is  made,  and  the  finding  of  said  committee  shall  be  final.  Should  the  finding  be 
in  favor  of  the  buyer,  the  buyer  shall  at  once  notify  the  seller,  by  wire,  and  it  shall 
be  the  duty  of  the  seller  to  make  satisfactory  adjustment  with  the  buyer  within 
24  hours,  at  the  expiration  of  which  time,  if  not  adjusted,  the  shipment  shall  be  sub¬ 
ject  to  the  order  of  the  seller  and  it  shall  be  the  duty  of  the  buyer  to  buy  in,  cancel, 
or  extend  the  defaulted  contract  and  notify  the  seller  of  his  action.  Should  the 
buyer  and  seller  fail  to  arrive  at  a  basis  for  adjustment  that  would  enable  the  buyer 
to  handle  such  grain  not  up  to  sample,  and  should  said  grain  be  finally  rejected,  it 
shall  be  the  duty  of  the  seller  promptly  to  reimburse  the  buyer  to  the  full  amount  of 
money  advanced  on  such  a  shipment  so  rejected. 

Rule  11.  Loading  minimum. — It  shall  be  the  duty  of  the  seller  to  load  cars  in 
accordance  with  the  rules  and  regulations  of  the  initial  railroad  and  to  assume  any 
loss  resulting  from  the  nonobservance  of  such  rules  and  regulations. 

Rule  12.  Telegrams  and  telephones. — The  sender  of  a  telegram  or  telephone  message 
shall  prepay  the  charges. 

Rule  13.  Acceptances. — ^Telegraph  and  telephone  acceptances  of  letter  and  card 
bids  for  “track  grain”  must  reach  the  office  of  the  bidder  within  the  limit  specified 
therein.  Wire  bids  and  quotations  shall  specify  time  limit  for  acceptance. 

Rule  14.  Surplus  grain. — Surplus  grain  shall  be  taken  to  account  by  the  buyer 
at  the  current  market  price  on  the  day  after  the  last  car  is  unloaded. 

Rule  15.  Interior  shipments. — Grain  sold  on  the  basis  of  “Regular  market  terms” 
,  can  not  be  forwarded  to  interior  points  by  the  buyer,  without  the  consent  of  the  seller, 
and  the  same  rule  shall  apply  to  “Terminal  market  sales”  that  do  not  contemplate 
public  official  weights  and  inspection. 

Rule  16.  Invoice. — It  shall  be  the  duty  of  the  seller  to  mail  to  the  buyer,  or  such 
other  consignee  as  may  have  been  previously  designated  by  the  buyer,  an  invoice, 
giving  the  initial  and  number  of  the  car,  kind  and  grade  of  grain,  actual  or  estimated 
weight  (state  which),  price,  contract  on  which  shipment  is  to  apply,  amount  of  draft 
drawn,  and  railroad  routing. 

Rule  17.  Bills  of  lading. — ^Bills  of  lading  attached  either  to  invoices  or  to  drafts 
shall  be  original  and  negotiable,  and  in  conformity  with  the  specifications  of  the  con¬ 
tract  on  which  the  shipment  is  to  apply,  and  shall  be  signed  in  ink.  Any  loss  resulting 
from  irregular  or  incorrect  bills  of  lading  shall  be  paid  by  the  seller. 

Rule  18.  Overdrafts. — When,  for  any  reason,  an  overdraft  has  been  made  on  grain 
shipments,  and  has  been  discovered  before  the  draft  is  paid,  the  buyer  shall  elect 
either  to  pay  the  overdraft  for  account  of  the  seller,  or  to  request  the  seller  to  reduce 
his  draft  to  the  proper  amount.  In  the  event  that  the  buyer  elects-to  pay  the  over¬ 
draft  for  account  of  the  seller  and  in  cases  where  drafts  are  so  paid,  and  an  overdraft 
is  not  manifest  until  an  account  current  is  rendered,  the  seller  shall  reimburse  the 
buyer  on  demand  for  the  full  amount  of  said  overdrafts. 

Rule  19.  Balances. — Any  cash  balances  accruing  to  the  seller  on  a  contract  shall 
be  promptly  remitted  when  said  contract  is  complete. 

RuiiE  20.  Margin  on  drafts. — Where  sales  are  made  on  destination  terms,  it  shall 
be  the  duty  of  the  seller  to  leave  ample  margin  on  his  drafts  to  provide  for  possible 
discrepancies  in  weights  and  grades. 

Rule  21.  Arbitration. — (a)  Where  differences  between  members  of  this  associa¬ 
tion  or  between  a  member  of  this  association  and  a  member  of  an  affiliated  association 
can  not  be  amicably  adjusted,  said  differences  shall,  at  the  request  of  either  party. 


MERCHANDISING  AND  SHIPPING. 


153 


be  fiibmitted^  to  the  arbitration  committees  of  either  this  association  or  the  State  or 
local  association  of  which  either  one  or  both  parties  may  be  a  member,  except  in 
cases  where  the  disputants  mutually  agree  to  exchange  arbitration,  in  which  event 
this  association  will  recognize  the  validity  of  such  exchange  arbitration. 

(b)  The  decision  of  an  arbitration  committee  of  this  association  shall  be  final,  except 
as  provided  in  Article  IV  of  the  Arbitration  Rules. 

(c)  Either  party  may  appeal  from  a  decision  of  the  arbitration  committee  of  a  State 
or  a  local  association  to  an  arbitration  committee  of  this  association,  except  as  provided 
in  Article  III  of  the  Arbitration  Rules. 

Rule  22.  Car  lots  of  grain  and  assorted  feedstuff's. — These  rules  shall  also  govern 
transactions  in  f  eedstufis  in  straight  car  lots,  and  grain,  f  eedstuffs,  and  flour  in  assorted 
car  lots.  By  feedstuffs  is  meant  all  animal  feed  that  is  derived  from  or  is  a  product  of 
grain. 

Rule  23.  Weights  and  inspection  of  grain  sold  destination  terms. — (a)  On" grain  sold 
track-loading  station,  or  delivered  basis  destination  terms,  it  shall  be  the  duty  of 
track  buyers,  receivers,  millers,  and  consumers  of  grain  at  points  of  destination  where 
no  regularly  constituted  rules  and  regulations  are  in  effect,  first,  to  obtain  the  consent 
of  seller  to  make  such  delivery,  and  then  furnish  to  the  seller  sworn  or  public  certifi¬ 
cates  of  weights  and  grades,  giving  the  post  office,  date,  name  of  elevator,  mill,  or 
warehouse  where  weights  were  obtained ;  name  of  the  weighmasters’  employer,  name 
of  the  weighmaster,  location  or  description  of  leaks,  if  any,  the  seal  record,  the  rail¬ 
road  agent’s  written  acknowledgment  of  said  leaks  or  other  bad-order  conditions, 
when  and  where  the  grain  was  unloaded,  and  the  original  paid  freight  bill  on  grain 
sold  delivered. 

(6)  On  a  sale  shipper’s  weights  and  grades  it  is  understood  shipments  must  be  made 
by  the  seller  from  his  own  stations,  or  from  stations  that  operate  under  the  same  tariff 
rates,  regulations,  and  conditions,^  and  he  must  furnish  the  buyer  sworn  certificates 
of  weight  attached  to  draft  or  invoice,  unless  otherwise  agreed  at  the  time  of  sale. 

Rule  24.  Grain  shipped  from  terminal  or  interior  markets. — ^When  grain  is  sold  by 
telegraph,  telephone,  or  mail,  by  receivers  or  distributors,  located  in  terminal  and 
interior  markets,  it  shall  be  understood  and  agreed  that  the  public  weights  and  grades 
of  the  market  from  which  the  grain  is  shipped  shall  govern. 

Rule  25.  Terminal  market  sales. — Sales  made  out  of  any  terminal  market  for  a 
specific  number  of  days’  shipment  shall  be  filled  with  shipments  from  the  point  from 
which  sold,  unless  otherwise  agreed  or  understood  at  time  of  trade. 

Rule  26.  O./f  grades. — It  shall  be  the  duty  of  receivers,  track  buyers,  and  dis¬ 
tributors  of  grain  on  regular  market  terms,  to  notify  sellers  of  any  failure  to  grade,  so 
that  he  will  receive  such  notice  within  24  hours  from  date  of  inspection.  The  buyer 
then  shall  either  apply  the  grain  on  contract  at  ruling  market  difference  on  day  of 
arrival  or  let  the  notice  to  seller  be  by  wire,  of  that  date,  giving  the  condition  of  the 
grain,  stating  whether  unloaded  or  still  on  track;  whereupon  it  shall  be  the  duty  of 
the  seller  receiving  such  notice  to  wire  disposition  at  once.  Off-grade  grain  sold  for 
account  of  shipper  shall  not  apply  on  contract. 

Rule  27.  Routing  on  grain  sold  delivered. — Grain  sold  delivered  shall  be  deliverable 
via  any  line  at  the  discretion  of  the  seller,  unless  otherwise  agi’eed  at  time  of  sale. 
When  such  shipments  are  routed  by  the  purchaser,  the  carrier  becomes  the  purchaser’s 
agent,  and  the  seller’s  liability  ceases  when  he  furnishes  bill  of  lading  in  accordance 
with  the  purchaser’s  instructions. 

Rule  28.  Routing  of  grain  sold  track. — Grain  sold  track  the  original  point  of  ship¬ 
ment  shall  be  routed  in  accordance  with  the  billing  instructions  furnished  by  the 
buyer. 

Rule  29.  Alteration  of  contract. — The  specifications  of  a  contract  can  not  be  altered 
or  amended  without  the  expressed  consent  of  both  the  buyer  and  the  seller.  (This 
abolishes  the  custom  of  “silence  confirms.”) 

Rule  30.  Stored  grain. — Grain  stored  in  terminal  regular  elevators  can  not  be 
applied  on  sale  for  shipment  except  by  consent  of  the  buyer. 

Rule  31.  Sellers  inspection. — Grain  sold  for  delivery,  seller’s  inspection,  shall  be 
covered  by  an  inspection  certificate  of  the  grade  contracted.  The  submission  of  a 
certificate  of  a  lower  grade  to  apply  on  a  contract  for  a  higher  grade  shall  be  authority 
for  the  buyer  to  sell  the  grain,  represented  by  such  certificates,  for  the  account  of  whom 
it  may  concern,  and  proceed  to  buy  in,  extend,  or  cancel  the  original  contract  for 
account  of  the  seller,  notifying  him  at  once  of  such  action. 

Rule  32.  Carload. — A  carload  shall  consist  of  bushels,  as  follows:  Wheat,  1,100; 
shelled  corn,  milo  maize,  kaffir  corn,  and  feterita,  1,100;  ear  corn,  700;  rye,  1,100; 
barley,  1,250;  oats,  1,600:  Provided,  That  where  rules  of  carriers,  lawfully  on  file  with 
the  Interstate  Commerce  Commission  or  State  railway  commissions,  provide  for 


154 


TERMINAL  GRAIN  MARKETING. 


minimum  carload  weights  in  excess  of  the  above,  such  minimum  weights  shall  con¬ 
stitute  a  carload  within  the  meaning  of  this  rule. 

Rule  33.  Grain  in  tmnsff.— Grain  shipped  prior  to  the  date  of  sale  can  not  be 
applied  on  contract  without  the  buyer’s  consent. 

Rule  34.  Size  of  cars  when  bushels  sold.— When  bushels  are  sold  and  the  size  of 
cars  to  be  loaded  is  not  mentioned  by  the  buyer,  it  shall  be  the  privilege  of  the  seller 
to  load  cars  of  a  size  suitable  to  his  convenience;  he,  the  seller,  to  answer  to  the  rail¬ 
roads  for  the  fulfillment  of  their  minimum  weight  requirements. 

Rule  35.  Term  “24  hours.^’— The  term  “24  hours,”  as  used  in  these  rules,  shall  be 
construed  to  mean  24  hours,  including  Sunday  or  legal  holiday. 

Section  2.  Mixing  and  conditioning  by  terminal  elevators, 

The  mixing  process. — Practically  every  private  terminal  elevator 
company  engaged  in  buying  and  selling  grain  makes  a  practice  of 
mixing,  cleaning,  and  conditioning  the  various  lots  of  grain  pur¬ 
chased  in  order  (1)  to  secure  the  screenings;  (2)  to  improve  the 
quality;  and  (3)  to  take  advantage  of  the  latitude  within  the  re¬ 
quirements  of  each  standard  grade  by  mixing  large  quantities  of  grain 
to  the  bottom  level  of  such  requirements.  A  large  Duluth  operator 
stated  that  blending  and  conditioning  (including  cleaning  and 
mixing)  during  the  years  1900  to  1914  was  the  most  important 
source  of  profit  to  the  private  terminal  elevator.  A  Minneapolis 
company  estimated  that  their  gross  profits  on  mixing  under  pre¬ 
war  conditions  had  averaged  1^  cents  per  bushel. 

The  different  grades  of  grain  are  frequently  mixed  in  railroad- 
operated  elevators,  under  the  supervision  of  the  local  inspection 
department,  with  a  view  to  releasing  additional  bin  space  for  stor¬ 
age.  But  this  practice  under  railroad  operation  appears  to  have 
little  or  no  direct  relation  to  merchandising  profits  and  is  neces¬ 
sarily  more  restricted  than  the  mixing  operations  of  private  com¬ 
mercial  elevators. 

The  process  of  mixing  in  the  Chicago  market  was  explained  be¬ 
fore  the  Interstate  Commerce  Commission  ^  in  1906  as  follows: 

Comi^ssioner  Prouty.  WTien  you  mix  oats,  what  is  your  purpose  in  mixing  the 
oats?  You  want  to  take  a  poor  grade  and  make  it  better.  What  is  the  trouble  with 
the  poor  grade?  Is  it  too  light? 

Mr.  Bevan.  Too  light  and  bad  color. 

Commissioner  Prouty.  MTiat  do  you  do — take  good  oats  and  mix  with  the  poor? 
Mr.  Bevan.  Exactly.  ^ 

Commssioner  Prouty.  And  you  try  to  get  enough  good  in  to  bring  up  the  quality? 
Mr.  Bevan.  Exactly.  ^ 

Prouty.  To  what  extent  is  it  possible  to  do  that?  Take  a  thou- 
sand  bushels  of  what  you  call  poor  oats.  You  want  to  bring  those  up  to  what  grade “i* 
Mr.  Bevan.  You  can  mix  in  about  25  per  cent  of  poor  oats  with  75  per  cent  good 

03;bS* 

Comrmssioner  Prouty.  And  produce  the  same  grade  that  the  good  oats  were  at 

tJQ0  st/Rrt  i 

Mr.  Bevan.  Yes,  sir. 

Mr.  Marble.  That  really  lowers  the  market  value  of  the  oats,  but  keeps  them 
within  the  limits  of  the  grade? 

Mr.  Bevan.  Within  the  limits. 

Mr.  Marble.  And  skins  the  grade? 

Mr.  Bevan.  I  do  not  know  about  “skinning.” 

Commissioner  Prouty.  Don’t  oats  sell  by  grade? 

Mr.  Bevan.  Some  do,  and  some  by  sample.  We  sell  all  of  ours  by  sample 
Commissioner  Prouty.  After  you  have  mixed  those  oats,  if  you  take  a  sample 
sample  sell  for  as  much  as  a  sample  of  the  good  oats  before  they  were  mixed? 
Mr.  Bevan.  That  is  up  to  the  buyer. 

Commissioner  Prouty.  Well,  as  a  general  proposition? 


»  Op.  cit.,  S.  Doc.  No.  278,  p.  788. 


MERCHANDISING  AND  SHIPPING. 


155 


Mr.  Bevan.  Yes,  sir. 

Commissioner  Prouty.  They  do  sell  for  as  much? 

Mr.  Bevan.  Yes,  sir. 

Commissioner  Prouty.  So  you  gain  the  difference  between  the  difference  in  the 
market  price? 

Mr.  Bevan.  You  must  make  something  or  there  is  no  use  being  in  the  elevator 
business. 

Commissioner  Prouty.  Is  that  the  main  thing  in  the  elevator  business,  bringing 
up  grades? 

Mr.  Bevan.  I  think  so. 

As  another  instance  of  mixing  and  conditioning,  a  certain  car  of 
wheat  was  bought  ‘‘on-track’^  at  Indianapolis  (in  1918)*  for  $2.07  per 
bushel.  This  wheat  had  been  graded  No.  3  because  ijt  was  slightly 
smutty.  The  grain  was  run  through  a  cleaner,  which  removed  the 
smut,  and  was  then  mixed  with  a  high  grade  No.  2.  It  thus  be¬ 
came  part  of  a  lot  which  was  sold  for  about  $2.17.  The  loss  in  weight 
from  scouring  did  not  seriously  cut  down  the  profit. 

Mixing  may  be  performed  either  within  the  elevator  or  in  the 
process  of  loading  out.  One  elevator  operator  stated  that  under 
conditions  prevalent  several  years  ago  in  loading  lake  vessels  he 
frequently  added  several  thousand  dollars  to  the  profit  on  a  cargo 
by  skillful  manipulation  of  the  various  streams  turned  into  the 
loading  spouts.  At  one  time  in  Chicago  it  was  customary  for  ship¬ 
pers  loading  a  vessel  to  gradually  increase  the  mixture  of  low-grade 

train  until  the  stream  would  scarcely  make  the  grade  specified. 

'requently  they  were  stopped  by  the  inspector  and  required  to 
run  the  entire  cargo  over  again.  There  was  a  continuous  effort 
to  keep  the  quality  of  the  shipment  down  to  the  lowest  level  allow¬ 
able,  i.  e.,  to  “skin  the  grade.’’ 

Results  of  mixing  wheat  by  private  elevators. — With  a 
view  to  ascertaining  the  results  of  mixing  operations  by  terminal 
elevators  data  were  obtained  from  certain  elevators  at  Kansas  City, 
Chicago,  Minneapolis,  and  Duluth.  Such  data  were  obtainable 
from  certain  houses  for  a  five-year  period  (1912-13  to  1916-17), 
from  others  for  only  four  of  these  years,  and  from  others  for  only 
three  years.^ 

Chicago. — The  Chicago  terminal  elevator  companies — especially 
those  operating  public  warehouses — have  regularly  mixed  the  re¬ 
ceipts  at  their  private  plants  for  the  purpose  of  turning  out  con¬ 
tract  grain,  i.  e.,  grain  deliverable  on  future  contracts.  An  ex¬ 
perienced  trader  and  officer  of  the  board  of  trade  has  estimated  that 
over  a  period  of  10  years  (prior  to  1918)  fully  90  per  cent  of  the 
stocks  in  the  public  warehouses  were  “manufactured”  in  this  way. 
The  extraordinarily  favorable  mixing  results  obtained  in  1913-14 
by  one  large  operator  appear  in  the  following  summary.  Since  figures 
by  grades  could  not  be  obtained  for  all  stocks  in  the  elevator  the 

*  Figxires  were  secured  in  Minneapolis  from  the  State  railroad  and  warehouse  commission,  giving  the 
“ins"  and  “outs"  of  wheat  by  grades  for  the  public  warehouses  in  Minneapolis,  some  30  in  number.  (In 
1912-13  there  were  30  public  elevators  in  MinneapoUs;  in  1913-14,  28;  1914-15,31;  1915-16,30;  in  1916-17,  25. 
In  this  last  year  is  included  the  Equity  Elevator  in  St.  Paul.)  .  i,  j 

In  Duluth  similar  figures  were  taken  from  the  books  of  two  terminal  elevator  companies  (Globe  and 
Consolidated).  These  data  were  for  wheat  of  all  grades  for  the  five  crop  years  1912-13  to  1916-17,  inclusive. 

In  Chicago  the  figures  used  were  secured  by  agents  of  the  Bureau  of  Markets.  Data  were  obtained  for 
wheat  from  J.  Rosenbaum’s  IrondaleA  for  four  crop  years,  and  from  Armour’s  Santa  Fe  and  Bartlctt- 
Frazier  or  the  Central  Elevator  Co.  operating  the  National  and  Calumet  A,  B,  and  C,  for  three  years.  Fig¬ 
ures  on  corn  were  obtained  for  the  four  crop  years  beginning  1913-14  from  J .  Rosenbaum  and  for  one  house 
of  Bartlett-Frazier.  Corn  figures  from  Armour’s  Santa  Fe  were  for  the  three  years  beginning  1914-15. 

In  Kansas  City,  data  on  the  mixing  of  wheat  were  obtained  from  five  terminal  elevator  companies  operat¬ 
ing  six  houses — viz,  the  Murray,  Wabash,  Kansas  City  Southern,  Kansas-Missouri,  the  Milwaukee,  and 
CWcago  Great  Western. 


1 


156  TERMINAL  GRAIN  MARKETING. 

opening  and  closing  inventories  are  disregarded  in  the  computa¬ 
tions  for  Chicago. 


Results  of  mixing  operations  in  wheat  at  a  Chicago  elevator,  1913-14. 


Bushels.i 

Percentages. 

In. 

Out. 

In. 

Out. 

Winter  wheat: 

No.  1 . . . 

8,881 
1,294, 067 
606, 450 
29, 168 
15,  722 

0.5 

66.2 

31.0 

1.5 

.8 

No.  2 . 

2,004,609 

'  100.0 

No.  3 . 

No.  4 . 

Lower . 

139 

Total . 

1,954,288 

2, 004, 748 

100.0 

100.0 

Spring  wheat: 

No.  1 . 

166, 530 
73, 935 
46, 835 
10,663 
80, 442 

350, 887 
914 

44.0 

19.5 

12.4 

2.8 

21.3 

99.5 

.2 

No.  2 . 

No.  3 . 

No.  4 . 

Lower . 

97i 

.3 

Total . 

378, 405 

352, 772 

100.0 

100.0 

Grand  total . ■. . . 

2, 332,693 

2,357,520 

1  No  figures  for  opening  and  closing  inventories. 


it  is  clear  that  this  operator  bought  wheat  of  all  grades,  both 
spring  and  winter,  and  was  able  to  deliver  out  practically  the  entire 
stocks  as  contract  grades. 

The  combined  results  of  wheat-mixing  operations  at  Chicago  in 
six  private  elevators  (Irondale  A,  Santa  Fe,  National,  and  Calumet  A, 
B,  and  C)  for  the  successive  crop  years  1914-15,  1915-16,  and  1916-17, 
and  for  one  of  these  six  in  1913-14,  appear  in  Appendix  Tables  13-16. 
These  figures  show  that  the  total  mixing  operations  in  wheat  of  these 
elevators  resulted  in  an  outturn  of  93.6  per  cent  of  No.  2  winter  wheat, 
as  compared  with  42.6  received,  and  an  outturn  of  90  per  cent  No.  1 
spring  wheat,  as  against  38.9  per  cent  taken  in. 

Minneapolis. — A  similar  analysis  was  made  of  wheat-mixing  results 
at  the  Minneapolis  public  elevators  for  five  specified  crop  years  and 
for  the  entire  period  (Appendix  Tables  17-22)  .  These  figures  indicate 
that  mixing  operations  by  the  Minneapolis  elevators  during  this 
period  were  of  comparatively  less  significance  than  at  Chicago. 
Because  of  the  predominant  local  milling  demand  for  wheat  in  that 
market  there  is  a  large  volume  of  selling  by  terminal  elevators  to  the 
mills,  often  on  type  sample.  In  consequence,  mixing  is  probably 
employed  largely  for  the  purpose  of  meeting  milling  requirements 
and  less  for  raising  the  commercial  grades  and  mixing  to  the  bottom 
level  of  such  grades.  The  shipping  business  in  wheat  at  Minneapolis 
is  small;  and  mixing  operations  of  the  sort  last  mentioned  seem  to  be 
practiced  more  extensively  in  connection  with  the  shipping  business 
and  are  more  characteristic  of  shipping  markets.  (Cf.  Chap.  I, 
sec.  2.) 

Duluth. — Similar  mixing  data  to  the  above  were  procured  at  Duluth 
from  the  books  of  two  elevator  companies  and  are  set  forth  in  Appendix 
Tables  23-28. 


<  There  is  no  reason  to  believe  that  the  inclusion  of  inventories  would  have  altered  to  any  marked  extent 
the  results  shown. 


MERCHANDISIN'G  AND  SHIPPING. 


157 


The  most  conspicuous  result  of  these  operations  over  a  five-year 
period  at  Duluth  was  the  increase  in  the  quantity  of  No.  1  northern 
spring  wheat  delivered  on  the  outturn,  as  compared  with  decreases  in 
the  outturn  of  No.  2  and  No.  3.  Whereas  40  per  cent  of  the  receipts 
for  the  five-year  period  were  No.  1  northern  spring  and  24  per  cent 
were  No.  2,  the  grain  loaded  out  graded  about  77  per  cent  No.  1  and 
10  per  cent  No.  2. 

Kansas  City. — The  records  of  receipts  and  shipments  by  five  ele¬ 
vator  companies  at  Kansas  City  (operating  six  elevators)  furnished 
data  for  four  crop  years.  (Appendix  Tables  29-33.) 

It  will  be  noted  from  the  figures  in  this  analysis  that  although 
many  varieties  of  wheat  were  handled  through  these  houses  there  was 
a  marked  effort  to  turn  out  No.  2  hard  and  No.  2  red,  presumably 
because  No.  2  hard  is  a  contract  grade  and  both  No.  2  hard  and 
No.  2  red  are  commonly  handled  in  the  export  trade.  The  figures 
for  the  four-year  period  showed  about  49  per  cent  No.  2  hard  in  the 
outturn,  as  against  32  per  cent  of  that  grade  received.  There  was  a 
decrease  of  over  50  per  cent  in  the  quantity  of  No.  4  hard  delivered 
out,  as  against  the  quantity  received. 

Comparison  of  four  markets. — From  the  data  obtained  it  was 
possible  to  make  a  comparison  of  operations  at  the  four  markets  on 
the  basis  of  ‘‘contract  grades”;  i.  e..  No.  1  and  No.  2  of  certain 
varieties  of  wheat  specified  by  rule  on  each  exchange,^  and  made 
deliverable  on  future  contracts  without  discounts  or  premiums.  The 
results  in  perceijtages  appear  in  the  following  statement  of  “ins”  and 
“outs”: 

Elevator  “ins^  ’  and  ^‘outs*  ’  of  all  contract  grades. 


Chicago. 

Minneapolis. 

Duluth. 

Kansas  City. 

In. 

Out. 

In. 

Out. 

In. 

Out. 

In. 

Out. 

1912-13 . 

Per  cent. 

Per  cent. 

Per  cent. 
47.2 

Per  cent. 
57.0 

Per  cent. 
54.2 

Per  cent. 
91.4 

Per  cent. 

Per  cent. 

1913-14 . 

1  42.4 

193.4 

57.1 

68.2 

67.2 

95.1 

68.4 

79.7 

1914-15 . 

62.9 

99.9 

21.7 

22.1 

32.3 

72.7 

25.1 

42.8 

1915-16 . 

46.9 

94.6 

35.2 

34.9 

32.3 

76.0 

4.0 

16.3 

1916-17 . 

30.6 

91.9 

11.2 

12.5 

15.8 

45.8 

47.0 

67.5 

Average . 

45.7 

95.0 

34.5 

38.9 

40.4 

76.2 

36.1 

51.6 

4  years  only . 

45.7 

95.0 

31.4 

34.4 

36.9 

72.4 

36.1 

51.6 

1  One  company  only. 


From  this  statement  it  appears  that  in  Minneapolis,  which  is 
largely  a  sample  market,  wheat  mixing  to  secure  contract  grades  (con¬ 
sidering  the  market  as  a  whole)  has  not  been  extensive.  In  fact,  it 
appears  that  for  1915-16  a  lesser  quantity  of  the  two  contract  grades 
was  shown  on  the  outturn  than  was  received  during  the  year.  The 
possible  reasons  for  this  have  already  been  discussed. 

On  the  other  hand,  the  elevators  considered  at  Duluth,  Kansas 
City,  and  particularly  Chicago,  have  been  able  to  deliver  out  a  very 
much  higher  percentage  of  the  upper. grade  higher-priced  wheat  than 
they  have  received.  At  Duluth  the  outturn  has  frequently  contained 


»  See  Vol.  V,  pp.  188-196. 

56976®— 22 - 12 


158 


TERMINAL  GRAIN  MARKETING 


over  twice  as  much  contract  grade  wheat  as  was  taken  in  during  the 
crop  year.  The  figures  tend  to  bear  out  certain  allegations  made  with 
reference  to  the  ‘‘manufacture’’  of  contract  grades  at  Chicago,  since 
on  the  basis  of  all  (merations  analyzed  at  that  market,  the  “outs”  for 
contract  grades  (Nos.  1  and  2)  averaged  95  per  cent  of  the  wheat 
handled  as  against  “ins”  of  those  grades  amounting  to  only  45.7  per 
cent  of  the  total. 

Mixing  profits  per  bushel. — The  general  results  of  mixing  oper¬ 
ations  are  fairly  apparent  from  the  comparisons  of  “ins”  and  “outs” 
already  shown.  Because  of  the  labor  involved,  it  was  considered 
inadvisable  to  compute  profits  per  bushel  in  more  than  two  markets. 
This  was  done  with  reference  to  the  Minneapolis  and  Duluth  figures 
on  all  grades  of  wheat.  Three  different  methods  were  employed  to 
obtain  representative  prices  to  apply  to  the  increase  of  outshipments 
for  a  given  grade  of  wheat.®  Profits  for  a  particular  grade  were 
calculated  by  multiplying  the  average  annual  price  of  that  grade  by 
the  overage  (excess  of  “out”  over  “in”).  Losses  were  likewise 

6  Prices  were  obtained  in  the  following  three  ways:  In  the  first,  designated  Method  I,  prices  were  arrived 
at  for  grades  No.  1  hard,  No.  1  northern.  No.  2  northern,  No.  3  northern.  No.  1  durum.  No.  2  durum,  by 
taking  the  average  of  the  mean  daily  prices  for  such  grades  as  given  out  during  the  year  by  the  closing 
quotations  committee  of  the  Minneapolis  Chamber  of  Commerce.  From  the  Daily  Market  Record,  Min- 
neapohs,  the  average  prices  of  No.  2  northern  and  all  of  the  grades  not  quoted  by  the  committee  were 
obtained,  summated,  and  averaged  for  two  days  in  each  month  of  the  year  and  the  price  differential 
between  each  of  the  latter  grades  and  the  No.  2  northern  figure  computed.  These  differentials  were  then 
applied  to  the  closing  quotations  average  price  for  No.  2  northern  to  get  the  average  prices  of  the  grades  not 
quoted.  All  prices  derived  by  this  method  are  thus  on  the  basis  of  closing  quotations. 

In  Method  II  prices  were  obtained  for  each  grade  by  taking  the  weighted  average  of  all  prices  quoted 
for  such  grades  in  the  Daily  Market  Record  on  two  days  (when  possible,  the  10th  and  20th)  of  each  month 
during  the  year. 

Some  exceptions  to  these  methods  may  be  noted.  In  1913-14  receipts  of  No.  4  northern.  No.  4  durum, 
no  grade  durum  and  western,  were  small  and  scattered.  Prices  for  these  grades  as  given  in  Method  II  are 
therefore  arrived  at  by  ta^g  the  average  of  all  prices  quoted  in  the  Daily  Market  Record  for  such  grades 
at  any  time  during  the  year  weighted  by  the  number  of  cars  at  each  price.  To  get  the  price  of  each  of  these 
grades  on  the  basis  of  the  closing  quotations  for  use  in  Method  I,  the  differential  in  each  case  was  arrived 
at  by  comparing  the  average  price  of  which  the  method  of  computation  has  just  been  set  forth  with 
the  average  price  of  No.  2  northern  computed  in  the  same  way  for  the  days  on  which  quotations  of  the 
grades  in  question  were  available.  These  differentials  were  then  applied  to  the  closing  quotations  average 
price  for  No.  2  northern  to  get  the  price  of  the  other  grades  in  Method  I.  In  1916-17  there  was  a  change 
from  State  to  Federal  grades  during  the  year.  The  prices  of  these  Federal  grades  were  computed  in 
Method  I  by  taking  the  closing  quotations  of  Nos.  1,  2,  3,  and  4  dark  northern,  northern  spring,  and  red 
spring,  and  for  Nos.  1,  2,  and  3  durum;  to  get  the  prices  of  the  other  Federal  grades  on  the  basis  of  the 
closing  quotations  the  differentials  were  arrived  at  oy  comparing  the  average  of  all  prices  quoted  in  the 
Daily  Market  Record  for  such  grades  at  any  time  during  the  month  with  the  average  prices  of  No.  2  northern 
spring,  computed  in  each  case  for  the  number  of  days  on  which  quotations  of  the  grade  in  question  were 
available.  In  every  instance  the  prices  were  weighted  by  the  number  of  cars.  Price  statistics  in  Method 
II  were  obtained  for  Federal  grade  by  taking  a  weighted  average  of  all  prices  quoted  during  the  month 
for  which  they  held.  The  net  profits  per  bushel  as  determined  by  these  two  methods  were  strikingly 
similar,  as  will  be  shown  presently. 

However,  to  test  the  results  more  thoroughly  another  method  has  been  tried,  which  may  be  called 
Method  III,  which  was  tried  out  in  the  three  years  1913-14  to  191.6-16.  By  this  method  the  weighted  aver¬ 
age  price  of  all  grades  quoted  in  the  Minneapohs  Daily  Market  Record  was  taken  for  two  days  a  week, 
Wednesdays  and  Fridays,  if  possible.  The  spread  on  each  day  from  the  No.  1  northern  price  was  deter¬ 
mined  and  an  average  of  these  differentials  made  for  the  year.  A  yearly  price  for  No.  1  northern  was 
determined  by  averaging  the  daily  prices  and  the  prices  of  the  other  grades  determined  by  adding  or  de¬ 
ducting  the  average  yearly  spread  from  the  No.  1  northern  price.  In  this  way  relatively  heavier  receipts 
either  at  the  beginning  or  end  of  the  year  for  a  grade  not  continuously  quoted  was  given  no  weight  in  the 
calculations.  The  results  by  this  method  show  a  striking  correspondence  to  those  obtained  in  the  two 
outUned  above. 

Prices  were  computed  for  Duluth  by  Methods  I  and  II  only. 

The  per  bushel  profits  on  mixing  wheat  in  Minneapolis  and  Duluth  were  thus  found  to  be — 


Minneapolis. 

Duluth. 

Year. 

Method 

Method 

Method 

Method 

Method 

I 

II 

III 

I 

II 

Cents. 

Cents. 

Cents. 

Cents. 

Cents. 

1912-13 . 

1.04 

1.00 

1.55 

1.33 

1913-14 . 

.26 

.27 

.23 

.71 

.64 

1914-15 . 

1.35 

1. 34 

1.30 

2.47 

2. 31 

1915-16 . 

.87 

.89 

.78 

3. 30 

2.39 

1916-17 . 

3. 38 

3.36 

4.60 

4. 31 

• 

MERCHANDISING  AND  SHIPPING. 


159 


determii^d  by  multiplying  such  a  price  by  the  shortage  for  that 
grade.  The  per  bushel  profit  was  derived  by  dividing  the  total 
profit  by  the  outs  or  shipments.  The  detail  for  the  various  com¬ 
putations,  as  worked  out  for  the  Minneapolis  elevators  by  different 
methods,  appears  in  Appendix  Tables  34-36.  Averaging  the  results 
shown  by  Methods  I  and  II  of  computing  prices  (footnote  6) ,  the 
following  were  the  per  bushel  mixing  profits  of  the  elevators  at  Min¬ 
neapolis  and  Duluth  which  were  studied  (footnote  3). 

Elevator  profits  due  to  mixing  operations  in  wheat  (all  grades). 


[Cents  per  bushel.] 


Year. 

Minne¬ 

apolis. 

Duluth. 

1912-13 . 

1.0 

.3 

1.3 
.9 

3.4 

1.4 
.7 

2.4 
2.8 

4.5 

Assuming  an  average  yearly  per  bushel  profit  of  2  cents  on  an 
.  elevator  of  1,000,000  bushels  capacity,  valued  at  $1,000,000,  handling 
2,000,000  bushels  of  wheat,  the  gross  yearly  return  from  mixing 
alone  would  amount  to  $40,000,  which  would  show  a  return  of  4  per 
cent  on  the  plant  investment.  This  demonstration  of  the  potential 
profits  obtainable  from  mixing  different  grades  of  wheat  conforms 
with  the  statements  made  to  the  commission’s  agents  that  millions 
of  bushels  of  wheat  are  handled  by  shipping  elevators  each  year 
merely  for  the  mixing  profits. 

It  was  stated  by  a  Minneapolis  elevator  man,  however,  that  mixing 
profits  are  not  as  great  as  might  appear,  since  competition  for  grain 
for  mixing  purposes  forces  buying  prices  up,  while  the  millers’  dis¬ 
counts  against  mixed  grain  force  the  selling  prices  down.” 

Mixing  to  make  ‘'contract ’’  corn. — With  reference  to  opera¬ 
tions  in  corn,  figures  were  obtained  from  three  Chicago  private 
elevators  for  three  successive  crop  years.  The  results  appear  in  the 
following  statement: 


Results  of  mixing  operations  in  corn  by  three  Chicago  elevator  companies  for  the  three 

crop  years  1914-15  to  1916-17. 


Year  and  grade. 

Bushels. 

Percentages. 

In. 

Out. 

In. 

Out. 

1914-15: 

No.  2 . 

6, 867, 582 
8, 134, 005 
2, 209,  551 
649,  281 

8,485,407 
9, 240,  905 
73,  823 
113,  228 

38.5 
45.  5 
12.4 
3.6 

47.4 

51.6 

4.4 

.6 

No.  3 . 

No.  4 . 

Lower . 

Total . .  .  . 

17,860,419 

17,913, 363 

100.0 

100.0 

1915-16: 

No.  2 . 

4, 512,  418 
1,766,926 
1,697, 642 
1,680,363 

7, 965, 865 
1, 258, 978 
331,  976 
309,407 

46.7 
18.  3 
17.6 
17.4 

80.7 

12.8 
3.4 
3. 1 

No.  3 . 

No.  4 . 

Lower . 

Total . 

9,657,349 

9, 866,226 

100.0 

100.0 

160 


TERMINAL  GRAIN  MARKETING. 


Results  of  mixing  operations  in  corn  by  three  Chicago  elevator  companies  for'  the  ihrde 

crop  years  1914-15  to  1916-17 — Continued. 


Year  and  grade. 

Bushels. 

Percentages. 

In. 

Out. 

In. 

Out. 

1916-17: 

No.  2 . . 

3,992,733 

5,548,443 

46.8 

65.0 

No.  3 . 

3,023, 691 

2,789,943 

35.5 

32.7 

No.  4 . 

1, 142,  783 

68,  529 

13.4 

.8 

Lower . 

365,  940 

129,  741 

4.3 

1.5 

Total . 

8, 525, 147 

8,536,456 

100.0 

100.0 

1914-15  to  1916-17: 

No.  2 . 

18, 190, 240 

28, 875, 095 

39.3 

62.1 

.  No.  3 . 

17, 829, 213 

16, 561, 871 

38.5 

35.7 

No.  4 . 

7,497,664 

482,  003 

16.2 

1.0 

Lower . 

2, 766, 308 

553, 443 

6.0 

1.2 

Total . 

46, 283, 425 

46,472,412 

100.0 

100.0 

‘  These  computations  show  that  in  each  of  the  crop  years  considered 
the  three  companies  as  a  whole  turned  out  a  considerably  larger  pro¬ 
portion  of  No.  2  than  they  had  received  (disregarding  inventories) 
and  that  on  the  average  for  the  four  years  the  outturn  of  No.  2' 
showed  62  per  cent  as  compared  with  39  per  cent  received. 

Economic  aspects  of  mixing. — It  appears  that  grain  passing  into 
a  primary  market  under  the  present  arrangements  frequently  takes 
one  of  two  courses:  (1)  It  is  bought  by  a  miller  and  adapted  to  the 
requirements  of  his  grind,  or  (2)  it  is  bought  by  a  terminal  elevator 
company,  cleaned,  conditioned,  and  mixed  with  other  lots  so  that 
the  outturn  just  meets  the  requirements  of  the  higher  grades  with 
practically  all  premium  attributes  eliminated  in  the  general  mixture. 
This  latter  course — the  handling  and  mixing  by  a  terminal  elevator 
dealer — has  provoked  considerable  criticism.  It  is  alleged  that  the 
only  services  of  economic  value  which  the  private  elevator  can  per¬ 
form  are  {a)  storage  of  excess  supplies  for  subsequent  distribution, 
{1)  cleaning  and  conditioning  to  render  the  grain  merchantable,  and 
(c)  direct  transfer  services  to  enable  shippers  to  obtain  weights  and 
to  effect  transshipment  from  carrier  to  carrier. 

This  position  was  taken  by  an  elevator  operator  in  Chicago,  who 
made  the  following  criticism  of  mixing,  when  interviewed : 

Q.  is  your  opinion  on  mixing?— -A.  The  way  I  feel  is  that  if  the  miller  or  con¬ 
sumer  wants  to  mix  grain,  let  him  do  his  own  mixing.  He  can  do  this  and  make  the 
profit  from  it  as  well  as  I  can.  Here  are  three  or  four  cars  grading  No.  2  red  wheat, 
and  if  I  see  a  car  of  No.  4  red  wheat  I  could  readily  mix  the  No.  4  with  the  other  wheat 
and  make  it  all  come  out  No.  2,  but  if  I  am  doing  business  and  am  doing  it  straight  I 
am  not  going  to  do  this. 

Q.  Do  you  think  that  terminal  elevator  wheat  will  be  discriniinated  against  in  favor 
of  country  run  wheat? — A.  Every  time.  I  buy  lots  of  grain  out  in  Kansas  City  and  I 
insist  that  it  be  country  run  wheat,  because  I  know  all  elevator  wheat  in  Kansas  City 
is  mixed. 

It  is  also  alleged — particularly  of  Chicago  dealers — that  the  possi¬ 
bility  and  practice  of  ^^manufacturing’’  contract  grades  through  mix¬ 
ing  and  conditioning  give  the  elevator  dealers  who  operate  ‘Tegular” 
warehouses  an  undue  advantage  in  the  futures  market  and  lead  to 
manipulations  in  that  market  (see  sec.  5). 


MERCHANDISTKG  AITD  SHIPPING.  161 

As  against  these  contentions,  it  has  been  asserted  by  elevator  men  in 
Chicago,  Minneapolis,  Kansas  City,  and  elsewhere  that  the  practice 
of  mixing  ‘‘makes  a  market’’  for  low-grade  grains  and  enables  the 
producer  to  realize  higher  prices  for  the  lower  grades  owing  to  the 
competitive  demand  of  elevator  companies  for  such  grain  for  mixing 
purposes.  They  insist  that  the  expectation  of  raising’ the  value  of 
the  grain  leads  elevator  concerns  in  a  competitive  market  to  bid  up 
the  prices,  i.  e.,  lessen  the  discounts  on  the  lower  grades,  and  causes 
them  to  pay  the  producer  a  higher  price  for  the  lower  grades  than  is 
possible  where  grain  is  concentrated  and  sold  without  such  treatment. 
It  is  also  contended  that  mixing  is  of  direct  benefit  to  the  small  miller, 
not  equipped  with  mixing  madiinery,  since  it  gives  him  an  even  run 
for  his  grind. 

An  elevator  man  stated  that  to  prohibit  conditioning  and  mixing 
by  terminal  elevators  would  work  a  hardship  upon  both  farmer  and 
consumer.  His  view  was  substantially  as  follows : 

It  would  have  this  effect.  It  would  cause  the  lower  grades  of  wheat  to  sell  on  the 
farm  much  lower  than  they  would  if  we  were  not  permitted  to  raise  the  value.  It 
would  reduce  the  volume  of  millable  wheat  very  materially.  If  you  could  not  bring 
it  in  and  dry  it  the  farmer  would  get  very  little  for  it  on  his  farm.  Otherwise,  if  the 
terminal  man  is  permitted  to  buy  that  wheat  and  clean  it  up,  dry  it  and  condition  it, 
and  mix  it  here,  he  will  pay  the  farmer  much  more. 

But  even  assuming  that  mixing  by  terminal  elevators  operates  to 
the  benefit  of  the  grower,  it  is  alleged  that  it  can  be  of  little  service  to 
millers  unless  performed  specifically  to  meet  milling  requirements.  It 
was  stated  in  Minneapolis  that  ‘  ‘  elevator  grain  ”  as  against  ‘  ‘  the  coun¬ 
try  run  ”  was  always  discounted  by  mill  buyers  unless  the  -mixing  had 
been  performed  by  special  arrangement.  The  millers  stated  that 
they  were  reluctant  to  buy  “elevator  grain”  because  it  was  difficult 
to  determine  its  milling  qualities,  and  experience  showed  that  it  was 
often  ill-adapted  to  milling  blends.  This  criticism  did  not  apply  to 
certain  elevator  companies  which  were  specializing  in  milling  require¬ 
ments. 

An  Illinois  miller  stated  that  he  preferred  the  “country  run” 
because  then  he  could  “grade  and  mix  it  properly.”  A  Milwaukee 
milling  company  reported  that  it  preferred  the  “country  run”  of 
grain  because  “the  terminals  doctor  it  and  skin  the  grade.” 

These  objections  to  the  terminal  elevator  “ mix were  generally 
expressed  wherever  millers  were  in  position  to  obtain  the  virgin 
grain. 

Inasmuch  as  the  mills  can  to  best  advantage  do  any  mixing  that 
will  increase  the  millable  supply  and  do  actually  mix,  there  is  no  rea¬ 
son  to  suppose  that  mixing  by  the  elevator  has  the  alleged  effect  of 
increasing  the  millable  supply.  It  is  entirely  possible,  however,  that 
the  competition  of  the  terminal  elevators  for  low-grade  grain  for 
mixing  purposes  does  have  some  effect  in  increasing  prices  to  pro¬ 
ducers  for  such  grades. 

Section  3.  Merchandising  by  terminal  elevator  companies. 

Introductory. — As  already  stated,  the  elevator  companies  are  the 
largest  dealers  in  grain  in  the  primary  markets.  A  considerable 
part  of  this  trading  is  for  local  delivery  in  certain  markets,  although 
the  elevator  companies  as  a  class  are  predominantly  shippers.  The 
following  statement  gives  a  fairly  typical  picture  of  the  merchandising 


162 


TERMINAL  GRAIN  MARKETING. 


process  where  hedging  is  employed,  although  there  are  many  varia¬ 
tions  in  methods  among  the  different  markets  and  individual  con¬ 
cerns  : 

We  put  out  our  card  bids .  F or  instance ,  we  have  acceptances  overnight  of  a  hundred 
thousand  bushels  of  wheat  and  a  hundred  thousand  bushels  of  corn — I  am  speaking 
now  of  prewar  times.  The  market  opens  in  the  morning  and  we  sell  an  option  against 
that  grain.  Then  that  would  protect  us  against  loss  and  would  also  protect  us  against 
any  undue  profit.  It  is  a  fixed  purchase  and  sale — cash  bought  and  future  sold. 
After  that  grain  was  shipped,  within  a  day  or  two  we  sell  a  hundred  thousand  bushels 
of  wheat  for  export  and  buy  in  our  Option.  The  cash  wheat  would  be  sold  and  the  op¬ 
tion  would  be  out  of  the  way.  In  the  case  of  the  corn  we  might  be  able  to  sell 
only  50,000  bushels  for  domestic  purposes.  Then  we  would  be  long  50,000  bushels  of 
cash  corn  and  short  50,000  bushels  of  the  future.  If  there  was  no  other  demand  for  it 
it  would  pay  us  to  deliver  that  out  on  contracts.  If  the  corn  failed  to  meet  the  require¬ 
ments  of  the  grade  we  would  clean  it,  dry  it,  put  it  in  public  elevators,  and  deliver  it 
out  to  satisfy  the  requirements  of  the  contracts  we  had  out. 

^  The  “carrying  charge’’  theory. — Theoretically  the  object  of 
most  terminal  elevator  companies  is  to  earn  a  “carrying”  or  “stor¬ 
age”  charge.  The  theory  sometimes  advanced  is  that  the  elevator 
companies  accumulate  grain  in  anticipation  of  future  demands  and 
tend  to  equalize  the  distribution  of  the  crop  to  converters  and  con¬ 
sumers,  and  that  the  costs  incident  to  carrying  these  surplus  stocks 
after  the  crop  has  been  moved  from  the  farm  (i.  e.,  storage,  insurance, 
interest,  etc.)  will  be  reflected  in  a  gradual  rise  in  the  level  of  prices. 
This  expected  rise  in  prices  toward  spring  frequently  fails  of  actual 
realization  because  of  the  other  factors  besides  the  cost  of  carrying 
the  grain  which  affect  prices. 

But  the  grain  carried  by  a  large  elevator  is  usually  hedged  in  the 
futures  market.  Under  such  circumstances  the  elevator  man  may 
cease  to  have  any  interest  in  whether  the  price  change  between  fall 
and  spring  is  a  decrease  or  an  increase.  If  he  is  to  carry  the  grain 
through  the  winter,  however,  he  is  very  much  interested  m  the  rela¬ 
tion  of  the  price  (of  the  future)  at  \^hich  he  hedges  to  the  cash  price. 
To  illustrate,  if  he  must  earn  1  cent  per  bushel  per  month  to  meet 
storage  costs,  in  order  to  carry  grain  from  November  to  May  (six 
months),  he  must  be  able  to  sell  the  future  (his  hedge)  in  November 
at  6  cents  over  the  cash  price  he  pays  for  car  lots  to  go  to  his  elevator. 
From  this  point  of  view,  winter  storage  is  practicable  or  not  according 
to  whether  the  future  shows  an  adequate  premium  late  in  the  fall. 
The  elevator  man  may  have  other  means  of  obtaining  a  profit  from 
stored  grain  which  will  make  him  willing  to  hedge  at  a  smaller  pre¬ 
mium  or  take  a  smaller  carrying  charge.  The  “carrying  charge” 
theory,  as  it  would  usually  be  understood  in  the  grain  trade,  refers 
to  the  situation  described  in  this  paragraph. 

Selling  for  local  delivery. — It  has  oeen  shown  that  with  few 
exceptions  private  elevator  companies  at  terminal  points  sell  a  larger 
volume  of  grain  for  shipment  than  for  local  delivery.  The  selling  for 
account  of  local  wheat-flour  millers  at  Minneapolis  and  to  local  corn 
mills  at  Indianapolis  are  perhaps  the  most  conspicuous  examples  of 
the  absorption  of  elevator  stocks  in  the  local  market. 

The  transactions  between  elevator  companies  and  local  millers,  as 
carried  on  in  the  Minneapolis  market j  require  but  brief  description. 
The  elevator  companies  buy  largely  on  the  exchange  floor,  and  usually 
by  sample.  The  sales  to  local  millers  are  largely  on  the  basis  of  type 
samples,  submitted  by  the  elevator  or  by  the  mill,  as  the  case  may  be. 


mBCHANDlSmO  AND  SHIPPING. 


163 


Sales  are  in  round  lots  generally.  The  sale  may  be  for  immediate 
or  for  deferred  delivery  and  there  is  no  requirement  that  cash  sales 
of  this  character  be  negotiated  on  the  exchange  floor.  Delivery 
usually  involves  a  switching  operation  from  the  elevator  to  the  mill 
storage  tanks.  In  the  case  of  regular  elevators  located  in  futures 
markets  soine  grain  is  delivered  to  mills  on  future  contracts,  although 
such  deliveries  usually  comprise  but  a  small  part  of  the  whole. 

In  some  instances,  notably  at  Duluth,  sales  for  local  delivery  are 
made  to  shipping  companies  who  do  not  themselves  operate  elevators. 
For  example,  the  Consolidated  Elevator  Co.,  which  operates  elevators 
at  Duluth-Superior  aggregating  more  than  10,000,000  bushels  storage, 
reported  that  it  did  little  shipping  on  its  own  account,  but  sold  to  the 
local  shipping  companies,  which  in  turn  forwarded  the  grain,  usually 
by  lake,  to  eastern  millers  and  dealers.  Since  the  elevator  company 
bought  from  local  commission  men,  some  of  whom  it  financed,  and 
sold  to  local  shippers,  its  business  was  largely  restricted  to  the  local 
market.^  The  general  method  followed  was  to  acquire  the  country 
run  of  grain  in  large  quantities,  hedge  it  by  equivalent  sales  of 
futures,  raise  its  commercial  value  by  mixing  and  conditioning,  secure 
the  screenings  for  sale  to  feed  concerns,  and  carry  the  stocks  until 
favorable  prices  were  offered  by  the  shippers,  or,  when  necessary, 
make  delivery  on  the  outstanding  futures.®  Statements  made  by 
officers  of  the  company  to  agents  of  the  commission  indicate  the 
manner  of  computing  margins  in  this  business,  viz : 

I  think  I  can  safely  say  that  we  are  always  ready  to  sell  the  grain  for  what  it  costs 
us.  We  get  our  handling  charge  out  of  it  because  we  sell  it  in  store,  and  the  man  that 
loads  it  out  has  to  pay  that  1^  cents  and  we  get  the  mix,  and  we  get  the  screenings  for 
thecleaning,  so  we  are  always  ready  to  sell  the  grain  for  what  it  costs  us. *  *  *  *  The 
man  that  we  sell  it  to,  I  think  he  sells  it  to  Buffalo,  I  think  his  profit  is  around  one- 
fourth  cent.  *  *  *  A  shipper  will  stand  on  the  floor  in  a  busy  season  and  get  one- 
fourth  cent  profit  between  us  and  the  miller  he  sells  it  to,  say. 

Shipping  operations  of  terminal  elevators. — The  terminal 
elevator  companies  are  sometimes  referred,  to  as  ‘^concentrators 
and  shippers’’  by  the  trade.  They  operate  at  terminal  points  be¬ 
tween  the  areas  of  supply  and  tne  consumptive  territory  in  the 
United  States  and  abroad.  Grain  applied  on  contracts  may  be  from 
cars  on  track  or  in  transit,  although  the  elevator  stocks  generally 
furnish  the  basis  for  these  shipping  operations. 

Many  of  the  larger  companies  issue  daily  card  offers  based  on  the 
closing  cash  quotations.  Certain  typical  cards  of  this  sort  have  been 
selected  to  illustrate  the  various  phases  of  the  shipping  business  as 
conducted  by  terminal  elevator  companies. 

The  following  card  was  sent  by  a  Kansas  City  elevator  company 
after  the  close  of  the  market  on  the  date  indicated  to  a  milling 
concern  at  Nashville,  Tenn.: 


7  This  concern  loaded  out  nearly  115,000,000  bushels  of  grain  and  flaxseed  during  the  5-year  period  1912-13 
to  1916-17,  turning  their  capacity  nearly  two  and  one-half  times  annually. 

*  Private  elevators  may  be  declared  “regular”  for  delivery  on  future  contracts  under  the  rules  of  the 
Duluth  Board  of  Trade. 


164  TERMIN’ AL  GRAIN  MARKETING. 

Form  20.--OFFER  CARD  ISSUED  BY  A  KANSAS  CITY  ELEVATOR  COMPANY. 

Simonds-Shields-Lonsdale  Grain  Co. 

Kansas  City,  Mo.,  May  6,  1921. 

On  basis  to-day’s  closing  prices  we  quote  our  wheat  as  follows:  Kansas  City  weights 
and  grades,  prompt  shipment: 


Our  samples. 

F,  0.  B. 

Kansas 

City. 

f 

Delivered 
East  St. 
Louis,  Ill. 

Delivered 
Chicago 
or  Minne¬ 
apolis 
rate. 

Delivered 
Philadel¬ 
phia  rate. 

70  per  cent  dark,  2  hard,  sample  B . 

Kansas  dark,  1  hard . 

$1.55 

1.60 

1.58 

1.54 

1.52 

1.65 

1.62 

$1.64i 

1.69i 

1.67i 

1.63i 

1.61i 

1  744 

$1.67i 
1. 72i 
1.70i 

1  604 

$1.87 

1.92 

1.90 

1  QA 

Kansas  dark,  2  hard . . . . . . 

1  hard  wheat . 

2  hard  wheat . . . 

1  644 

1.84 

1  Q7 

1  red  wheat . 

1  774 

2  red  wheat . 

1.71i 

1  7dA 

1  0/1 

Wheat  receipts  to-day  134  cars. 


For  prices  delivered  group  1  Texas,  add  cents  per  bushel  to  f.  o.  b.  Kansas 
City  quotations. 

For  prices  delivered  group  3  Texas,  add  31  cents  per  bushel  to  f.  o.  b.  Kansas  City 
quotations. 

Crop  complaints  to-day  were  decidedly  more  numerous  and  was  largely  responsible 
for  the  advance.  Exporters  are  not  following  the  advance  however  and  as  the  crop 
damage  at  the  moment  is  not  of  a  serious  nature  it  is  probable  there  has  been  enough 
advance  for  the  present,  still  damage  clMms,  true  or  false,  carry  an  appeal  and  attract 
buying  power  which  nearly  always  has  effect. 

•»  Terms:  Demand  draft,  bill  lading  attached. 


.  It  will  be  noted  that  these  quotations  are  adjusted  to  four  delivery 
bases.  Rate  differences  make  a  difference  in  price  of  9^  cents  per 
bushel  between  Kansas  City  and  East  St.  Louis,  12J  cents  between 
Kansas  City  and  Chicago  or  ^Minneapolis  rate  points,  and  32  cents 
between  Kansas  City  and  Philadelphia. 

The  first  quotation  is  on  a  type-sample  basis,  the  sample  being 
guaranteed  to  contain  70  per  cent  of  dark  No.  2  hard  wheat,  offered 
at  a  discount  of  3  cents  under  the  regular  Kansas  dark  No.  2  hard 
grade.  , 

The  quotations  were  all  for  ‘‘prompt’’  shipment,  i.  e.,  within  10 
days  excluding  the  date  of  sale.® 

Sometimes  these  cards  show  prices  of  actual  cash  sales  as  of  the 
day  upon  which  the  quotations  are  based.  The  following  card  from 
another  Kansas  City  elevator  company  is  an  example  in  point, 
affording  an  immediate  check  upon  the  shipper’s  margin  of  profit: 

~  i  -  “““  ~  "  — ■ 

»  Rules  of  the  Grain  Dealers  National  Association. 


t 


MERCHANDISING  AND  SHIPPING 


165 


Form  21.— OFFER  CARD  ISSUED  BY  A  KANSAS  CITY  ELEVATOR  COMPANY,  SAMPLE  BASIS, 

INCLUDING  CLOSING  CASH  PRICES. 

Moore-Seaver  Grain  Co. 

Kansas  City,  Mo.,  May  7, 1921. 

We  offer  you  subject  to  our  immediate  wire  confirmation,  1  to  5,000  bushels  each  of 
the  following  grades  and  samples  bulk  grain,  Kansas  City  weights  and  grades. 


[10  days’  shipment.) 


i. 


- 

F.  0.  B. 
Kansas 
City. 

C.  A.  F. 

East 

St.  Louis. 

C.  A.  F. 

Chicago 

or 

Minne¬ 

apolis. 

C.  A.  F. 

Group  1 
Texas. 

C.  A.  F. 
Phila¬ 
delphia 
rate. 

Sample  A  No.  1  dark  hard  Kansas . 

151 

160§ 

164 

\11\ 

184i 

Sample  A  No.  2  dark  hard  Kansas . 

149 

1581 

162 

175i 

182i 

Sample  B  No.  1  semidark  Kansas . 

148 

157J 

161 

174J 

181i 

Sample  B  No.  2  semidark  Kansas . 

146 

155i 

159 

172^ 

179i 

Sample  0  No.  1  hard  wheat . 

146 

155J 

159 

172i 

179i 

Sample  0  No.  2  hard  wheat . 

144 

153i' 

157 

170J 

177j 

Sample  R  No.  1  red  wheat . 

158 

167i 

171 

184i 

191i 

Sample  R  No.  2  red  wheat . 

155 

164i 

168 

181i 

188i 

No.  2  mixed  wheat  (80  per  cent  red) . 

150 

159i 

163 

176i 

183J 

70  per  cent  dark.  No.  2  hard . 

147 

156i 

160 

180i 

Add  15i  cents  per  bushel  to  Kansas  City  price  for  basis  C.  A.  F.  Memphis,  Tenn.  Add  26  cents  per  bushel 
to  Kansas  City  price  for  basis  C.  A.  F.  Buffalo,  N.  Y. 


We  solicit  your  orders  to  buy  sample  table  wheat  and  assure  yoii  we  will  give  same 
our  personal  attention.  Our  commission  for  buying  and  shipping  is  1  per  cent. 

Sales  of  cash  wheat  on  the  Kansas  City  Board  of  Trade  to-day  were  ^s  follows: 


Cars. 


1  dark  hard  148 .  1 

2  dafk  hard  148, 152 .  8 

3  dark  hard  147 .  3 

1  hard . 

2  hard  143,  146  .  7 

3  hard  143 .  3 


Cars. 

1  red . 

2  red . 

3  red . . . 

1  mixed . 

2  mixed . 

3  mixed . 


Sales  dark  hard  wheat  6  to  8  cents  lower,  hard  5  to  7  cents  lower,  soft  wheat  nomi¬ 
nally  5  cents  lower.  The  demand  for  cash  wheat  to-day  could  be  called  dull.  Only 
a  few  buyers  in  the  market  with  a  rather  free  carry  over  to-night.  Better  country 
acceptances  on  overnight  bids  was  responsible  for  the  lack  of  interest  generally,  most 
buyers  holding  off  until  Monday  expecting  a  better  run  of  wheat. 

Kindly  let  us  have  your  inquiries. 

Moore-Seaver  Grain  Co. 


E.  &  O.  E. 


166 


TERMINAL  GRAIN  MARKETING. 


The  following  card  was  sent  from  Buffalo  to  millers  in  New  York 
State  offering  grain  for  shipment  from  Kansas  City  and  Chicago.  It 
mil  be  noted  that  all  sales  are  to  be  made  on  western  market  terms, 
i.  e.,  the  terms  of  the  market  from  which  shipment  is  made. 

Form  22.— OFFER  CARD  ISSUED  BY  A  CHICAGO  TERMINAL  ELEVATOR  COMPANY. 


Armour  Grain  Co., 

1300  Chamber  of  Commerce,  Buffalo,  N.  Y.,  May  2,  1921. 

Subject  to  acceptance  here  by  9  a,  m.,  above  date,  we  offer  as  below  (orders  for  over 
five  cars  subject  to  confirmation),  cost  and  freight  following  rate  points,  seller  pays 
Government  tax  on  freight  charges.  E.  and  O.  E. 

All  sales  subject  delays  account  strikes  or  embargoes. 

Buyer  agrees  to  settle  for  overage  or  shortage  at  out  limit  selling  price  the  date  of 
loading  provided  can  not  secure  cars  as  ordered. 

All  sales  subject  to  terms  of  market  from  which  shipment  is  made:  also  subject 
demand  draft  B-L  attached. 


FROM  CHICAGO. 


FROM  CHICAGO — ALL  RAIL. 


[10  days.] 

Oats,  unsulphured,  2,000-bushel  cars: 

Sainple  2,  white,  32-34 . 

Sample  3,  white,  32-34 . 

Regular  2,  white . 

Regular  3,  white . 

2  mixed . 

Royal  mixture,  32-34 . 


481 

47f 

48| 

m 

46l 

4ll 


Sulphured  or  unsulphured: 

38  sterlings,  40,  J  cent;  42, 1  cent  more _ 

36  knickers,  38,  |  cent  more . . . 

36  clippers,  38,  i  cent  more . 

32-34  winners,  undipped . 


48| 

47| 

471 

m 


Sulphured  only: 

36-38  Crown  mixture .  47J 

36-38  Capital  mixture .  47| 

36-38  Niagara  mixture .  47 J 


[Corn,  1,428  bushel  cars.) 


3  yellow,  10  days .  77 j 

3  white,  10  days .  77 j 

3  mixed,  10  days . 

2  yellow — 2  wlute,  10  days . j  79J 

48  Imperial  barley,  10  days .  81i 

44  Liberty  barley,  10  days .  76J 


LAKE  AND  RAIL — VTA  BUFFALO. 

[Shipment  within  10  days  after  opening  of  naviga¬ 
tion.  Chicago  inspection.] 

3  yellow  corn,  c.  i.  f.  Buffalo . 

“At  and  East”  rates. 

Albany,  .’i . 

Baltimore,  Philadelphia,  New  York . 

Boston . 

FROM  KANSAS  CITY. 

[10  days.] 


Dark,  2,  hard  winter . 

Semidark,  2,  hard  winter 

2  hard  winter . 

2  red  winter . 

2  Milo . 

2  white  kaffir . 

2  Milo — kaffir  mixed . 


1731 

1691 

1651 

1691 

162 

144 

156 


Prices  above  are  Philadelphia  rate.  For  other  points  add  or  deduct  as  below. 


For— 

Deduct 

Bflo., 

Pitt’g. 

Deduct 

Syr., 

Roch. 

Deduct 

Balt. 

Ded’t 

Utica. 

Deduct 

Albany. 

Add 

N.  Y. 

Add 

Bost. 

Wheat . 

Corn,  rye . 

Barley . 

Oats . 

Feed  per  ton . 

7* 

6| 

6 

4 

2.  30 

2i 

21 

2 

11 

.70 

f 

t 

i 

.20* 

1 

i 

1 

i 

.30 

f 

1 

1 

1 

-f  .10* 

11 

u 

1 

s 

.40 

2i 

21 

2 

11 

.80 

Always  mention  price  when  ordering  to  avoid  mistakes. 

Armour  Grain  Co. 


MERCHANDISING  AND  SHIPPING. 


167 


The  quotation  sheet  of  the  Taylor  &  Bournique  Co.  shown  below 
illustrates  in  greater  detail  the  scope  of  business  and  operating 
methods  of  a  large  merchandising  elevator  company: 


Form  23.— QUOTATION  SHEET,  BASIS  PHILADELPHIA  RATE  POINTS,  ISSUED  BY  A  LARGE 

GRAIN  DISTRIBUTING  COMPANY. 


Taylor  &  Bournique  Co.,  Grain  Merchants. 

“quality  and  uniformity.” 

Chamber  of  Commerce,  Buffalo,  N.  Y. 

[Members  of:  Chicago  Board  of  Trade,  Minneapolis  Chamber  of  Commerce,  Milwaukee  Chamber  of  Com¬ 
merce,  New  York  Produce  Exchange,  Boston  Chamber  of  Commerce,  Buffalo  Corn  Exchange,  Balti¬ 
more  Chamber  of  Commerce,  Philadelphia  Commercial  Exchange,  Sioux  City  Board  of  Trade,  Des  Moines 
Board  of  Trade.  Main  office,  Milwaukee,  Wis.  Eastern  branches:  New  York  City,  N.  Y.,  Produce 
Exchange;  Boston,  Mass.,  Chamber  of  Commerce;  Buffalo,  N.  Y.,  Chamber  of  Commerce;  Philadelphia, 
Pa.,  Bourse  Building;  Baltimore,  Md.,  Chamber  of  Commerce,  Western  branches:  Chicago,  Ill.,  Postal 
Telegraph  Building;  Streator,  Ill.,  Murray  Building;  Sioux  City,  Iowa,  Grain  Exchange  Building; 
Des  Moines,  Iowa,  Hubbell  Building;  Fort  Dodge,  Iowa,  Snell  Building.  Private  wires  all  offices. 
Fast  and  efficient  service.] 

Cost  prices  Philadelphia  points  on  orders  received  by  10.15  a.  m. 

Manifest  errors  excepted.  Limited  number  of  cars.  Western  terms  are  hnal.  All 
corn  and  oats  guaranteed. 

Following  offerings  subject  to  Milwaukee  Chamber  of  Commerce  rules.  Shippers’  ' 
option,  Milwaukee,  Chicago. 

Hammond  or  Schneider  weights  and  inspection.  For  other  points  add  or  deduct 
as  below,  viz: 


For— 

Deduct. 

Add. 

Cleve¬ 

land. 

Buf¬ 

falo, 

Pitts¬ 

burg. 

Syra¬ 

cuse, 

Roch¬ 

ester. 

Balti¬ 

more. 

Utica. 

Al¬ 

bany. 

To¬ 

ronto. 

New 

York. 

Bos¬ 

ton. 

Mon¬ 

treal. 

Que¬ 

bec. 

Wheat . 

8i 

lOi 

8i 

6 

6| 

6 

4 

2.30 

2i 

2i 

2 

li 

.70 

f 

I 

i 

1 

.20 

1 

1 

i 

* 

.30' 

1 

i 

i 

i 

+.10 

li 

H 

1 

1 

.40 

2i 

2i 

2 

li 

.80 

Com . 

Barley . . 

3 

2i 

Oats.!! . 

Feed  per  ton . 

Tuesday.  Phone  (L.  D.)  Seneca  6437  when  in  the  market  for  grain. 

Chicago  Board  of  Trade  using  daylight  saving  time.  Acceptances  should  reach  us 
by  9.15  a.  m.  eastern  standard  time. 


Oats  (10  d^s): 

49|  c.,  Excelsiors. 

48i  c..  Superiors. 

48|  c.,3  whites. 

49|  c.,  2  whites,  natural. 

49|  c.,  2  whites,  sulphured. 

49i  c.,  36^^  Nashotahs. 

48i  c.,  36^  sulphured  Waukeshas. 

49|  c.,  38^  natural  or  sulphmed  White  Rocks. 
50|  c.,  40tt  natural  or  sulphured  Oshkosh. 

47|  c.,  Poland  oats.  50  per  cent  barley. 

Rye  (two  cars,  10  days’  shipment); 

166i  c.,  good  N  0. 2  Wisconsin  milling. 

Wheat  (two  cars,  subject  to  confirmation),  now 
loaded  ready  to  run: 

180  c.,  1  dark  northern  spring. 

175J  c.,  2  dark  northern  spring. 


Com  (10  days): 

7S^  c.,  2,  yellow  com. 

White,'same  as  yellow. 

Mixed  i  c.  discount. 

Barley  (5  cars,  10  days): 

80i  c.,  48|t  feeding. 

78ic.,46ff  feeding. 

c.,  43#  sulphured,  “A”  feed, 
c.,  43#  natural  “B”  feed. 

Buffalo  offerings  subject  confirmation: 

180c.,l,  mixed  durum  wheat. 

172  c.,  2,  mixed  durum  wheat. 

167  c.,  3,  mixed  durum  wheat. 

173  c.,  2,  mixed  winter  wheat. 

170  c.,  3,  white  winter  wheat. 

95  c.,  smol^  wheat. 

85  c.,  N.  D,  Salvage  wheat;  2  mixed  com,  7 
cents. 


2  yellow  corn,  first  half  May  shipment,  64^  cents,  Georgian  Bay. 


Split  cars,  1  cent  per  bushel  more  each  grade.  All  sales  subject  to  no  penalty  if 
delay  account  of  car  shortage,  embargoes,  or  any  conditions  over  which  we  have  no 
control. 

We  are  in  the  market  for  two  cars  New  York  State,  two  white  wheat.  Have  you 
any  to  offer?  Also  in  the  market  for  a  couple  cars  of  buckwheat. 


168 


TERMINAL  GRAIN  MARKETING. - 


Following  is  the  card  issued  by  a  corporation  operating  at  Buffalo 
and  shipping  both  on  all-rail  and  ex-lake  billings,  all  shipments  within 
three  days: 


Form  24.— OFFER  CARD  ISSUED  BY  A  BUFFALO  MILL  AND  ELEVATOR  COMPANY. 


Telephone  Seneca  7460.  BUFFALO,  N.  Y.,  May  7,  1921. 

We  offer  for  acceptance,  to  reach  us  not  later  than  10.30  a.  m.  Eastern  time  next 
business  day  for  shipment  as  shown  below,  printer’s  and  manifest  errors  excepted. 
Including  freight  to  various  rate  points  as  shown  below.  Official  weight  and  inspec¬ 
tion  certificates  final.  Sight  draft  payable  on  first  presentation,  or  7  per  cent  inter¬ 
est  will  be  added  to  draft  until  paid.  Orders  for  Penna.  Ry.  delivery  on  all  rail 
subject  to  our  confirmation. 

To  avoid  mistakes,  always  name  price  when  ordering. 


All  rail. 


2  yellow  corn 
Eastern  corn. 

3  yellow  corn 

1  white  oats.. 

2  white  oats. . 
Eastern  oats. 

3  white  oats. . 
36  white  clips 


Shipment. 

Roch.  <t 
Sy’cuse. 

Utica. 

Balt. 

Phila., 

Albany. 

N.  Y. 

Boston. 

3  days . 

3  days . 

76J 

77f 

77J 

78i 

79f 

00 

O 

3  days . 

74 

75| 

76f 

76 

77i 

78i 

3  days . 

49| 

50 

50i 

50i 

51J 

3  days . 

47J 

m 

48f 

49 

49f 

50i 

3  days . 

47f 

48 

48i 

48J 

49| 

49| 

3  days . 

461 

47i 

47f 

48 

•  481 

49i 

3  days . 

48J 

49^ 

49f 

50 

50f 

51i 

Ex.  Lake  grain  offered  below. 


3  days  from  Buffalo. 

6i 

7 

7i 

8i 

9 

10 

lOJ 

11 

12i 

131 

2  yellow  corn . 

69J 

69f 

70J 

70f 

71 

71i 

71i 

72i 

73 

731 

3  yellow  corn . 

67i 

67f 

68| 

68f 

69 

69i 

691 

70J 

71 

2  white  oats . 

-.441 

44| 

44f 

45i 

45i 

45f 

45J 

45J 

46f 

46| 

3  white  oats . 

43| 

•■44J 

44i 

44f 

44f 

45J 

45i 

45f 

/ 

45i 

461 

3  days  from  Buffalo. 

14 

14i 

16 

17 

.  17i 

18 

19i. 

20i 

21J 

221 

2  yellow  corn . . 

731 

74J 

75 

75f 

751 

76J 

77 

77f 

78i 

78f 

3  yellow  corn . 

71| 

72J 

73 

73| 

731 

74J 

75 

75f 

76J 

76f 

2  white  oats . 

46i 

47 

47i 

47i 

48 

48i 

48f 

49 

49| 

491 

3  white  oats . 

46f 

46i 

47 

471 

47i 

47f 

48i 

48i 

48i 

491 

* 

'  - 

At.  and  East 

Rates. 

3  days  from  Buffalo. 

23i 

24 

.  25^ 

26i 

28 

Balt. 

Alby. 

Phil. 

N.  Y. 

Bos. 

2  yellow  corn . 

791 

79f 

.  80i 

81 

81| 

77i 

77 

771 

771 

801 

3  yellow  corn . 

•  77i 

771 

78i 

79 

791 

75i 

75 

751 

751 

781 

2  white  oats . 

50 

50i 

50i 

51 

5U 

48f 

48i 

48f 

48f 

3  white  oats . 

49J 

49f 

50 

50J 

51 

48| 

m 

m 

491 

If  you  do  not  know  your  local  rate  from  Buffalo — ^ask  us.  Time  by  which  accept¬ 
ances  must  reach  us  is  “Daylight  saving”  time. 

]  Eastern  Grain,  Mill  &  Elevator  Corporation. 


Certain,  elevator  companies  specialize  in  selling  to  flour  millers  at 
distant  points.  For  example,  the  Aylsworth  Grain  Co.,  of  Kansas 
City,  as  operated  in  1918,  sold  to  millers  located  in  Minnesota,  Wis¬ 
consin,  Illinois,  Texas,  California,  and  elsewhere.  Ninety-five  per 
cent  of  their  business  was  reported  to  •  be  with  this  milling  trade. 
Frequently  this  class  of  business  is  carried  on  partly  by  means  of 
type  samples'  shipped  to  the  millers,  such  samples  being  used  some¬ 
times  as  the  basis  of  specific  contracts  and  sometimes  only  as  an  indi¬ 
cation  of  the  quality  of  the  grain  in  stock. 


MERCHANDISING  AND  SHIPPING. 


169 


In  many  instances  the  shipping  business  of  elevator  companies 
is  combined  with  other  supplementary  functions,  such  as  operating 
country  elevators,  handling  on  consignment,  milling  and  manufactur¬ 
ing  grain  products,  operating  a  future  commission  business,  etc. 
The  most  conspicuous  example  of  such  an  integrated  organization  is 
the  Armour  Grain  Co.,  of  Chicago,^®  although  there  are  several  other 
large  corporations  which  operate  elevators  at  more  than  one  terminal 
point  and  combine  cash  and  future  commission  businesses  with  their 
merchandising  operations. 

Section  4.  Mixing  and  conditioning  for  others  by  private  elevator 

companies. 

Mixing  and  conc^tioning  grain  for  account  of  others  is  obviously 
only  a  secondary  dr  incidental  source  of  profit  to  private  elevators. 
A  special  examination  of  this  matter  was  made  at  Duluth,  where 
there  are  no  public  elevators  and  where  the  large  terminal  elevators 
constitute  the  strongest  ^roup  in  the  market.  The  evidence  ob¬ 
tained  shows  that  the  facilities  for  cleaning  and  conditioning  grain 
at  that  point  are  almost  exclusively  utilized  by  the  private-emvator 
operators  in  connection  with  their  own  merchandising. 

One  manager  stated,  in  substance,  as  follows : 

If  a  car  is  dirty,  it  will  command  a  premium  almost  to  cover  the  value  of  the  screen¬ 
ings.  We  all  get  together  at  the  beginning  of  each  year  and  agree  on  rates.  Not 
being  public,  we  don’t  have  to  publish  them.  There  is  no  binding  force  to  these 
rates,  and  if  a  house  were  full,  say,  it  would  not  need  to  do  any  cleaning.  Usually  if 
a  man  wanted  to  pay  insurance,  and  2(t;.  per  bu.  for  putting  the  grain  in  and  out,  we’d 
clean  the  grain  for  him  if  he  let  us  have  the  screenings.  If  he  wanted  the  screenings 
we’d  charge  him  1^.  per  bu.  more,  to  cover  the  cleaning.  These  rates  would  always 
be  by  special  arrangement,  however,  and  it  would  depend  on  how  we  felt  about  it, 
unless  there  were  something  valuable,  like  flax,  to  be  cleaned  out. 

Another  manager  alluded  to  the  fact  that  the  market  was  not 
adapted  to  a  small-lot  business,  and  stated  that  it  was  preferable  that 
the  grain  be  cleaned  in  the  country.  (Cf.  Vol.  I,  Chap.  VII,  sec.  8.) 
His  statement  was,  substantially,  as  follows : 

We  are  not  built  and  equipped  for  handling  grain  in  small  lots  for  other  people. 
We  say  “Do  your  cleaning  in  the  country.”  We  have  to  turn  out,  for  loading  boats, 
maybe  400,000  bushels  of  grain  a  day,  at  busy  times,  and  have  this  to  clean  for  our¬ 
selves.  If  it  has  already  gone  through  one  cleaning — as  is  usual,  since  we  try  to  run 
the  main  through  the  cleaners  as  it  comes  in — we  can  clean  and  load  out  36,000  bushels 
per  hour,  with  all  24  machines  running.  The  screenings  from  all  the  machines  go  in 
together,  and  then  we  reclean  them,  for  wheat,  at  our  leisure.  *  *  *  Except  for 
this,  there  is  little  call  here  for  cleaning.  If  I  had  my  way  I’d  rather  not  have  high- 
dockage  cars.  You  can’t  get  a  fair  sample  from  such  a  car.  Oats,  e.  g.,  hangs  back, 
while  the  wheat  runs  into  the  probe.  Quick-running  grain  gets  in  first.  On  cars  with 
higher  than  6  per  cent  dockage,  differences  of  1  to  3  per  cent  will  crop  out.  It  means 
shortages  at  every  turn.  For  example,  this  year  we’re  short  on  spring  wheat  and  over 
on  durum,  due  partly  to  the  fact  that  not  so  much  of  the  durum  was  oaty ,  and  partly  to 
the  fact  that  we  had  to  clean  the  spring  wheat  so  much  harder  to  get  it  up  to  grade. 

The  stuff  cleaned  out  of  the  spring  wheat  it  was  easy  to  get  rid  of  by  putting  it  into 
sample  grade  durum,  for  export  to  Italy  at  a  price  fixed  by  the  arbitrating  committee. 
Sample  grade  is  a  mixture  of  spring  and  durum,  and  may  be  sample-grade  spring  or 
sample-grade  durum,  depending  on  whieh  preponderates.  According  to  the  trade, 
spring  wheat  in  durum  does  not  lower  the  flour-making  quality  of  the  latter,  but 
durum  wheat  in  spring  does  lower  flour-making  quality.  That’s  why  we  make  it 
sample-grade  durum.  We’ve  just  mixed  it  this  way  since  the  war. 


10  This  concern  operates  terminal  elevators  at  eight  points,  aggregating  nearly  26,000,000  bushels  storage 
capacity,  is  engaged  in  both  the  cash  and  future  commission  busmess,  operates  country  elevators,  and  manu¬ 
factures  cereal  products. 


TERMINAL  GRAIN  MARKETING. 


170 


The  managers  of  another  concern  expressed  similar  views.  They 
pointed  out  that  with  a  1,250,000-bushel  house  they  frequently  did  a 
business  amounting  to  17,000,000  bushels  annually.  They  stated 
that  the  value  of  water-front  sites  at  Duluth  and  the  short  season 
made  a  relatively  high  operating  cost  so  that  they  could  not  offer  to 
clean  for  others  at  the  rates  prevailing  in  Minneapolis.  They  stated 
that  if  they  should  arrange  to  do  cleaning — which  they  had  not  done 
for  a  long  time— they  would  have  to  fix  the  charge  after  the  operation. 

From  an  officer  of  another  large  elevator  company  was  received  a 
summary  statement  in  the  same  vein : 


We  don  t  do  any  cleaning  for  screenings  for  other  people.  That  profit  belongs  to  us 
and  we  have  to  depend  on  it.  If  we  could  charge  enough  for  cleaning  we  might  do  it’ 
butthefarmer  would  think  himself  being  robbed.  ’ 

Section  5.  Manipulation  of  future  deliveries. 


Private  elevator  companies  with  houses  that  are  ‘"regular”  under 
exchange  rules  are  often  in  position  to  influence  the  course  of  the 
futures  market  through  their  control  of  a  large  quantity  of  deliverable 
grain.  A  large  elevator,  or  a  group  of  elevators,  may  make  heavy 
deliveries  on  the  first  day  of  a  delivery  month  with  a  view  to  such 
manipulation.  By  this  maneuver,  long  buyers  of  futures  who  do  not 
wish  to  bother  with  the  cash  grain  will  be  impelled  to  sell  hastily,  thus 
depressing  the  current-delivery  future  price  relatively  to  the  price  for 
the  n^ext  delivery  of  futures.  The  elevators  will  then  be  able  to  trans¬ 
fer  their  open  hedges  to  the  next  delivery  on  the  basis  of  a  profitable 
spread  between  the  two  options,  buying  in  the  current  option  and 
sellmg  the  next  option.  They  may  also  be  able  to  buy  back  the  cash 
gram  at  a  sufficiently  depressed  price  to  give  them  a  larger  carryino^ 
charge.  Similarly,  if  the  elevators  withhold  delivery  on  a  large  bloc^ 
of  open  future  sales  until  the  end  of  the  delivery  month,  smaller 
traders  may  become  apprehensive  and  start  selling  for  fear  of  a  re¬ 
action  when  delivery  is  made.  A  large  elevator  company  is  usually 
on  the  alert  for  opportunities  to  make  profits  by  spreading  between 
options,  and  is  sometimes  in  position  to  make  such  opportunities. 
The  elevators  with  large  stocks  of  grain  hedged  and  storage  available 
tor  additional  supphes  have  advantages  over  speculators  not  so 
equipped,  and  if  such  elevators  operate  together  they  may  some¬ 
times  control  the  local  situation. 


Section  6.  The  business  of  shippers  not  operating  elevators. 

The  business  of  shipping  on  a  commission  basis  is  carried  on  to  a 
small  extent  in  the  terminal  markets  generally.  In  most  instances, 
however,  the  dealers  who  are  classed  as  shippers  take  title  to  the 
gram  and  sell  for  their  own  account.  This  class  of  traders  includes  a 
considerable  number  of  the  so-called  independent  shippers — concerns 
not  operating  elevators  in  addition  to  the  elevator  companies  whose 
business  has  already  been  discussed.  The  number  of  such  firms  ex¬ 
clusively  engaged  in  shipping  is  almost  negligible,  since  most  of  the 
dealers  not  operating  elevators  carry  on  a  commission  business  in 
addition  to  their  trading  operations. 

However,  the  shipping  function  in  the  grain  market  at  Duluth  has 
been  pmormed  for  the  most  part  by  concerns  not  operating  eleva- 
tors.  Ihe  elevator  companies,  instead  of  shipping  direct  to  eastern 
millers  and  exporters,  often  sell  to  certain  large  locM  shipping  concerns 
which  specialize  m  moving  the  grain  (mostly  wheat  and  rye)  down 


MERCHANDISING  AND  SHIPPING.  171 

the  Lakes.  In  some  cases  these  concerns  have  exported  directly  from 
Duluth. 

The  business  of  shippers  at  Chicago,  Minneapolis,  Kansas  City,  and 
other  points  closely  resembles  that  at  Duluth  with  the  important  ex¬ 
ception  that  the  business  in  the  former  markets  is  handled  largely  by 
rad  and  to  a  greater  extent  in  competition  with  elevator  companies. 
The  shipping  business  at  Duluth  is  more  closely  comparable  to  the 
export  business  at  ocean  ports;  there  is  little  competition  with  local 
elevator  companies  and  the  business  consists  essentially  of  large-scale 
handling  by  water  routes. 

At  Minneapolis  the  shippers  solicit  and  receive  orders  from  con¬ 
sumers,  exporters,  and  brokers  farther  east.  The  business  is  largely 
confined  to  the  coarse  grains,  which  are  not  consumed  in  the  local 
market  as  extensively  as  wheat.  Most  of  the  orders  are  for  over¬ 
night  acceptance. 

Operations  of  a  Minneapolis  shipper. — It  has  been  noted  that 
shipping  is  usually  combined  with  some  other  function  of  trade.  The 
business  of  one  of  the  Minneapolis  houses  is  quite  in  point.  In 
addition  to  the  shipping  business  this  concern  sells  on  commission 
and  operates  a  smallline  of  country  elevators.  The  bulk  of  its  ship¬ 
ments  are  to  western  points.  This  business  originates  generally 
through  branch  offices  of  the  company  located  in  western  cities  or 
through  brokers  in  cities  on  the  Pacific  coast.  At  times  stocks  of 
grain  are  carried  in  a  local  terminal  elevator,  but  these  are  never 
large,  usually  less  than  25,000  bushels.  Most  of  the  business  is  that 
of  filling  orders  as  they  Come  in.  A  deal  may  originate  either  in 
Minneapolis  or  at  the  purchaser’s  end.  The  Minneapolis  office  some¬ 
times  wires  its  branch  offices  and  brokers  to  try  and  get  orders  for 
grain  at  a  stated  price.  These  agents  then  advise  the  trade  in  their 
localities,  and  try  to  book  orders,  and  if  successful  they  communicate 
the  details  to  the  head  office.  Some  sales  for  shipment  are  to  local 
dealers  or  through  brokers. 

The  bids  are  received  at  all  hours  of  the  day,  some  coming  direct 
to  the  trading  floor.  Counter  propositions  are  made  when  necessary, 
and  when  both  parties  are  agreed  as  to  all  terms  of  the  transaction 
it  is  closed  and  the  filling  of  the  order  begins.  All  sales  and  pur¬ 
chases,  it  is  stated,  are  usually  hedged  as  quickly  as  possible. 

To  fill  an  order,  the  buyer  for  the  company  passes  about  the  trading 
floor  examining  the  samples  there  displayed.  He  makes  and  receives 
offers,  and  when  he  finds  a  seller  with  the  desired  grain  at  a  price  that 
is  suitable  to  the  purchaser  the  trade  is  made.  The  buyer  notes  on 
his  trading  card  tnat  he  has  bought  from  the  seller  a  car  of  grain 
at  a  stated  price.  The  car  number,  initial,  and  the  grade  of  grain  is 
noted  and  also  the  terms  of  delivery.  A  small  sample  of  the  grain 
is  obtained  from  the  sample  pan.  The  buyer’s  card  goes  to  the  office 
and  from  it  is  prepared  a  confirmation  of  purchase  which  goes  to 
the  seller.  A  con&mation  also  goes  to  the  purchaser  when  a  trans¬ 
action  is  closed. 

A  list  of  all  cars  purchased  is  sent  to  a  private  sampling  company 
handling  the  firm’s  business.  The  sampling  company  provides  sam¬ 
ples  whereby  to  check  those  obtained  by  the  State.  If  tne  samples  do 
not  agree,  the  car  can  be  refused,  although  a  settlement  may  be  made 
between  the  seller  and  purchaser.  If  the  samples  agree,  the  car, 
upon  arrival  at  the  elevator  specified  by  the  buyer,  is  unloaded  and 


172 


TERMINAL  GRAIN  MARKETING, 


transferred  into  another  car  for  shipment.  The  grade  is  checked 
again  and  inspection  and  weight  certificates  are  secured. 

Upon  procuring  satisfactory  grade  and  weight  certificates  the 
following  documents  are  forwarded  to  the  purchaser,  wherever  he 
may  be  located : 

(1)  An  invoice  setting  forth  the  details  of  the  transaction. 

(2)  The  bill  of  lading. 

(3)  A  duplicate  of  the  weight  certificate. 

(4)  A  duplicate  of  the  inspection  certificate. 

(5)  A  draft  for  the  amount  of  the  invoice. 

When  the  bill  of  lading  is  delivered  to  the  purchaser,  the  shipper’s 
re^onsibility  ceases. 

Out-of-town  purchasers  may  have  their  purchases  inspected  by  the 
official  inspector  of  the  Minneapolis  Chamber  of  Commerce.  When 
grain  has  been  bought  on  type  sample,  for  example,  the  buyer  sends  a 
part  of  the  sample  to  the  official  inspector,  who  examines  the  car  or 
cars  of  grain  to  be  shipped  and  rejects  any  grain  not  up  to  the  sample 
which  the  buyer  submitted. 

Operations  of  a  Buffalo  shipper. — ^A  comparatively  large 
shipper  at  Buffalo,  as  another  example,  is  engaged  in  buying  wheat 
in  the  primary  markets  of  the  West  and  selling  to  mills  in  Buffalo 
and  the  East.  In  some  years  he  has  gone  direct  to  Kansas  City 
and  bought  southwestern  wheat  in  large  quantities  in  competition 
with  the  grain  concerns  at  that  point,  routing  these  purchases  to 
Chicago  in  round  lots.  At  Chicago  the  grain  is  transferred  to  lake 
boats  and  shipped  in  cargo  lots  to  Buffalo,  where  it  is  stored  in  the 
local  elevators  until  disposed  of.  His  largest  selling  territory  in 
1918  was  central  New  York  and  Pennsylvania,  where  he  supplied 
local  mills.  Most  of  these  small  mills  buy  a  carload  at  a  time,  as 
their  storage  capacity  is  limited.  He  estimated  that  he  distributed 
at  least  95  per  cent  of  the  wheat  sold  in  Buffalo  to  milling  points*. 
His  practice  is  to  collect  by  sight  draft  with  documents  attached  as 
already  described  for  other  shippers. 

Section  7.  Exporting. “ 

General  conditions. — Several  of  the  large  shipping  companies 
operating  terminal  elevators  at  primary  markets  export  grain  direct 
from  those  points.  This  is  readily  accomplished  through  the  employ¬ 
ment  of  brokers  and  freight  forwarders  at  the  ocean  ports,  in  case 
the  exporting  company  has  no  branch  office  at  the  point  of  trans¬ 
shipment.  The  concerns  operating  strictly  as  exporters,  however,  are 
usually  located  at  seaboard  points. These  traders  in  most  instances 
do  not  operate  elevators  but  employ  the  facilities  operated  by  the 
railroads  and  port  authorities  to  handle  grain  accumulated  for  foreign 
account. 

Nearly  every  grain  exporter  bases  his  operations  on  foreign  cable 
orders  or  acceptances  issued  with  overnight  limits,  i.  e.,  for  acceptance 
prior  to  the  next  opening  of  the  exchange  at  sender’s  market.  Prior 
to  1917  it  was  customary  for  exporters  to  send  out  overnight  offers 
based  upon  their  commitments  m  American  cash  and  futures  mar¬ 
kets.  During  the  cessation  of  future  trading  in  wheat  export  selling 
in  the  United  States  was  largely  based  on  orders  in  hand  and  an 


See  in  general,  Commission’s  report  on  methods  and  operations  of  grain  exporters.  Most  of  the 
large  exporters  are  members  of  the  North  American  Grain  Export  Association,  which  in  1921  comprised 
52  niembers.  The  secretary’s  office  is  in  the  New  York  Produce  Exchange  Building. 

12  See  also  Ch.  I  for  discussion  of  export  demand  for  specific  grains. 


MERCHANDISING  AND  SHIPPING. 


173 


effort  was  made  by  conservative  operators  to  close  out  or  cover  their 
balances  of  cash  grain  purchases  so  as  to  carry  no  long  accounts  at 
the  close  of  business  each  day.  Since  the  armistice,  international 
trade  has  been  too  variable  for  general  characterizations  as  to  method. 

Several  exporters  have  stated  that  when  there  is  a  hedging  market 
they  allow  a  margin  of  4  or  5  cents  to  cover  costs  and  profit  in 
moving  the  ^rain  through  the  port.  One  New  York  exporter  stated 
(1918)  that  in  making  cable  offers  he  had  usually  added  3|  cents  to 
New  York  track  basis  for  a  sale  f.  o.  b.  steamer.  The  items  entering 
into  this  margin  he  listed  as  follows: 

Cents. 


Interest,  30  days . 

Insurance  shortages . 

Incidentals,  New  York  Harbor . 

Transfer  charge  (elevating  into  steamer) 

Broker’s  commission  on  exchange . 

Freight  broker  and  other  incidentals.... 

Total . 

Profit . 


k 


Total 


31 


These  margins  are  necessarily  minimum  figures,  for  when  there  is 
an  active  export  demand  the  exporter  expects  to  make  larger  profits 
on  individual  transactions. 

Typical  OPERATIONS. — As  a  specific  example  of  more  recent  oper¬ 
ations,  one  concern  on  the  Atlantic  seaboard  started  business  on 
August  17,  1920,  by  purchasing  in  all  48,550  bushels  of  cash  wheat, 
as  follows: 


Kind  and  grade. 

Purchases,  cash 
wheat  (deliver¬ 
ed  Philadelphia). 

Sales,  December 
futures. 

Price. 

Bushels. 

Price. 

Bushels. 

No.  2  red  ..  . 

$2. 71 
2.59 

2.  70 

1  2. 674 

1,200 

6,000 

1,350 

40,000 

$2.38 

2.38i 

40,000 

5,000 

Nn  2  red  garlieky  . ? . 

Mn  9  rpH  . 

Tnt.al  . 

48,550 

\ 

45,000 

1  Bought  at  2.68  basis  f.  o.  b.  New  York;  deducted  0.6  cents  to  give  the  Philadelphia  price. 


The  lot  of  40,000  bushels  was  bought  from  Omaha  on  an  order  to 
“ship  within  one  week.”  This  purchase  was  made  on  the  basis  of 
the  Chicago  December  option  and  was  thereupon  hedged  by  a  sale 
of  40,000  Chicago  December.  The  balance  was  acquired  from  local 
receivers  and  on  “to-arrive”  bids  to  the  country.  A  sale  of  5,000 
December  was  also  made  to  hedge  these  other  cash  purchases.  On 
the  same  day  it  sold  24,000  bushels  No.  2  hard  winter  wheat  to  the 
Italian  ministry,  leaving  it  long  24,550  bushels  of  cash  wheat  and 
short  45,000  of  Chicago  December  at  the  close  of  the  day’s  business. 
On  the  next  day  it  accumulated  18,750  bushels  of  the  cash,  bought 
15,000  Chicago  December,  and  sold  15,000  December,  leaving  it 
long  43,300  bushels  of  cash  wheat  and  short  45,000  Chicago  Decem¬ 
ber.  vSubsequent  export  sales  were  made  in  excess  of  supplies  ac- 

56976°— 22 - 13 


174 


TERMINAL  GRAIN  MARKETING. 


cumulated,  so  that  from  August  20  to  September  1  its  daily  balances 
showed  it  short  cash  wheat  and  long  in  the  Chicago  December, 
^ter  September  1  the  export  demand  slackened  in  proportion  to 
incoming  supplies,  and  the  balances  were  shifted  to  the  long  side  in 
cash  wheat  and  to  the  short  side  in  the  futures  accounts.  The 
daily  balances  for  the  remainder  of  that  month  and  until  September 
10  appear  in  the  following  statement: 


Date. 

Cash. 

December. 

March. 

Long. 

Short. 

Long. 

Short. 

Long. 

Short. 

Aug.  20 . 

124, 000 
119, 000 
77,000 
57,  000 
33,000 
37,000 
137, 000 
126, 000 
104,000 
58,000 
43,000 

120, 000 
115, 000 
65,000 
55,000 
50,000 
35, 000 
35,000 
35, 000 
35,000 
35,000 
35,000 

21 . 

23 . 

.  .  . 

24 . 

25 . 

. 

26 . : . 

■ 

27 . 

10,000 

10,000 

10,000 

10,000 

10,000 

28 . 

30 . . . 

31 . 

Sept.  1 . 

2 . 

4,000 
74,000 
87,000 
120, 000 
168, 000 
185, 000 

10, 000 
60, 000 
80,000 
125,000 
180,000 
185,000 

4 . 

7 . 

8 . 

9 . 

10 . 

Exporters  assert  that  competition  has  been  more  severe  in  their 
business  than  for  almost  any  other  type  of  .grain  shipping.  Instances 
are  reported  of  a  single  London  firm  receiving  as  many  as  100 
bids  from  American  exporters  at  prices  varying  not  more  than  seven- 
eighths  of  1  cent.  Prior  to  the  war  business  with  England  was 
done  largely  on  a  c.  i.  f.  basis,  which  compelled  the  exporter  to  assume 
responsibility  for  delivery  of  the  grain  in  good  condition  at  the 
European  port  and  to  assume  the  risk  that  the  importer  was  solvent 
and  reliable.  In  recent  years  there  has  been  a  tendency  to  export 
f.  o.  b.  American  port  to  a  greajber  extent.  The  contract  arrange¬ 
ment  depends,  however,  upon  the  nature  of  the  foreign  demand  and 
the  tonnage  facilities  available  to  the  parties  concerned.  The  war 
conditions,  resulting  in  purchase  by  Government  commissions  and 
increased  risks  of  transportation,  together  with  the  lack  of  a  hedging 
market  in  the  case  of  wheat,  disturbed  all  normal  relationships  in 
the  export  business  and  are  alleged  to  have  increased  the  handling 
margins  involved. 

Customary  costs.— The  following  charges  may  be  included  in  the 
costs  of  export  handling,  exclusive  of  profits: 

(1)  Interest  on  the  grain  in  transit;  that  is,  from  the  time  of 
acceptance  of  the  sight  draft  sent  from  the  West  to  the  time  of 
receiving  the  ocean  bill  of  lading. 

(2)  Inspection  and  weighing  fees. 

(3)  Elevation,  including  free  storage  of  10  to  20  days,  according 
to  the  rules  of  the  port. 

(4)  Conditioning,  by  special  order,  when  such  is  necessary. 

(5)  Storage,  if  grain  remains  in  the  export  elevator  more  than  the 
specified  ‘Tree  time.’’ 


Prior  to  the  crop  of  1920-21. 


MERCHANDISING  AND  SHIPPING.  *  175 

(6)  Insurance  on  the  grain  while  in  elevator  storage  and,  in  the 
case  of  c.  i.  f.  sales,  while  on  the  steamer. 

(7)  Brokerage,  in  case  a  broker  is  employed  to  purchase  or  to 
‘‘fob”  the  grain. 

(8)  Demurrage  on  the  steamer  in  case  grain  is  not  loaded  on  time. 

(9)  Ocean  freight,  when  the  sale  is  on  a  c.  i.  f.  basis. 

Export  cargoes  are  financed  as  readily  as  domestic  shipments. 
Foreign  exchange  is  sold  to  banks  at  the  ports,  and  sight  drafts  of 
sometimes  30,  sometimes  60  days,  with  bill  of  lading  and  other 
documents,  are  accepted  by  the  banks  for  collection  against  the  sale. 
The  Canadian  and  United  States  of  America  grain  contract  of  1914 
provides  as  follows : 

Payment  by  cash  in  London  in  exchange  for  shipping  documents  on  or  before  the 
arrival  of  the  vessel,  less  discount  at  the  rate  of  one-half  of  1  per  cent  per  annum  above 
the  advertised  rate  of  interest  for  short  deposits  allowed  by  the  leading  joint-stock 
banks  in  London,  for  the  unexpired  time  of  7  days  from  the  arrival  of  bill  or  bills  of 
lading  in  London  for  all  ports  north  of  and  including  Baltimore,  14  days  for  Virginian 
ports,  and  30  days  for  all  other  ports  south  of  Chesapeake  Bay,  or  at  seller’s  option, 
by  buyer ’s  acceptance  of  shipper ’s  or  seller ’s  drafts,  domiciled  in  London  with  docu¬ 
ments  attached  as  usual  at  7  days  from  date  of  arrival  of  bill  or  bills  of  lading  in  London 
for  all  ports  north  of  and  including  Baltimore,  14  days  for  Virginian  ports  and  30  days 
for  all  other  ports  south  of  Chesapeake  Bay.  Payment  in  no  case  later  than  the  prompt. 


Chapter  VI. 


OPERATIONS  OF  CASH  GRAIN  BROKERS. 

Section  1.  General  functions. 

The  business  of  the  cash  grain  broker  is  to  brin^  together  bujer  and 
sellejr.^  He  does  not  handle  the  commodity  on  his  own  account  and 
assumes  no  risks  for  shipment,  storage,  delivery,  or  payment  for  the 
grain.  The  broker  is  primarily  concerned  with  getting  a  brokerage 
from  buyer  or  seller  (occasionally  from  both)  for  bringing  about  the 
transaction.^  The  bona  fide  broker  is  a  middleman  specialist  acting 
as  agent  in  individual  transactions  and  disclosing  the  name  of  his 
principal  whenever  he  arranges  a  trade.^  His  volume  of  business 
depends  upon  a  strategic  location,  an  organized  service,  or  extensive 
personal  connections  often  acquired  in  other  branches  of  the  grain 
business.  The  cash  broker  frequently  assists  in  clearing  commit¬ 
ments  in  the  futures  market  as  between  buyer  and  seller;  he  often 
buys  a  hedge  for  his  principal  and  may  later  close  out  the  hedge  upon 
agreement  with  the  second  party;  but  these  operations  are  supple¬ 
mental  to  the  immediate  cash  trade. 

Brokerage  frequently  means  a  method  of  handling  rather  than  a 
distinct  business.  Although  many  firms  incidentally  operate  on  a 
brokerage  basis  there  are  but  few  firms  in  the  primary  markets  who 
operate  solely  as  brokers  in  the  strict  sense  of  the  term. 

The  broker  is  distinguished  from  the  commission  man  chiefly  in 
point  of  risk  and  responsibility  for  the  movement  of  grain.  The 
commission  man  assumes  risks  of  shipment,  delivery,  and  payment 
which  are  not  assumed  by  the  broker.  The  commission  man  fre¬ 
quently  allows  a  country  shipper  to  draw  on  him  for  a  large  percentage 
of  the  value  of  the  grain  which  has  been  shipped  or  consigned.  He 
runs  the  risks  which  attach  to  this  procedure,  such  as  overdrafts,  or 
possible  dishonesty  on  the  part  of  the  shipper.  And  he  frequently 
assumes  the  risk  of  nonpayment  by  the  purchaser  after  the  sale  has 
been  made.  The  broker  has  none  of  these  hazards.  He  is  merely 
an  agent,  handling  no  funds  in  his  own  name  and  taking  no  responsi¬ 
bility  for  charges  due  on  the  transaction.  His  fee  is  usually  not  over 
one-fourth  cent  per  bushel. 

In  the  larger  central  markets  the  strictly  brokerage  business  is  very 
limited.  Brokering  is  a  minor  and  almost  incidental  part  of  the 
business  done  at  Minneapolis,  for  example,  and  the  number  of  strictly 
cash  brokers  in  Chicago  would  embrace  only  a  comparatively  few 
specialists.  In  fact,  several  of  the  larger  exchanges  forbid  members 
to  act  as  brokers  except  between  members  in  the  local  market.^ 


1  See  definition,  Vol.  II,  Appendix,  p.  329. 

2  See  Vol.  II,  p.  241,  footnotes. 

*  He  is  liable  only  imtil  his  principal  is  disclosed. *  *  *  Itis  well  known  in  the  grain  trade  that  a 
broker  is  alimited  agent,  and  is  not  authorized  to  bind  his  principal  beyond  the  things  that  come  in  the 
course  of  his  business.  When  he  has  brought  the  minds  of  two  principals  together  on  a  grade  and  confir¬ 
mations  have  passed,  his  authority  ceases  to  bind  his  principal,  without  special  authority  from  his  princi¬ 
pal.”  (Consolidated  Grocery  Co.  v.  The  Gillette  Grain  Co.,  Arbitration  Decisions  of  the  Grain  Dealers’ 
National  Association,  Vol.  I,  p.  164.) 

*  See  Vol.  II,  p.  241. 

176 


OPERATIONS  OF  CASH  GRAIN  BROKERS. 


177 


Concerns  operating  strictly  as  brokers  are  found  most  frequently  in 
the  smaller  markets  or  at  points  where  there  is  no  active  exchange. 
Two  Indianapolis  concerns  reported  that  they  seldom  sold  any  grain 
for  shipment  except  through  brokers. 

The  larger  primary  market  dealers  often  operate  through  brokers 
in  consumptive  territory  where  they  have  no  branch  offices.  Selling 
to  local  distributors  in  the  Southeast,  for  example,  is  frequently 
effected  through  brokers  in  that  area.  The  smaller  millers  and  manu¬ 
facturers  of  grain  products  often  depend  upon  brokers  to  negotiate 
their  purchases. 

Section  2.  Typical  operations  of  brokers  on  exchange. 

The  operations  of  a  broker  on  the  Chicago  Board  of  Trade  who  has 
specialized  in  ‘^to-arrive”  business  will  illustrate  the  brokerage  business 
at  that  market.  This  broker  takes  orders  frona  members  and  sells 
only  to  members.  For  such  a  service  he  receives  $1  a  car.  His 
method  of  operation  is  as  follows:  A  commission  firm  turns  oyer  to 
the  broker  an  order  received  from  a  country  elevator  to  sell  grain  for 
deferred  shipment  within  a  specified  period.  This  order  is  generally 
at  a  flat  price.  The  broker  watches  the  bids  posted  on  the  board  for 
‘‘to-arrive”  grain.  These  bids  are  generally  based  on  an  option ;  that  is, 
a  bid  may  be  4  cents  above  May;  if  May  oats  is  selling  at  81  cents  and 
the  order  in  hand  is  to  sell  on  a  30-day  shipment  3  white  oats  at  85 
cents,  he  will  wait  until  the  bids  as  posted  just  cover  the  price  at 
which  he  is  instructed  to  sell.  Then  he  will  offer  the  oats  to  the 
elevator  company  making  such  a  ‘‘to-arriye”  bid,  giving  up  the 
name  of  the  commission  house  for  which  he  is  acting. 

The  typical  operations  of  a  Chicago  cash-grain  broker  m  arranging 
a  trade  for  shipment  out  of  the  market  are  as  follows:  (1)  A  local 
concern,  having  a  surplus,  requests  the  broker  to  see  what  he  can 
get  for  a  given  quantity  of  a  given  grade  of  grain;  (2)  the  broker 
notifies  one  or  more  eastern  brokers  and  asks  for  bids;  (3)  bids 
come  in  from  the  East;  (4)  the  broker  goes  to  the  trading  floor  and 
secures  prices  from  his  principal  on  the  quality  of  grain  desired,  adds 
insurance,  freight,  and  other  charges  and  submits  an  offer  to  the 
eastern  broker;  (5)  as  soon  as  the  broker  has  named  a  price  which 
meets  the  approval  of  an  eastern  bidder  he  is  notified  by  the  lat¬ 
ter  to  close  the  trade;  (6)  the  broker  then  collects  his  commission 
from  his  original  correspondent  and  his  interest  in  the  sale  is  ended. 
Sometimes  the  Chicago  principal  may  instruct  the  broker  to  offer  a 
given  grade  and  quantity  of  grain  in  the  first  place,  and  the  pro¬ 
cedure  outlined  is  of  course  reversed  when  the  eastern  broker  wires 
in  bidding  for  grain  or  asking  for  offers. 

A  certain  St.  Louis  broker  acts  chiefly  as  a  selling  agent  for 
line  companies  but  buys  mainly  for  mills.  The  steps  in  a  typical 
transaction  as  conducted  by  him  are  as  follows:  Offers  and 
bids  come  in  by  wire  or  telephone  both  from  country  shippers 
and  from  prospective  purchasers.  A  line  company  may  advise 
that  it  has  a  certain  quantity  of  grain  of  a  given  grade  to 
sell  at  a  certain  price,  immediately  upon  receiving  this  informa¬ 
tion  he  notifies  purchasers  whom  he  Imows  to  be  in  the  market. 
Having  found  a  purchaser  under  the  proposed  conditions,  he  at  once 
notifies  the  line  company,  giving  the  name  of  the  firm  who  will  buy. 
The  next  step  is  to  send  a  confirmation  to  both  purchaser  and  seller 


178 


TERMINAL  GRAIN  MARKETING. 


designating  the  quantity  and  grade  of  grain  that  has  been  sold  and 
the  price  agreed  to.  Both  purchaser  and  seller  are  requested  to  sign 
the  duplicate  of  this  memorandum  and  to  return  it  to  him  as  evidence 
of  acceptance,  though  failure  to  return  the  duplicate  within  a  reason¬ 
able  time  is  understood  as  an  acceptance  of  the  contract.  This  con¬ 
cludes  his  services  in  the  transaction.  In  case  a  trade  is  instituted 
by  a  buyer  rather  than  a  seller  he  notifies  country  dealers  and  the 
procedure  is  simply  reversed.  He  relies  for  market  price  guidance 
chiefly  upon  the  private  wire  information  distributed  by  large  Chicago 
operators.  They  furnish  this  service  free — apparently  for  the  purpose 
of  securing  his  patronage. 

Section  3.  Brokers  operating  without  exchange  privileges. 

Exchange  privileges  are  not  sought  by  certain  brokers,  sometimes 
because  their  business  is  too  small  to  warrant  investing  in  a  member¬ 
ship,  or  because  of  restrictions  in  the  exchange  rules, ^  or  because  they 
are  located  at  small  secondary  markets  where  there  is  no  highly 
organized  exchange.  Such  brokers  may  hold  out  to  customers  the 
advantage  of  eliminating  middlemen’s  charges’’  in  the  terminal 
market.  The  fact  that  Minneapolis  millers  sometimes  deal  through 
brokers  to  avoid  stiffening  up  the  market”  shows  that  the  inde¬ 
pendent  cash-grain  broker  has  a  recognized  place. 

A  few  instances  are  reported  of  brokers  operating  successfully  even 
at  primary  market  points  without  being  members  of  the  local  ex¬ 
changes.  One  such  firm  in  particular  was  observed  at  Kansas  City. 
This  operator  has  built  up  a  considerable  brokerage  business  over  a 
period  of  25  years  without  being  a  member  of  any  grain  exchange, 
although  his  office  is  in  the  Kansas  City  Board  of  Trade  Building. 
He  obtains  grain  from  line  elevator  companies  and  terminal  market 
shippers  who  sell  grain  in  large  quantities,  and  buys  for  exporters, 
millers,  and  other  consumptive  buyers,  especially  manufacturers  of 
oats  and  corn  products.  He  also  buys  and  sells  for  grain  dealers  at 
other  markets  such  as  St.  Louis,  Fort  Worth,  and  Wichita  Falls,  Tex. 
He  keeps  in  touch  with  his  customers  through  a  general  market  letter 
mailed  daily  or  weekl^q  according  to  the  activity  of  the  market,  and 
also  by  means  of  the  telephone  and  telegraph. 

The  typical  steps  by  which  this  broker’s  transactions  are  effected 
are  as  follows:  He  receives  a  telegram  from  an  exporter  or  consumer 
of  grain  asking  for  a  price  for  a  certain  kind  and  grade  of  grain  delivered 
at  a  certain  point,  or  sold  on  Kansas  City  basis,  tie  immediately  pro¬ 
ceeds  to  communicate,  by  wire,  with  the  line  elevator  companies  in 
Kansas  or  Nebraska  or  Slissouri,  and  perhaps  to  telephone  the  ter¬ 
minal  elevator  companies  and  other  grain  dealers  in  Kansas  City, 
from  all  of  whom  he  requests  quotations  at  which  they  are  willing  to 
sell  the  kind  and  grade  of  grain  which  is  in  demand  by  prospective 
purchasers.  The  best  price  is  then  wired  to  the  prospective  purchaser, 
who  orders  the  broker  by  wire  to  purchase  grain  at  the  given  price, 
if  it  is  satisfactory  to  him.  If  the  prospective  purchaser  accepts  the 
offer,  he  immediately  confirms  the  transaction  by  writing,  wiring,  or 
telephoning  directly  to  the  prospective  seller  that  his  offer  has  been 
accepted.  In  other  instances  the  prospective  buyer  advises  the 
broker  to  buy  a  certain  number  of  cars  of  a  given  kind  and  grade  of 
grain  at  a  certain  price.  He  immediately  tries  to  fill  the  order  by 


» See  Vol.  II,  p.  241. 


OPERATIONS  OF  CASH  GRAIN  BROKERS. 


179 


comiriunicating  with  the  sellers  of  grain;  if  he  is  able  to  obtain  the 
grain  at  the  quoted  price  he  advises  the  purchaser  that  a  contract  has 
been  made. 

Section  4.  Brokers’  bids  and  offers. 

As  an  example  of  the  buying  operations  of  a  broker,  the  following 
bid  card  was  issued  by  a  broker  at  Lincoln,  Ill.,  for  grain  to  be  shipped 
to  the  terminal  points  indicated; 

Form  25.— CARD  BID  ISSUED  BY  A  CASH  GRAIN  BROKER. 


CORN  BELT  BROKERAGE  CO. 

Lincoln,  III.,  Monday,  April  18,  1921. 


For  acceptance  to  reach  us  before  9.30  a.  m,,  above 
date,  we  bid  you  imtil  filled  E,  &  O.  E. 


NEW  ORLEANS  (F.  O.  B.  36  RATE). 

1  H  1  R  1  Mx  W.  W.—  5  day— 1.30 

1  H  1  R  1  Mx  W.  W.— 10  day— 1.29 

ST,  LOUIS  (F.  O.  B.  12.5  RATE). 

1 II 1  R  Wheat  10  day — 1.22^ 

3  White  Corn — ^30  day — •  .  48^ 

3  Yellow  Corn — 30  day — •  .  47 

3  Mixed  Corn — 30  day —  .  45^ 

4  Grades  Corn  2c  Discount 

2  White  Oats — 30  day —  .  34 

3  White  Oats — 30  day — •  .  33^ 

NEW  WHEAT  (F.  O.  B.  NET  YOUR  STATION). 

1  R  1 II  wheat — ^July  15 — 1.  02 
1  R  1  H  wheat — ^July  31 — -1. 00 

1  R  1  H  wheat — ^iVug.  15 —  .  98 

CAIRO  TERMS  (F,  O.  B.  16  RATE). 

3  White  Oats — 5  day — 34J 

CHICAGO  TERMS  (F.  O.  B.  12.5  I.P  RATE). 

2  Y  2  M  Corn  30  day — •  .  50| 

3  W  3  Y  Corn  30  day — •  .  47f 

4  W  4  Y  Corn  30  day —  .  44| 

2  White  Oats  30  day —  .  33| 

2  R  2  H  wheat  July  20 — ■  .  99| 

PEORIA  (F.  O.  B.  12  I.P.  RATE). 

2  R  2  H  Wh  August — 97 

4  Y  4  W  Corn  May  15 — 45 
New  3  W  Oats  August — 31^ 


LOUISVILLE  (F.  O,  B.  19.5  RATE). 

■3  White  Oats  10  day — ^33^ 

T^ephones  No.  909  and  771. 


180 


T'ERMIl^AL  GRAIN  MARKETING. 


As  an  example  of  a  broker’s  operations  on  the  selling  end  the  fol¬ 
lowing  offer  card  was  issued  by  a  Pittsburgh  broker  and  grain  com¬ 
pany  representing  Minneapolis  shippers: 

Form  26.— OFFER  CARD  ISSUED  BY  A  BROKERAGE  CONCERN  AT  PITTSBURGH. 


We  offex  for  the  account  of  Gregory,  Jennison  &  Co,,  Minneapolis,  for  prompt 
SHIPMENT  from  Minneapolis,  basis  Minneapolis  terms,  demand  draft.  Column 
marked  “X”  shows  cost  and  freight  paid  your  station,  subject  confirmation. 

ALL  MINNEAPOLIS  WHEAT  ALLOWS  DOCKAGE  FREE. 

ACCEPTANCES  MAY  BE  WIRED  TO  GREGORY,  JENNISON  &  CO.,  MINNEAPOLIS. 

C  Choice. 

H  Dark  #1  Nor.  Spg .  1.80  1.82-3/4  1.83-1/2  1.86-1/2  1.87-1/4 

O  Dark  #2  Nor.  Spg .  1.75  1.77-3/4  1.78-1/2  1.81-1/2  1.82-1/4 

I  Dark  #3  Nor.  Spg .  1.61  1.63-3/4  1.64-1/2  1.67-1/2  1.68-1/4 

C  Extra  Fancy  #1  Dark  Northern  Spring — 10<l;  over  Choice  No.  1  Dark. 

E  Minneapolis  May  Closed  1,30-3/4.  Premiums  Unchanged. 

******* 

For  acceptance  at  Pittsburgh  we  quote,  subject  confirmation  Canadian  Dark 
#1  Northern,  immediate  shipping  instructions: 

1.82-3/4  f.  o.  b.  Toledo  rate.  1.97-1/4  del’d  Baltimore  rate. 

1.94  del’d  Pittsburgh  rate.  1.98  del’d  Philadelphia  rate. 

May  7,  1921. 

Harper  Grain  Company, 

Pittsburgh,  Penna. 


The  following  is  a  specimen  of  a  card  issued  by  a  broker  operating 
on  the  buying  side  for  account  of  exporters : 

Form  27.— OFFER  CARD  ISSUED  BY  AN  EXPORT  AND  DOMESTIC  BROKER  AT  ST.  LOUIS. 


Bushfield  Grain  Co., 
Export  and  Domestic  Brokers. 


Phone:  Olive  2142.  St.  Louis,  May  21, 1921. 

E or  acceptance  to  reach  us  15  minutes  before  market  opens  next 
business  day,  we  bid  you  as  follows: 


Basis 
delivered 
New  Or¬ 
leans,  La., 
for  export. 

Basis 
delivered 
Baltimore, 
Md.,  for 
export. 

Basis 
dehvered 
New  York, 
N.  Y.,  for 
export. 

• 

Time  of 
shipment. 

1  red  wheat . 

1761 

1751 

1741 

5 

10 

15 

Do . 

Do . 

Do . 

1  hard  wheat. . . . 

1761 

1751 

1741 

5 

10 

15 

Do . 

Do . 

Do . 

2  rye . 

2  white  com . 

2  yellow  corn.... 

2  mixed  corn. . . . 

All  export  contracts  subject  to  terms  governing  at  destination, 
unless  otherwise  agreed.  Lower  grades  of  wheat  apply  at  old 
Government  scale  of  discounts.  Seller  pays  one-fourth  brokerage. 
Our  bids  are  for  account  of  reliable  exporters. 


OPERATIONS  OF -CASH  GRAIN  BROKERS. 


Section  6.  The  seaboard  brokers. 

The  eastern  seaboard  brokers  operate  between  the  great  shipping 
and  selling  markets  of  the  productive  areas  and  the  consumptive  and 
export  trade  of  the  East.  Their  business  differs  from  that  of  the 
inland  operators  in  volume,  in  more  elaborate  selling  organization, 
and  in  technical  understanding  of  transportation  and  transshipment 
matters.  The  export  broker,  or  forwarder,  for  example,  must  be  able 
to  figure  on  (1)  freight  rates  and  available  tonnage,  (2)  ocean  insur¬ 
ance,  (3)  foreign  exchange  rates,  (4)  the  time  difference  between 
American  and  European  markets,  as  well  as  (5)  price  relations  based 
on  the  futures  markets  and  quoted  in  foreign  money.  He  must  be 
prepared  to  exchange  inland  for  ocean  documents  on  sales  f.  o.  b. 
or  c.  i.  f.  The  latter  practice  requires  business  connections  with 
steamship  lines  or  freight  brokers  and  forwarding  agents.  Frequently, 
also,  the  export  broker  represents  a  banking  house  and  handles  the  sale 
of  foreign  exchange  for  exporters  for  whom  he  acts. 

The  seaboard  broker  handles  transactions  for  all  manner  of  shippers 
in  primary  and  secondary  markets,  as  well  as  for  European  buyers. 
The  large  elevator  companies  at  western  primary  markets  frequently 
sell  to  consumers  and  for  export  through  brokers  at  the  ocean  ports  be¬ 
cause  of  the  convenience  of  dealing  through  men  familiar  with  eastern 
trade  and  export  demand.  The  following  is  a  form  of  confirmation 

used  by  a  seaooard  cash  grain  broker : 

\ 

Form  28.— CONFIRMATION  BLANK  USED  BY  A  CASH  GRAIN  BROKER  ON  THE  SEABOARD 


'r  I 


■' 


tn 


W'l 


''  :  1 

li! 

'  '  'V, 


'iii 


182  TERMINAL  GRAIN  MARKETING.  ] 

•  j 

grain,  the  export  brokers,  selling  on  the  f.  o.  b.  or  c.  i.  f.  basis,  perform 
a  greater  number  of  services  than  is  usually  true  of  the  interior  broker. 
Such  a  broker  is,  nevertheless,  distinguished  from  a  commission  rngn 
or  shipper  as  appears  in  the  following  extracts  from  the  rules  of  the 
Baltimore  Chamber  of  Commerce:^ 

Sec.  3.  or  agents  who  perform  any  of  the  following  services  for  persons  not  r 

members  or  the  Baltiniore  Chamber  of  Commerce,  or  for  members  thereof  not  residing 
in  Baltimore,  yiz. ;  Shipping  grain  for  export,  receiving  and  shipping  grain  for  export,  } 
exchanging  inland  for  ocean  documents  and/or  engaging  ocean  freights,  aball  make  a  ' 
imnjmum  charge  of  one-quarter  ^1/4)  cent  per  bushel,  and  shall  also  chaive  all  expenses 
of  whatever  character  incurred  in  the  handling  of  the  grain  or  transfer  of  documents.  s 
±mt,  it  said_  brokers  or  agents  buy  or  sell  the  grain,  or  perform  any  service  other  than  as  f 
above  specified  for  persons  not  members  of  the  Baltimore  Chamber  of  Commerce  or 
members  thereof  not  residing  in  Baltimore,  the  rates  specified  in  Section  1  of  this  i 
article  shall  be  charged.  In  case  of  grain  handled  through  the  driers  there  shall  be  1 
charged  all  incidental  expenses  incurred.  | 

Railroads  owning  or  operating  terminals  whose  representatives  are  members  of  the  I 
Baltimore  Chamber  of  Commerce  shall  be  exempt  from  the  provisions  of  this  rule,  pro-  j 
vided  the  commodities  are  handled  by  them  only  in  their  capacity  as  common  earners,  3 
and  are  not  in  any  manner  received,  delivered  or  handled  by  them  in  a  commercial  or  J 
mercantue  capacity,  or  directly  or  indirectly  in  competition  with  members  subject  to  j 
the  provisions  of  this  rule.  It  is  further  provided  that  the  handling  of  grain  by  carriers  I 
as  herein  set  forth  shall  at  all  times  be  subj ect  to  the  investigation  of  the  Board  of  Direc-  I 
tors  ot  this  Chamber,  or  a  duly  authorized  committee  thereof.  I 

Sec.  4.  Brokers^  or  agents  are  exempt  from  the  provisions  of  this  rule  upon  the  1 
following  transactions  only;  Sales  of  ex-lake  grain  for  export,  or  grain  for  export  sold  1 
on  western  terms,”  i.  e.,  western  weights  and  grades,  also  grain  soldfor  export  F.  O.  B.  I 
vessel  or  C.  I.  F  to  or  through  this  or  other  Atlantic  or  Gulf  ports,  or  grain  sold  from  I 
Baltimore  C.  I.  F.  to  New  York  or  Philadelphia,  when  one  or  both  principals  reside  in  a 
Baltimore  and  either  is  a  member  of  the  Baltimore  Chamber  of  Commerce.  But  on  ■ 
all  such  sales  the  broker  or  agent  shall  be  held  liable  both  for  the  acceptance  of  the  '■ 
contracts  and  for  their  faithful  performance  until  accepted  by  the  principals.  I 

It  will  be  noted-from  the  above  rule  that  the  broker  is  not  restricted  i 
to  a  minimum  fee  of  one-fourth  cent  per  bushel  on  certain  contracts  9 
where  one  or  both  principals  reside  in  the  local  market,  i.  e.,  he  may  I 
operate  for  one-eighth  of  a  cent.  I 

The  export  broker  pays  the  freight,  supervises  inspection,  orders  9 
the  transferring  from  elevator  to  steamer,  arranges  insurance,  sells  S 
foreign  exchange,  and  makes  any  negotiation  necessary  to  forward  the 
commodity,  billing  the  costs  plus  brokerage  back  to  the  shipper.  || 

^  Rules,  1919,  Art.  XXIV,  secs.  3,  4. 


Chapter  VII. 


FINANCING  THE  GRAIN  TRADE. 

Section  1.  Introductory. 

The  system  of  financing  the  production  and  distribution  of  the 
cereal  grains  is  the  result  of  long  development,  an‘d  has  undergone 
but  few  important  changes  in  recent  years.  It  is  frequently  neces¬ 
sary  for  the  grower  to  borrow  funds  to  produce  a  crop,  and  the  local 
banks,  farm-loan,  and  other  agencies  are  looked  to  for  the  necessary 
credit  facilities.  The  grower  usually  expects  to  liquidate  his  loans  by 
the  sale  and  delivery  of  his  product,  thus  shifting  the  financial  burden 
upon  the  country  elevator  operator.  The  elevator  concern  can  readily 
secure  credit  for  a  large  proportion  of  the  value  of  the  grain  as  soon  as 
it  is  loaded  into  cars  and  accepted  by  the  carrier,  and  in  the  North¬ 
west,  as  subsequently  shown,  even  before  any  grain  is  purchased 
(Vol.  I,  Chap.  X).  Grain  in  transit  can  be  financed  by  the  trans¬ 
fer  of  negotiable  bills  of  lading,  and  grain  in  terminal  elevator 
storage  is  readily  financed  through  the  hypothecation  of  the  ware¬ 
house  receipts.  The  advances  made  against  grain  after  it  has  entered 
the  car-lot  market  range  from  80  to  95  per  cent  of  the  apparent 
market  value  of  the  commodity;  the  percentage  advanced  being 
relatively  high  when  the  grain  has  been  officially  inspected  and 
weighed  and  when  it  is  stored  in  an  elevator  under  public  license  and 
regulation.  The  owner  of  unencumbered  warehouse  receipts  or  of 
negotiable  bills  of  lading  is  always  in  position  to  borrow  working 
capital. 

Outside  of  the  Northwest  there  appears  to  be  little  difficulty  in 
financing,  through  banking  channels,  the  movement  of  grain  from 
producing  areas  to  terminal  points.  The  following  statement  made 
m  April,  1921,  by  the  Federal  reserve  agent  at  St.  Louis  will  illustrate 
this: 

(1)  The  unit  of  the  country  grain  trade  is  the  elevator  company  or  grain  shipper. 
The  capital  of  these  runs  from  a  scoop  shovel  to,  say,  $50,000,  with  an  average  of 
about  $15,000.  Most  of  this  capital  is  invested  in  buildings,  plants,  equipment,  or 
is  used  to  carry  stocks  of  farm  machinery,  feeds,  and  farm  supplies.  It  therefore 
follows  that  the  country  grain  dealer  as  an  average  has  not  more  than  $5,000  or  $10,000 
fluid  capital  for  shipping  purposes. 

(2)  The  method  employed  usually  is  that  through  an  agreement  with  the  local  bank, 
the  grain  dealer  issues  his  checks  on  the  bank  to  farmers  for  the  daily  purchases.  As 
soon  as  these  amount  to  a  carload  or  more,  generally  it  is  loaded  and  forwarded  to  ter¬ 
minal  markets  and  by  agreement  with  the  country  banker  the  draft  is  made  against  the 
commission  merchant  at  the  terminals  for  about  the  cost  of  the  grain  at  home.  A 
conservative  estimate  would  be  that  92  per  cent  of  the  grain  in  this  zone  is  handled  on 
that  system.  Some  dealers  believe  that  it  will  run  as  high  as  98  per  cent.^ 

(3)  From  4  to  8  per  cent  of  the  grain  immediately  around  St.  Louis  is  financed 
through  open  lines  of  credit,  but  at  distances  of  more  than  150  miles  this  class  of  financ¬ 
ing  is  negligible.  As  far  as  I  have  any  knowledge,  virtually  nothing  is  financed 
through  bankers’  acceptances,  that  form  not  having  taken  hold  in  our  rural 
communities. 

(4)  The  methods  employed  at  present  do  not  differ  materially  from  those  in  use 
during  the  past  decade.  The  commission  merchant  and  buyers  at  terminal  markets 
really  finance  the  crop  movement,  though,  of  course,  quite  a  per  cent  of  the  money 
to  do  so  is  obtained  from  the  banks  here  and  in  other  large  centers.  The  existing 

183 


184 


TERMINAL  GRAIN  MARKETING. 


system  of  financing  and  handling  grain  is  the  result  of  almost  a  century  of  experience, 
and  it  is  believed  by  those  in  a  position  to  judge  to  be  about  the  most  economical 
one  possible. 

A  similar  statement  as  to  conditions  in  the  Southwest  was  made 
by  the  department  of  examination  and  statistics  of  the  Federal 
Reserve  Bank  of  Dallas  (April,  1921) : 

In  most  of  the  cases  grain  is  financed  almost  entirely  in  this  section  by  the  banks 
at  the  point  from  which  shipments  are  made. 

In  the  small  country  towns  the  grain  shipper  draws  a  draft  on  the  purchaser  in  the 
larger  cities,  with  bills  of  lading  attached.  The  draft  is  payable  on  demand  and  is 
immediately  credited  to  the  account  of  the  drawer  by  his  local  bank.  The  latter  in 
turn  sends  the  draft  (as  a  cash  item)  to  their  city  correspondent  in  the  town  where 
the  drawee  is  located.  The  draft,  immediately  on  presentation,  is  paid  by  the  drawee, 
who  holds  the  bills  of  lading  until  arrival  of  car,  any  differences  in  weight  or  grade 
being  subsequently  adjusted  between  the  drawer  and  drawee. 

Grain  merchants  in  the  larger  centers  make  a  practice  of  purchasing  corn,  wheat, 
and  oats  in  the  producing  sections  of  the  district  under  the  manner  outlined  above. 
In  turn  they  then  sell  wheat  to  flour  mills  or  exporters  on  a  cash  basis,  but  a  large 
volume  of  oats  and  corn  handled  by  them  is  distributed  in  the  consuming  territory  of 
the  district  through  shipments  financed  by  the  grain  shippers  themselves,  that  is  to 
say,  the  shipments  are  made  against  drafts  payable  either  on  arrival  of  car  or  a  specified 
number  of  days  “after  sight,”  in  either  event  the  drafts  being  handled  by  the  for¬ 
warding  banks  as  time  items. 

It  is  estimated  that  approximately  80  per  cent  of  gi-ain  shipments  in  this  district 
are  made  against  demand  drafts,  and  about  20  per  cent  against  sight  drafts,  B/L’s 
being  attached  in  both  instances.  The  amount  of  financing  of  grain  by  the  use  of 
bankers’  acceptances,  or  open  lines  of  credit,  is  practically  nil. 

The  widest  variety  of  methods  employed  in  financing  appears  in  the 
business  tributary  to  Chicago.  The  following  extracts  from  a  report 
prepared  for  the  Commission  by  the  Federal  reserve  bank  of  that 
district  (June  1,  1921)  offers  a  concise  explanation  of  the  practice: 

_  Three  methods  of  financing  are  employed,  depending  upon  conditions:  D/BL  con¬ 
signments,^  payment  at  country  stations  against  credits  established  in  Chicago  by  the 
large  handlers  and  warehousemen,  bankers’  acceptances  in  special  cases. 

The  choice  of  a  method  of  financing  depends  almost  entirely  on  the  “spread”  be¬ 
tween  cash  grain  and  futures  in  this  market.  Since  the  opening  of  the  World  War 
cash  grain  has  almost  uniformly  commanded  a  premium  over  the  futures ;  hence  ship¬ 
pers  were  sure  of  a  price  better  than  the  ruling  quotations  for  future  delivery,  and 
they  have  generally  adopted  the  B/BL  mode  of  collecting  for  their  grain.  This  has 
enabled  the  Chicago  grain  buyers  to  restrict  by  half  to  two-thirds  their  usual  lines  oi 
open  credit  at  Chicago  banks,  the  prevailing  premium  for  “spot”  enabling  them  to 
operate  with  a  minimum  of  credit. 

At  the  present  moment  speculative  conditions  tend  to  wipe  out  the  premium  on 
spot  grain  on  the  board  of  trade  sample  tables,  and  it  is  likely  that  the  buyers  will  be 
obliged  to  go  back  to  the  old  practice  of  transferring  funds  from  Chicago  to  country  / 
stations  for  the  purchase  of  the  new  crop. 

The  outstanding  feature  of  the  method  recently  employed,  in  comparison  with  the 
old  naethod  of  buying  for  cash  at  the  spout  of  the  thrasher,  is  that  farmers  have  come  to 
a  position  of  financial  independence  which  permits  them  to  hold  for  the  advantageous 
time  to  dispose  of  their  grain,  and  then  allows  them  to  draw  against  shipping  documents, 
thereby  gaining  the  Chicago  premiums  for  “spot”  grain. 

Section  2.  Financing  country  elevators^  in  the  Northwest. 

Development  of  the  practice. — There  are  indications  that  the 
early  elevator  companies,  which  were  organized  to  bring  in  the  grain 
from  Minnesota  and  the  Dakotas,  depended  upon  the  banks  in  Min- 
•neapolis  and  Duluth  to  finance  the  crop.  Later  the  commission 
merchants,  in  order  to  develop  their  consignment  business,  assumed 

1  Consignments  financed  by  drafts  forwarded  with  bills  of  lading  attached,  the  bill  of  lading  to  be 
transferred  upon  acceptance  of  the  draft. 

*  For  statistical  data  on  the  different  methods  of  financing  country  elevators,  consult  Vol.  I,  Chap.  X. 
This  chapter  should  be  consulted  for  further  information  on  financing. 


FINANCING  THE  GRAIN  TRADE. 


185 


similar  banking  functions  and  proceeded  to  extend  open  credit  to 
country  elevator  companies.  Thus  the  financing  of  these  country 
shippers  has  been,  in  the  Northwest,  an  important  factor  in  the  com¬ 
petition  for  country  shipments.^  In  the  territory  tributary  to  Min¬ 
neapolis  and  Duluth  the  majority  of  country  elevators  (other  than 
line)  depend  upon  commission  men  to  finance  their  purchasing.  The 
proportion  of  ‘^open-accoupt  shippers’’  as  reported  by  firms  in  that 
area  has  varied  between  75  and  90  per  cent  of  the  customers  of  each 
consignee.  There  have  been  a  few  large  receivers  in  the  Northwest 
who  persistently  decline  to  finance  country  elevators,  but  an  exami¬ 
nation  of  the  records  of  these  particular  concerns  showed  that  their 
principal  customers  were  line-elevator  companies  rather  than  indi¬ 
vidual  elevators.  In  no  other  important  grain-producing  area  do  the 
commission  houses  finance  country  shippers  as  extensively  as  they  do 
in  the  Northwest  (Vol.  I,  Table  83).  The  mxethod  was  employed 
first  as  a  business  necessity,  and  it  appears  that  it  was  later  extended 
through  commission  house  competition. 

Large-scale  financing  by  commission  merchants  in  the  Northwest 
is  greatest  in  the  more  undeveloped  areas.  In  older  territory, 
for  example,  southern  Minnesota  and  southern  South  Dakota;  the 
country  elevators  have  usually  financed  themselves  more  largely 
through  their  local  banks  and  through  their  stockholders.  This 
has  also  been  affected,  however,  by  the  fact  that  this  area  is  less 
tributary  to  Minneappolis  and  Duluth  than  are  other  portions  of  the 
Northwest  (Vol.  I,  p.  239). 

It  is  estimated  that  the  extensions  of  credit  by  commission  men  in 
the  Northwest  have  frequently  aggregated  over  $100,000,000  for  a 
single  crop  year.  Some  idea  of  the  amounts  outstanding  to  individual 
elevators  can  be  gained  from  the  fact  that  commission  merchants’  asso¬ 
ciations  of  Minneapolis  and  Duluth  in  a  joint  session  in  the  spring  of 
1917^  proposed  to  restrict  loans  to  $45,000  to  each  elevator  and  to 
require  bills  of  lading  as  security. 

How  the  system  may  affect  an  individual  concern  appears  from  the 
statement  of  one  firm  which  declared  that  it  had  30  accounts  with 
farmers’  elevator  companies  in  one  year,  and  that  of  $700,000  out¬ 
standing  to  such  shippers  only  $25,000  was  secured  by  collateral. 
Except  in  the  few  cases  where  a  mortgage  had  been  taken  on  the 
elevator,  these  loans  had  been  made  on  open  drawing  account. 
Less  than  20  per  cent  of  the  sums  loaned  was  on  demand  paper; 
$5,000  was  regularly  reserved  to  cover  credit  losses.  During  the  year 
previous  such  losses  had  amounted  to  $3,500.  During  other  periods 
they  had  been  as  high  as  $9,000. 

Kates  of  interest. — Commission  men  in  the  Northwest  have 
generally  figured  on  a  spread  of  about  1  per  cent  between  terminal 
and  country  rates  of  interest.  As  an  illustration,  one  Minneapolis 
house  obtained  on  security  large  loans  from  the  banks  for  which  they 
paid  5J  to  6  per  cent  in  advance.  They  required  customers  to  pay 
7  per  cent  for  advances  during  the  crop  movement  and  allowed  them 
6  per  cent  on  credit  balances  during  the  quiet  season.  It  is  stated 
that  they  paid  their  customers  6  per  cent  interest  during  the  summer 
periods  when  they  were  borrowing  at  bank  for  4}  per  cent  and  that 
they  kept  up  this  practice  to  hold  the  business. 

Another  company  reported  that  they  ordinarily  charged  6  per  cent, 
requiring  7  per  cent  only  in  some  cases  in  Montana;  and  that,  since 


186 


TERMINAL  GRAIN  MARKETING. 


they  must  pay  from  5^  to  6  per  cent  for  the  money,  the  financing  did 
not  leave  any  profit.  Normally,  however,  there  has  been  a  spread  of 
1  per  cent  maintained  between  the  rate  charged  the  local  elevators 
and  that  at  which  the  company  borrows  the  funds. 

A  Minneapolis  concern  paying  the  bank  6  per  cent'  and  charging  7 
per  cent,  stated  that  certain  qualifications  must  be  made  regarding 
this  ‘ ^spread 

(1)  That  the  country  elevators  were  charged  only  for  the  actual 
time  they  used  the  funds,  while  money  was  frequently  borrowed  from 
the  bank  for  a  definite  time,  and  interest  was  paid,  therefore,  even 
while  the  funds  were  idle;  (2)  that  the  company  paid  discounts  in 
advance,  while  the  elevators  did  not;  and  (3)  that  since  the  company 
allowed  the  elevators  the  same  rate  of  interest  on  balances  which  it 
charged  on  loans,  it  occasionally  ran  into  a  loss. 

One  commission  man  stated  that  his  concern  never  realized  a  full 
1  per  cent  profit  on  the  banking  business. 

Now  the  normal  rate  of  interest  is  about  6  per  cent,  some  is  5|  or  5^,  but  even  then 
we  are  only  charging  7 .  There  is  not  ever  the  full  1  per  cent  difference  because  of  the 
difference  in  time.  We  don’t  average  at  the  end  of  the  year  1  per  cent  on  the  money 
we  borrow.  ^ 

Q.  At  times  money  is  cheaper  than  that? — A.  We  change  our  scales  of  charges  in 
the  country  on  the  basis  of  what  we  pay  here.  The  last  crop,  the  highest  rate  charged 
in  the  country  so  far  as  I  know  was  6  per  cent,  and  yet  part  of  the  year  we  were  paying 
6  per  cent  here  for  money,  though  on  the  start  we  didn’t  pay  as  much.  This  year  we 
are  charging  7  per  cent.  We  started  off  borrowing  at  5^  and  then  hiking  up  to  6  or 
more,  paying  7  before  the  year  is  over;  it  will  be  very  hard  for  us  to  advance  our  rate 
to  them. 

Q.  Formerly  the  rate  was  lower  here,  wasn’t  it?  Got  down  as  low  as  4  per  cent? _ 

A.  That  is  the  time  when  the  country  does  not  need  money.  When  the  money  is 
cheap  that  interest  is  costing  us  money  because  it  means  that  the  farmers  are  in  a 
prosperous  condition  or  that  they  are  shipping  out  their  wheat  and  taking  storage 
checks  in  exchange  for  it  and  are  not  selling  it.  When  those  conditions  prevail,  of 
course,  the  farmers’  elevator  companies,  instead  of  having  debit  balances,  they  have 
credit  balances.  Actually,  we  are  paying  them  6  per  cent  for  money  which  is  lying 
idle  in  Minneapolis. 

In  1920—21,  according  to  the  best  available  information,  commis¬ 
sion  houses  were  borrowing  at  about  7i  per  cent  and  lending  at 
about  9. 

In  practice  a  formal  agreement  as  to  interest  rates  to  be  charged 
has  been  made  each  year  by  the  commission  merchants’  associations 
of  the  two  markets,  Minneapolis  and  Duluth,  and  deviations  from  the 
rate  adopted  are  subject  to  action  by  the  respective  bodies.  The 
following  extract  from  the  minutes  of  the  Minneapolis  Commission 
Merchants’  Association  is  in  point: 

Th©  chair  stated  the  call  of  the  meeting  which  was  for  the  purpose  of  considering 
the  interest  rate  to  be  charged  to  shippers  the  coming  season.  After  full  discussion 
and  a  call  up(m  each  individual  member  present,  a  motion  was  made  and  carried 
imanimously  that  7  per  cent  be  made  the  rate  of  interest  for  the  coming  season  and 
that  the  chair  appoint  a  committee  of  three  members  to  visit  the  Duluth  Grain  Com¬ 
mission  Merchants  Association  and  arrange  for  that  body  to  cooperate  with  us  in 
charging  7  per  cent  and  report  back  to  this  association  the  result  of  their  meeting  with 
the  Duluth  association. 

On  occasion,  however,  members  have  been  allowed  to  charge  a 
lower  rate  at  a  given  country  station  in  order  to  meet  the  competitive 
methods  of  a  nonmember  of  the  association. 

Risks  and  security. — Personal  notes,  or  mortgages,  signed  by 
the  directors  of  the  elevator  have  been  often  required  for  a  varying 
proportion  of  the  money  loaned  to  country  houses.  In  the  majority  of 


FINANCING  THE  GRAIN  TRADE. 


187 


cases  the  amount  of  this  collateral  was  far  less  than  the  aggregate  of 
the  funds  advanced,  and  in  many  cases  no  security  was  required  at 
all.  This  general  lack  of  precaution  as  to  security  is  partly  due  to 
the  severity  of  competition  which  leads  to  more  liberal  advances  of 
funds  than  would  be  tolerated  in  the  purely  banking  business. 

Guaranty  agreements. — In  considering  security  some  preference 
has  been  indicated  for  notes  indorsed  individually  by  officers  or 
directors  of  the  local  elevator  company  or  for  guaranty  agreements 
indorsed  severally  by  such  officers  and  directors.  Firms  which  go 
so  far  as  to  require  a  mortgage  on  the  grain  in  the  elevator  need, 
of  course,  make  no  further  agreement  to  compel  the  shipper  to 
consign  them  this  grain.  Any  other  commission  firm  receiving  this 
grain  would  be  disposing  of  property  subject  to  lien. 

The  form  of  guaranty  agreements  shows  considerable  variation, 
but  the  following  embodies  the  conditions  usually  set  forth : 

Form  29.— GUARANTY  AGREEMENT  BETWEEN  COUNTRY  SHIPPER  AND  COMMISSION 

HOUSE. 

Whereas . .  a  corporation  under  the  laws  of  the  State 

of . located  at  the  town  of . ,  State  of . 

. desire  to  obtain  money  and  credit  with  which  to  carry  on  their  business 

from  the  Brown  Grain  Company,  a  corporation  (under  the  laws  of  the  State  of  Minne¬ 
sota)  doing  a  commission  business  in  the  city  of  Minneapolis,  State  of  Minnesota,  in 
the  way  of  loans,  advanced  on  shipments  and  credit  on  open  accounts  from  time  to 
time  as  may  be  agreed  upon  between  them. 

And  whereas  the  individual  guarantors  hereunder  are  directors  or  stockholders  in 
the . . ,  or  otherwise  interested  in  its  financial  success. 

Now,  therefore,  in  consideration  of  Brown  Grain  Company  furnishing  money  to 
the . ,  as  above  specified,  we,  the  undersigned,  uncon¬ 

ditionally,  jointly,  and  severally  guarantee  the  payment  and  agree  to  pay  within 
thirty  (30)  days  after  demand  of  any  and  all  sums  due  or  to  become  due  to  said 
Brown  Grain  Company  for  moneys  so  furnished  to  said  company,  with  interest  at 

the  rate  of . per  cent  (  )  per  annum,  and  we  hereby  jointly  and  severally 

waive  notice  of  acceptance  of  this  guarantee  by  Brown  Grain  Company,  and  of  notice 

of  the  moneys  furnished  by  them  to  said . .  and  of  default 

in  payment  thereof,  as  well  as  notice  of  demand  or  protest  or  any  other  steps  to  be 
taken  by  the  Brown  Grain  Company  to  enforce  payment  against . 

It  is  further  agreed,  that  the . . . shall  keep  all  of  its 

grain  and  seeds  fully  insured  at  all  times  with  the  following  clause  attached  to  the 
policy  therefor:  “Loss,  if  any,  payable  to  the  Brown  Grain  Company  as  their  interest 
may  appear.” 

And  we  further  agree  that  this  contract  is  not  valid  unless  executed  and  accepted 
at  the  home  office  of  the  Brown  Grain  Company. 

Dated . 

Witnesseth:  . . . . 

.  By  President: . - . 

.  By  Secretary: . . 

Accepted  and  executed  by  the  Brown  . 

Grain  Company  at  Minneapolis,  Minne-  . 

sota .  . 

Brown  Grain  Company,  . . 

By . 


The  fact  that  this  financing  is  carried  on  as  a  part  of  the  commis¬ 
sion  business  and  not  solely  as  a  banking  function  reduces  the  liability 
to  loss.  Various  factors  operate  to  remove  the  apparent  hazards. 

(1)  In  return  for  financing  the  country  elevator  company  most 
commission  men  require,  either  by  verbal  agreement  or  signed 
contract,  that  the  shipper  so  financed  shall  consign  and  ship  the  bulk 


188 


TERMINAL  GRAIN  MARKETING. 


of  his  grain  to  the  house  extending  credit.  This  has  made  it  possible 
for  commission  men  to  loan  large  amounts  practically  unsecured 
without  sustaining  destructive  losses.  The  money  is  loaned  under 
these  conditions,  not  on  grain  paper  but  upon  the  assurance  of 
receiving  the  actual  grain. 

Mutual  contracts. — ^Most  of  the  firms  find  it  unnecessary  to 
bind  elevators  by  formal  agreement  to  consign  to  the  financing  house, 
since  it  is  mutually  understood  that  funds  are  advanced  upon  this 
condition.  However,  in  many  instances  mutual  contracts  have  been 
executed  which  bind  the  local  elevator  company  to  ship  all  or  some 
agreed  proportion  of  its  purchases  to  the  commission  merchant  in 
consideration  of  the  funds  advanced.  The  following  is  an  example : 

Fofm  CONTRACT  fiRTWteRN  COtlNffeT  SfttrTSit  ANO  COMMiSSiON  ftOtiSR. 

i§i|Re¥s  of  the  ffltliMi  promises  aiid  lindertaMiigS 

heyein^  hereby  diiiiiiaily  jirOmise  knd  agree  t6  arid,  with  O^ch  other,  £iS  f011ow§i  .  . 

i^hat  the  VA]<f  i3usEN  Harrington  Oo.,  engaged  in  btisinesS  as  h  grdiii  cdmmissiOii 
iherchiatit,  hereinafter  called  the  “Commission  Merchant,”  will  advance  mohey  tliid 

otherwise  give  credit  to  the . owner  and  operator  of  a 

eertain  grain  elevator  in  the  town  of . vState  of . . . -  -  - , 

hereinafter  called  the  “Elevator  Company,”  of  such  amounts,  from  time  to  time 
during  the  continuance  of  this  contract,  as  may  be  requested  by  said  Elevator  Com¬ 
pany,  not  obligating  itself,  however,  to  advance  an  amount  exceeding  at  any  time 
the  sum  of . dollars  ($ . ) . 

That  said  Elevator  Company  shall,  during  the  continuance  of  this  contract  and  of 
any  indebtedness  to  said  Commission  Merchant  hereunder,  consign  and  ship  to  said 

Commission  Merchant  for  sale  by  it  upon  commission. . . . . all  grains 

purchased  by  said  Elevator  Company  and  shipped  from  its  elevator;  and  shall  pay 
to  said  Commission  Merchant  on  all  transactions,  the  current  commissions  and  charges 
according  to  the  rules  of  the  Exchange  where  the  grain  is  bought  and  sold.  And 
said  Commission  Merchant  ma}''  make  sales  or  purchases  of  grain  in  its  name  for  said 
Elevator  Company  according  to  the  usages,  customs,  and  regulations  of  such  grain 

0X.cll£tIl^GS 

That  said  Commission  Merchant  will  receive  all  grains  consigned  to  it  by  said 
Elevator  Company  and  will  use  its  best  efforts  to  sell  the  same  at  the  best  prices  pos¬ 
sible  and  shall  promptly  render  confirmations  and  account  of  sales  thereof,  and  the 
monthly  statement  of  the  account  sent  to  said  Elevator  Company  showing  the  amount 
due  the  said  Commission  Merchant  up  to  the  first  of  the  month,  shall  constitute  an 
account  stated,  unless  such  statement  is  promptly  returned  vdth  objections  stated 
thereon  to  said  Commission  Merchant. 

That  said  loans  and  advances  to  said  Elevator  Company  shall  draw  interest  at  the 
. rate  of . per  cent  per  annum,  computed  on  daily  bal¬ 
ances  or  the  stated  rate  of  interest  in  notes,  if  any,  as  to  the  amount  of  pich  notes; 
and  that  the  manager  of  said  Elevator  Company  acts  for  and  on  behalf  of  said  Elevator 
Company  and  its  directors  in  all  transactions  with  said  Commission  Merchant. 

This  Agreement  shall  remain  in  force  from  year  to  year,  but  may  be  terminated 
at  will  by  said  Commission  Merchant  by  notice  in  writing  or  by  all  of  the  other  parties 
hereto  giving  notice  in  ^vriting  to  that  effect  to  said  Commission  Merchant,  and  paying 

all  indebtedness  to  it.  .  ^  i,  4. 

That  the  parties  hereto  and  signers  hereof,  except  said  Commi^ipn  Merchant, 
jointly  and  severally,  in  consideration  of  the  agreement  of  said  Commission  Merchant 
making  advances  01  money  and  giving  credit  to  the  said  Elevator  Company ,  which 
advances  and  credits  are  hereby  requested  by  all  the  parties  hereto  and  signers  hereof, 

except  said  Commission  Merchant,  promise  and  agree  to  pay  on  or  before . - 

. of  each  year  to  said  Commission  Merchant  the  full  balance  of 

all  moneys  or  credits  theretofore  advanced  or  loaned,  together  with  accrued  interest 
thereon;  and  upon  the  termination  of  this  Agreement  agree  to  repay  on  demand 
to  said  Commission  Merchant  in  full  the  balance  of  any  moneys  theretofore  advanced 
or  loaned  by  said  Commission  Merchant  to  said  Elevator  Company,  vnth  accrued 
interest  thereon,  whether  said  moneys  are  represented  by  notes,  secured  or  unsecured, 
or  carried  in  open  account;  and  hereby  jointly  and  severally  waive  notice  of  all  loans, 
advances,  credits,  defaults  and  protests  thereon,  and  agree  that  the  liability  of  the 
signers  hereto,  except  said  Commission  Merchant,  shall  in  no  way  be  limited  and  re- 


FINANCING  THE  GRAIN  TRADE. 


189 


stricted  by  the  kind,  character  or  nature  of  the  business  transacted  by  the  said  Elevator 
Company,  or  the  uses  made  by  said  Elevator  Company  of  the  loans  and  advances 
made  by  said  Commission  Merchant,  or  the  amount  of  said  advances  and  loans;  and 
it  shall  not  be  necessary  for  the  said  Commission  Merchant  to  notify  any  of  the  parties 
hereto  of  the  acceptance  of  this  Agreement  or  of  any  default,  other  than  to  give  said 
Elevator  Company  a  copy  of  this  Agreement,  and  said  Elevator  Company  hereby 
acknowledges  receipt  of  copy  of  the  same. 

Dated  this 

Witnesses; 


Witnesses; 


Secretary. 


day  of. 


.19... 


The  Van  Dusen  Harrinoton  Co., 
By . 


By. 

and. 


President. 


(2)  The  supervision  exercised  through  traveling  solicitors  and,  in 
some  cases,  through  regular  monthly  reports  from  the  local  elevator 
is  said  to  provide  another  means  of  security  for  advances.  The  com¬ 
mission  merchants  to  some  extent  thus- supervise  the  purchases  of 
grain  with  a  view  to  preventing  speculation  or  the  conversion  of  the 
funds  into  anything  but  grain.  A  constant  comparison  is  made  be¬ 
tween  the  credit  balance  outstanding  to  the  shipper  and  the  grain 
reported  to  be  stored  or  shipped.  When  the  disparity  becomes  too 
great  a  traveling  man  is  sent  to  investigate. 

The  commission  houses  as  a  rule  insist  that  country  grain  in  store 
be  properly  insured  and  do  not  leave  this  matter  to  the  discretion 
of  country  managers. 

This  supervision  of  the  elevator’s  business  is  frequently  rendered 
less  rigid,  however,  by  the  exigencies  of  competition.  Anything 
inquisitorial  may  result  in  the  loss  of  a  customer.  An  elevator 
manager  who  has  been  compelled  to  make  out  tedious  daily  reports 
is  some  day  confronted  by  a  traveling  man  with  the  promise  that 
funds  can  be  secured  at  less  inconvenience — ‘‘We  ask  no  questions 
and  require  no  notes.”  Consequently,  the  account  goes  to  the  more 
liberal  house.  This  operates  to  the  benefit  of  the  larger  houses  who 
are  willing  or  better  able  to  take  such  risks  and  stand  the  possible 
loss. 

(3)  A  third  element  of  security  claimed  by  commission  men  lies  in 
the  requirement  often  made  that  grain  be  hedged  as  soon  as  pur¬ 
chased.  The  commission  men  watch  the  quantities  of  grain  bought 
by  each  elevator  and  in  many  cases  insist  that  it  keep  such  grain 
fully  hedged. 

(4)  Finally,  an  additional  check  upon  country  dealers  is  main¬ 
tained  through  the  credit  bureaus  established  by  commission  mer¬ 
chants’  associations  in  Minneapolis  and  Duluth,  which  have  been 
described  in  Chapter  II,  section  6. 

As  a  summary  of  the  risks  involved  in  such  financing,  the  following 
statement  was  made  to  agents  of  the  Commission  by  an  officer  of  a 
Minneapolis  commission  house : 

There  is  a  tremendous  risk  in  the  commission  business  *  *  *  yet  the  losses  in 
the  business  are  comparatively  small  because  the  commission  men  have  been  par¬ 
ticularly  conservative  in  making  their  loans.  Now,  of  course,  when  we  go  out  in  a 
country  and  get  business,  we  try  to  get  what  is  guaranteed  by  the  directors  (if  it  is  a 
farmers’  elevator)  as  individuals.  Individually  these  men  are  not  worth  a  great  deal, 

56976°— 22 - 14  ' 


190 


TERMINAL  GRAIN  MARKETING. 


but  collectively  they  represent  quite  a  collateral  security.  If  we  had  a  loss  at  a 
station  we  probably  could  not  collect  it  in  60  days  or  even  6  months,  but  over  a  period  , 
of  years  those  men  who  own  their  farms  are  good  for  it,  so  that  our  chances  for  actual 
loss  are  not  very  much,  but  unless  we  watch  very  closely  we  do  get  a  tremendous 
amount  of  money  tied  up  in  slow  accounts. 

The  farmers’  elevator  may  not  be  successfully  managed.  In  our  particular  case  we 
require,  except  in  the  older  territory  where  the  credit  is  absolutely  good,  daily  re¬ 
ports  of  the  grain  purchased.  We  require  the  privilege  of  hedging  those  purchases 
each  day.  Of  course,  under  the  present  war  conditions,  there  is  no  hedging  of  wheat, 
but  under  normal  conditions  as  soon  as  1,000  bushels  of  wheat  are  bought  by  one  of  our 
shippers,  we  sell  1,000  bushels  of  futures  here.  When  his  car  comes  in  we  sell  the 
car  and  buy  back  1,000  bushels  of  wheat.  One  of  my  men  asked  why  we  did  not  just 
sell  the  car  instead  of  selling  another  1,000  that  same  day  against  a  purchase,  but  we 
might  be  working  two  or  three  hours  on  the  sale  of  that  car  and  the  market  might  get 
away  2,  3,  or  5  cents. 

But  even  so,  where  we  take  those  precautions,  the  manager  may  be  erratic  in  his 
grading.  He  may  grade  the  farmers’  wheat  too  high,  or  not  take  sufficient  dockage, 
or  not  get  enough  wheat,  or  not  be  correct  enough  in  his  weighing,  so  that  at  the  end 
of  the  year  he  is  either  short  on  dockage  or  net  weight  or  has  such  grades  that,  through 
the  combination  and  the  expense  of  operating  the  elevator,  there  will  be  an  actual 
loss  in  the  .business.  Suppose  there  is  such  a  loss  in  the  new  country.  It  is  pre¬ 
sumably  true  that  that  particular  country  has  not  got  the  financial  means  to  make 
good  that  loss.  The  commission  company  must  tide  them  over  another  year.  Either  i 
the  manager  has  learned  his  lesson  and  is  fit  to  handle  it  and  make  money  another 
year,  or  they  change  and  put  in  a  competent  manager.  The  idea  is  that  the  profits 
will  be  sufficient  to  liquidate  the  losses  the  year  before,  but  this  is  not  always  the  case, 
and  those  accumulations  of  losses  mean  the  tying  up  of  a  considerable  amount  of 
money  in  slow  though  good  accounts  unless  a  commission  man  watches.  Now,  to 
watch  carefully  means  a  lot  of  expense,  and  that  is  one  of  the  big  expenses  of  the  com¬ 
mission  business.  That  is  why  I  say,  theoretically,  we  are  simply  the  selling  agents; 
practically,  we  are  their  banker,  and  further  than  that,  we  must  watch  them  very 
carefully  and  we  are  watching  them  at  long  range.  That  means  expense.  As  an 
example:  There  is  a  concern  out  in  southwestern  North  Dakota  that  claims  they 
can’t  get  cars.  They  have  152,000  of  our  money..  They  are  reporting  to  us,  their 
reports  showing  about  $38,000  worth  of  grain  in  the  house,  but  the  last  report  was 
dated  Saturday  and  the  last  draft  was  dated  Monday,  It  is  presumable  that  he 
bought  grain.  We  call  up  our  traveling  man  by  long  distance.  He  goes  into  North 
Dakota  by  automobile  and  train,  which  is  expensive.  He  will  report  from  there  as 
to  what  is  actually  in  that  house,  how  much  insurance  they  have  got  on  it,  whether 
there  is  a  loss  clause  payable  to  our  company  on  the  cars.  He  will  stay  there.  That 
is  all  expensive.  If  we  did  not  have  to  do  that,  centsa  bushel  would  be  a  gold  mine. 

The  matter  of  financing  without  adequate  security  has  been  a 
subject  of  considerable  agitation  among  commission  men  and  others 
on  the  ground  that  such  an  advance  of  funds  constituted  a  violation 
of  the  commission  rule.  The  Minneapolis  rule  ^  forbids  a  member 
^‘with  intent  to  evade  the  regular  rates  of  commission  established 
by  the  rules  of  the  association^’  to  ‘^directly  or  indirectly  pay,  or 
give,  or  offer  so  to  do,  any  money,  or  other  consideration  of  whatso¬ 
ever  nature  to  any  person,  to  procure  or  influence  shipments  or  con¬ 
signments  of  grain  *  *  ” 

In  1912,  when  severe  losses  were  incurred  by  several  commission 
men,  an  attempt  was  made  to  include  financing  in  the  prohibitions 
under  the  commission  rule.  No  specific  action  was  taken,  how¬ 
ever,  although  it  became  evident  that  funds  had  been  advanced 
without  security  and  that  financing  had  been  carried  to  excess.  On 
January  6,  1914,  a  circular  was  issued  which  clearly  implied  that 
financing  was  not  considered  objectionable  under  the  rule  of  the 
Minneapolis  Chamber  of  Comme-rce.^ 

3  General  Rules  of  the  Chamber  of  Commerce,  Rule  VIII,  Sec.  11, 

<  The  undersigned  members  of  the  rules  committee  are  of  the  opinion  that  any  reports  furnished  by  a 
country  shipper,  at  the  request  of  the  commission  merchant,  or  any  auditing  done  by  the  commission 
merchant  for  his  own  protection  vAiile  financing  said  shipper,  is  not  a  violation  of  the  commission  rule. 

But  to  keep  the  books  of  a  eountry  shipper,  or  to  offer  io  do  so  without  full  compensation,  for  the  purpose  of 
obtaining  shipments,  is  contrary  to  the  commission  rule. 


financing  the  grain  trade. 


191 


Economic  effects  of  financing. — Various  questions  arise  as  to 
the  effect  of  commission-house  financing  upon  the  cost  of  moving  the 
grain  crop  and  upon  the  competitive  system.  It  is  generally  felt  that 
financing  has  added  undue  elements  of  risk  to  a  fairly  secure  and 
profitable  business  and  that  it  keeps  out  of  the  commission  business 
men  with  small  capital  and  creditf  acilities.  One  firm  stated :  ‘You  ve 
got  to  have  money  if  3mu  are  going  into  the  Northwest.’’  Another 
trader  asserted  that  the  commission  man  has  assumed  the  functions  of 
a  banker  and  has  degenerated  into  a  reckless  banker  taking  securities 
which  banks  would  not  accept  as  collateral.  He  said  that  when 
financing  was  found  to  be  the  most  effective  method  of  eliminating 
the  competition  for  an  individual  account  it  was  used  liberally  and 
loosely.  His  position  was  that  commission  houses  should  secure 
business  on  the  efficiency  of  their  service  and  not  on  the  amount  of 

money  they  could  command.  _  . 

There  is  no  clearer  evidence  of  the  opposition  to  financing  than 
the  resolutions  adopted  from  time  to  time  by  the  commission  mer¬ 
chants’  associations  of  Duluth  and  Minneapolis.  At  the  rneetmg  of 
the  Minneapolis  association  on  December  19,  1912,  resolutions  were 
presented  reciting  the  “  excessive  financing  by  commission  merchants 
of  country  shippers  and  the  employment  of  an  undue^  ^number  of 
traveling  representatives  soliciting  commission  business,  condemn¬ 
ing  the  excessive  financing  of  country  shippers,  approving  ‘  the 
effort  which  has  been  made  during  the  past  two  or  three  years  to 
place  this  financing  upon  a  sound  oanking  basis,”  and  pledging  the 
influence  of  the  association  to  discourage  the  undue  employment  of 
traveling  representatives  and  to  bring  about  the  proper  financing 
of  country  shippers.  These  resolutions  were  adopted;  yet  it  ap¬ 
pears  that  five  years  later  (1917)  the  associations  in  both  markets 
were  again  considering  drastic  resolutions  for  the  elimination  or 
regulation  of  financing.  A  resolution  of  the  Duluth  association  ® 
reviewed  the  whole  matter  and  recommended  immediate  measures 
for  turning  all  banking  functions  over  to  country  banks  under  the 
Federal  reserve  system,  as  follows : 

Resolved,  That  this  association  exert  its  best  efforts  from  tMs  time  on  to  forward 
a  ‘‘campaign  of  education”  looking  to  a  discontinuance  of  the  burdens  carried  by 
commission  houses  in  financing  grain  dealers  in  the  Northwest,  by  using  every  effort 
and  instructing  traveling  men  to  use  every  effort  to  have  independent  dealers 
and  farmers’  elevator  companies  secure  their  funds  through  their  local  banks  and 
through  these  local  banks  passing  their  paper  on  to  a  Federal  reserve  bank,  ihe 
Government  has  established  these  reserve  banks  for  the  purpose  of  caiTying  com¬ 
mercial  paper,  and  are  at  present  doing  it  generally  for  wholesale  houses,  retail 
houses,  manufacturing  interests,  etc.,  but  the  agricultural  interests  seem  to  make 
no  use  of  it,  although  the  commission  houses  in  the  two  markets  have  practically 
financed  the  building  and  operating  of  elevators  for  independent  dealers  and  farmers 
elevator  companies  during  the  past  10  or  15  years,  practically  put  the  business  on 
its  feet,  and  the  time  has  come  when  a  lessening  of  tins  burden  be  brought  about. 
It  can  be  brought  about  if  the  commission  men’s  association  in  this  and  the  Minne¬ 
apolis  market  will  lend  their  efforts  toward  doing  so  by  this  “campaign  ot  educa¬ 
tion’’  through  correspondence  and  through  traveling  men.  The  risk  that  has  been 
assumed  in  the  past  by  commission  men  is  out  of  all  proportion  to  the  earnings,  and 
so  recognized  by  banks  and  others.  No  commission  men  have  ever  gotten  rich  in 
strictly  grain  commission  business,  and  the  burdens  and  risks  of  financing  are  too 

heavy  for  a  mere  matter  of  livelihood.  ,  ^  ^  >  a 

We  would  ask  the  cooperation  of  the  Minneapolis  Gram  Commission  Men  s  Asso¬ 
ciation,  and  secure  if  possible  their  assurance  that  this  campaign  of  education  will 
be  started  by  them. 


5  Resolution  of  the  Duluth  Commission  Merchants’  Association,  Mar.  5, 1917. 


192 


TERMINAL  GRAIN  MARKETING. 


This  resolution  did  not  result  in  the  proposed  campaign  of  educa¬ 
tion,”  but  rather  in  the  adoption  by  both  associations  of  proposed 
amendments  to  the  rules  to  be  offered  to  the  governing  bodies  of 
the  respective  exchanges  for  a  stricter  regulation  of  the  financing 
systern.  Wliile  these  resolutions  did  not  touch  upon  the  effect  of 
financing  as  a  competitive  weapon,  they  did  confirm  the  objections 
made  to  excessive  and  unsecured  loans.  Following  is  the  resolution 
proposed  to  be  offered  by  the  Minneapolis  Commission  Merchants’ 
Association  to  the  Chamber  of  Commerce  May  16,  1918: 

Article  1.  That  funds  advanced  to  any  corporation  for  the  purpose  of  buying 
and  shipping  grain  shall  be  secured  by  a  corporation  note  in  an  amount  equal  to  the 
amount  of  funds  advanced,  indorsed  individually  by  the  directors  of  the  corpora¬ 
tion  and  such  security  may  be  accompanied  by  mortgage  on  the  property  of  the  cor¬ 
poration  or  collateral  notes  and  accounts. 

Art.  2.  Grain  advances  to  independent  dealers  shall  be  seciued  by  the  note  of 
such  dealers  accompanied  by  insurance  with  loss  payable  writer  on  the  grain  when 
the  said  dealer  is  known  to  be  financially  responsible;  otherwise,  he  shall  be  re¬ 
quired  to  furnish  daily  reports  of  grain  receipts  and  purchases  for  the  purpose  of 
hedging,  checking,  etc,,  and  surrounding  business  with  such  protection  as  deemed 
necessary  in  the  matter  of  banking  facilities  with  full  insiuance  on  the  grain,  and 
in  the  event  of  the  commission  house  keeping  books  for  indi^dduals,  the  miniTmim 
charge  shall  be  $100  per  annum. 

Art.  3,  No  loans  to  be  made  to  corporations  or  individuals  for  the  purpose  of  buy¬ 
ing  or  building  elevators. 

Art.  4.  No  loans  to  be  made  to  any  corporation  or  firm  or  indi\ndiial  except  for  the 
purchase  of  grain. 

Art.  5.  A  committee  consisting  of  three  members  of  the  Minneapolis  Chamber 
of  Commerce  shall  be  appointed  by  the  directors  of  said  board  to  pass  on  such  security 
as  outlined  above  when  presented  to  them  here  and  settle  complaints  in  relation 
thereto,  their  decision  being  final.  The  rate  of  interest  on  such  grain  advances  shall 
not  exceed  The  lawful  rate  of  the  State  of  Minnesota  nor  less  than  6  per  cent  and  the 
interest  paid  to  individuals  and  corporations  on  credit  balances  shall  not  exceed  4 
per  cent  per  annum. 

An  amendment  offered  by  the  Duluth  association  was  about 
identical,  the  principal  differences  being  that  article  2  provided  a 
minimum  charge  for  bookkeeping  of  $300  per  annum  and  article  3 
did  not  absolutely  prohibit  loans  for  the  purpose  of  buying  or  build¬ 
ing  elevators  but  merely  provided  that  such  loans  should  not  be  in 
excess  of  50  per  cent  of  the  actual  value  of  such  elevators  and  should 
be  secured  by  mortgages  accompanied  by  insurance  or  collateral 
stock  notes. 

These  amendments  never  came  before  the  exchange  associations, 
since  they  were  disapproved  by  coimsel.  It  has  been  stated  indi¬ 
vidually,  however,  by  a  majority  of  commission  men  in  the  North¬ 
west,  that  financing  in  their  opinion  is  a  burden  which  the  country 
banks  should  assume. 

A  ininority  of  commission  men,  on  the  other  hand,  have  advocated 
financing  as  an  economic  necessity.  The  following  reasons  are 
advanced : 

(1)  The  practice  enables  commission  men  to  be  sure  of  a  steady 
flow  of  business  and  consequently  makes  for  economy  of  operation  in 
the  commission  business. 

(2)  Before  a  commission  house  can  borrow  money  enough  to  finance 
country  elevators,  the  members  of  the  firm  must  be  approved  as  relia¬ 
ble  by  terminal  market  bankers;  so  that  only  men  of  high  standing 
enter  the  business. 

(3)  Without  such  financing  the  farmers’  organizations  in  the  coun¬ 
try  would  not  have  the  guardianship  whicui  they  now  have;  the 


193 


FINANCING  THE  GRAIN  TRADE. 

commission  man  endeavoring  to  protect  his  shippers  from  loss,  since 
such  failures  reflect  upon  his  own  business  standing. 

(4)  Assuming  that  hedging  is  necessary  to  keep  the  margins  low 
in  the  grain  business,  financing  is  said  to  be  a  benefit  on  the  ground 
that  the  elevators  financed  are  generally  required  to  keep  their 
grain  hedged.  It  is  pointed  out  that  financing  has  thus  resulted  in 
less  speculation  with  cash  grain  in  the  Northwest  than  in  some  other 
sections.  One  commission  merchant  was  asked  what  necessity  there 
was  for  hedging  in  the  Northwest  that  did  not  exist  in  the  South¬ 
west,  where  little  hedging  is  done.  He  replied:  ^'1  think  your  finan¬ 
cing  has  to  do  with  that.  I  think  there  is  more  speculation  in  the 
Southwest,  actual  speculation  on  the  handling  of  cash  grain,  than 
there  is  in  the  Northwest.  They  don’t  avail  themselves  of  the  hedg¬ 
ing  facilities  because  there  are  more  of  them  able  to  finance  them¬ 
selves,  and  have  the  privilege  of  doing  as  they  see  fit,  while  here  we 
insist  on  grain  being  hedged.” 

(5)  It  is  argued  that  it  is  beneficial  to  have  commission  men  finance 
the  country  elevators,  since  they  are  able  to  check  up  the  funds  loaned 
in  a  way  quite  impossible  to  the  banks.  The  receivers  are  in  position 
to  check  the  purchases  of  grain  and  also  to  watch  the  market  for  price 
fluctuations,  viz: 

If  barley  is  off  5  cents,  we  know  it,  and  we  see  to  it  that  our  clients  know  it  and  save 
themselves  from  loss  of  our  funds  by  acting  accordingly. 

Yet  it  is  a  fact  that  this  financing,  which  necessarily  requires 
large  drawing  accounts,  is  undertaken  to-day  primarily  as  a  weapon 
of  competition.  Funds  are  offered  with  a  view  to  securing  shippers’ 
accounts  or  to  hold  them  in  the  face  of  competition.  It  is  thus  merely 
a  phase  of  competitive  operations  among  commission  men .  The  com¬ 
mission  man  who  finances  a  country  elevator  expects  to  receive  the 
great  bulk  of  its  consignments.  Once  having  secured  a  country 
account,  he  expects  little  competition  for  that  business  during  the 
season,  except  occasionally. 

Opinion  of  the  Federal  Land  Bank. — While  deploring  the  neces¬ 
sity  of  this  form  of  financing,  i.  e.,  through  open-line  credit,  the  Fed¬ 
eral  Land  Bank  of  St.  Paul  explains  ®  the  situation  as  follows: 

*  *  *  It  was  about  the  only  way  the  elevators  could  secure  money,  and  the 
commission  houses  have  really  made  it  possible  for  them  to  run  their  farmers’  elevators 
in  many  cases  where  they  would  otherwise  not  have  been  able  to  operate  at  all.  The 
commission  houses  have  secured  the  necessary  credit  from  the  large  metropolitan 
banks  and  have  loaned  this  credit  to  the  scattered  elevators  throughout  the  country. 
In  other  words,  the  commission  houses  have  been  a  buffer  between  the  country  ele¬ 
vator  and  the  metropolitan  bank.  Under  no  system  that  could  be  devised,  that  I 
can  see,  would  the  metropolitan  banks  care  to  loan  money  direct  to  the  country  eleva¬ 
tors.  It  is  too  hazardous  a  proposition.  There  is  too  much  inefficiency  in  the  man¬ 
agement  of  country  elevators  as  yet  to  place  them  on  a  firm  credit  basis  which  would 
entitle  them  to  go  into  the  money  markets  and  secure  credit  like  a  well-organized 
and  operated  terminal  house. 

Section  3.  Financing  the  cash  commission  business  at  Duluth. 

The  commission  houses  at  Duluth  have  frequently  been  financed 
to  a  large  extent  by  loans  from  the  terminal  elevator  companies 
rather  than  by  bank  loans.  A  majority  of  the  commission  houses  at 
Duluth  have  operated  to  some  extent  on  funds  advanced  by  one  or 
more  terminal  elevator  companies,  which  have  frequently  made  such 
loans  on  ‘^open-line  of  credit,”  i.  e.,  without  collateral  security. 


6  By  correspondence  with  the  Federal  Trade  Commission,  May  19,  1921. 


194 


TERMINAL  GRAIN  MARKETING. 


The  statement  below  indicates  the  extent  of  loans  outstanding:^  and 
secured  only  by  personal  or  firm  notes  on  the  books  of  two  terminal 
elevator  companies  on  November  30  of  each  of  the  years  specified: 


Year. 

Company  A. 

Company  B. 

Number 
of  ac¬ 
counts. 

Amount 
outstanding 
as  of 
Nov.  30.1 

Number 
of  ac¬ 
counts. 

Amount 
outstanding 
as  of 
Nov.  .30.1 

1912 . 

8 

$900  .500 

K 

$.555,000 

'  7An  nm 

1913 . 

12 

1  17,8  .500 

ft 

1914 . 

13 

1  6Qfi  000 

C 

AAA  AAA 

1915 . : . 

14 

1  fiOO  000 

K 

OAt;  AAA 

191G . 

14 

2, 097, 500 

7 

(\Af\  AAA 

uuu 

1  The  figures  for  these  loans  are  actual  amounts  outstanding  unsecured.  The  figures  for  Company  B 
were  arrived  at  by  taking  the  total  amount  loaned  on  both  secured  and  unsecured  notes  and  then  de¬ 
termining  the  highest  amount  within  that  figure  which  the  commission  firm  could  borrow  without  collat¬ 
eral.  The  vice  president  stated  that  the  commission  firm  would  borrow  up  to  a  certain  limit  on  unse¬ 
cured  notes  and  after  that  figure  had  been  reached  they  must  put  up  collateral  for  further  loans  The 
limits  of  unsecured  credit  for  these  firms  ranged  from  $25,000  to  $300,000. 

* 

An  inquiry  into  loans  made  by  the  same  Duluth  terminal  elevator 
companies  during  the  four  years  1917-1920  shows  how  large  is  the 
proportion  of  unsecured  loans : 


Year  (Nov.  30). 

Company  A. 

Company  B. 

Secured 
by  bills  of 
lading  or 
warehouse 
receipts. 

Secured 
by  personal 
or  firm 
notes. 

Secured 
by  biUs  of 
lading  or 
warehouse 
receipts. 

Secured 
by  personal 
or  firm 
notes. 

1917 . 

$822, 575 
1, 540, 800 
97, 300 
253, 900 

$898, 000 
1, 334, 000 
906,500 
520, 000 

$375, 350 
1,405,300 
221, 300 
322,000 

$1, 813,000 
2, 082,500 
1,560,000 
1, 122, 500 

1918 . 

1919 . 

1920 . 

Loans  to  commission  houses  by  the  three  other  large  elevator  com¬ 
panies  at  Duluth  have  been  small  and  incidental  as  compared  with 
the  figures  shown  above.  It  appears  that  the  loans  not  secured  by 
grain  collateral  in  the  case  of  each  of  these  companies  was  less  than 
$50,000  on  the  dates  specified  in  the  above  tables. 

It  appears  that  the  loans  from  Companies  A  and  B  are  to  com¬ 
mission  houses  who  sell  primarily  to  the  elevator  companies.  The 
commission  houses  draw  upon  the  elevator  companies  for  funds  to 
finance  country  elevators;  and  as  the  consignments  come  in  they  sell 
to  these  terminal  elevator  companies  in  order  to  liquidate  their  ac¬ 
counts.  Out  of  35  receivers  operating  in  the  Duluth  market  in  1917, 
7  obtained  loans  froin  Company  B  and  13  obtained  loans  from  Com¬ 
pany-  A.^  The  commission  firms  so  financed  comprised  most  of  the 
large  companies  in  the  market  and  probably  handled  60  per  cent  of 
the  grain  received  at  the  market  during  1912-13  to  1916-17. 

The  plants  operated  by  Companies  A  and  B  comprised  about  51 
per  cent  of  the  devator  capacity  of  the  market,  and  during  the  period 


7  The  elevator  companies  usually  loaned  at  a  rate  one-half  of  1  per  cent  higher  than  that  for  which  they 
could  obtain  the  funds.  There  was  little  profit  from  these  operations  owing  to  the  necessity  of  borrowing 
on  time  against  loans  on  open  account. 


FINANCING  THE  GRAIN  TRADE. 


195 


1912-13  to  1916-17  they  purchased  more  than  53  per  cent  of  all  the 
grain  coming  into  the  marKet,  their  proportionate  purchases  of  wheat 
being  considerably  larger  than  this.  Considering  that  other  com¬ 
panies  also  advanced  funds  to  commission  houses  to  some  extent,  it 
IS  fairly  apparent  that  a  large  part  of  the  grain  marketed  at  Duluth 
was  applied  on  these  loans — assuming  that  the  financed  commission 
houses  sold  directly  to  the  companies  advancing  the  funds. 

Analysis  of  the  sales  showed  this  last  to  be  the  case.  Of  six  repre¬ 
sentative  commission  houses  financed  by  the  terminal  elevator  com¬ 
panies,  each  sold  more  than  70  per  cent  of  its  grain  to  the  terminal 
elevator  which  had  advanced  it  funds.  An  officer  of  one  company 
estimated  that  80  per  cent  of  the  consignments  received  went  regu¬ 
larly  to  the  elevator  which  was  advancing  it  funds. 

On  the  other  hand,  the  records  of  a  ^‘free-lance’’  company  (not 
financed  by  an  elevator  company)  showed  no  such  predominance  of 
sales  to  any  one  house.  The  highest  percentages  of  grain  sold  to  any 
one  buyer  by  this  concern  were  as  follows: 

Per  cent. 


Wheat — ^A.  D.  Thompson .  28.  8 

Durum — Globe  Elevator . ., .  26.  8 

Durum — Capitol  Elevator .  26.  8 

Flax — A.  D.  Thompson .  33.  2 


An  officer  of  one  of  the  terminal  elevator  companies  doing  a  large 
volume  of  this  financing  declared  that  there  was  no  written  contract 
of  any  kind  between  a  financing  elevator  and  its  “assisted”  commis¬ 
sion  houses,  binding  the  latter  to  turn  over  a  definite  percentage  of 
its  grain  to  the  elevator,  but  added,  “We’re  not  going  to  loan  unless 
he  gives  us  his  business.”  Questioned  further  on  this  point,  he  ex¬ 
plained  that  one  could  not  expect  a  commission  man  to  give  all  of  his 
business  to  one  elevator,  since  there  would  frequently  be  poor  cars 
which  the  latter  would  not  want  to  take,  and  when  the  commission 
man  offered  such  a  car  to  some  other  buyer  the  latter  would  nat¬ 
urally  refuse  to  take  it  unless  he  be  given  some  good  cars  also.  If 
the  houses  receiving  loans  on  open  account  would  give  us  all  of  their 
grain,  he  said,  the  elevator  company  would  get  45  per  cent  of  the 
grain  coming  to  Duluth,  whereas  they  actually  got  about  22  per  cent. 

It  is  apparently  difficult  for  elevators  which  do  not  make  loans  on 
this  basis  to  obtain  this  “mortgaged  grain,”  as  they  call  it.  The 
manager  of  one  company  stated  the  situation  as  follows  (quoting  the 
agent”s  report  of  the  interview) : 

Financed  commission  men  can  not  sell  grain  to  anybody  else  unless  *  *  *  the 
latter  will  pay  more  money,  and  even  then  it’s  a  question.  *  *  *  It  works  out 
practically  as  if  the  elevators  had  lines  of  feeders  in  the  country.  I  don’t  see  how  any 
corporation  is  justified  in  putting  the  money  of  its  stockholders  out  so  beyond  control. 
‘  ‘  I  loan  to  you  and  you  scatter  it  all  over.  ’  ’  A  man  worth  $100, 000  gets  credit  amount¬ 
ing  to  $500,000.  Personally  I  refuse  to  ‘  ‘  throw  money  to  the  birds  ”  in  that  way.  It 
does  make  it  hard  to  get  our  share  of  the  grain.  When  we  spring  the  price  sometimes 
these  other  companies  follow,  and  sometimes  they  drop  out. 

Officers  of  other  companies  declared  that  they  were  obliged  to  pay 
a  premium  to  prevent  a  commission  house  from  selling  its  grain  to 
the  elevator  which  had  advanced  it  credit.  It  was  stated  that  even 
the  lower  grades  of  grain  were  often  turned  over  to  the  financing  ele¬ 
vator  at  an  agreed  differential,  the  grain  being  sold  off  exchange. 

It  was  also  alleged  that  the  nonfinancing  mevators  were  so  associ¬ 
ated  with  line-elevator  companies  that  they  did  not  bid  for  grain  to 


196 


TERMIITAL  GRAIN  MARKETING. 


any  large  extent  from  the  so-called  financed  commission  houses  un-  | 
less  the  supplies  of  a  particular  crop  proved  insufficient  to  meet  their  i 
demands. 

T 

Without  further  discussion  of  the  competitive  situation  it  appears  ' 
reasonably  conclusive  that  such  extensive  borrowing  from  dealers  is  i 
carried  on  for  commercial  reasons  rather  than  for  lack  of  banking 
facilities.  [ 

Section  4.  Conclusions  on  financing.  [ 

Improved  banking  arrangements  are  needed  in  the  producing  areas  i 
of  the  Northwest  so  that  country  shippers  need  not  be  dependent  upon  * 
terminal  market  commission  houses  for  their  working  funds.  While 
in  other  sections  of  the  country  grain  in  car  lots  is  financed  through 
regular  banking  channels,  the  country  dealer  in  the  Northwest  f 
frequently  draws  upon  a  commission  house  for  operating  funds  and 
thereby  becomes  obligated  to  ship  to  this  concern.  This  results  in  ! 
competition  in  financing  as  well  as  in  the  handling  of  grain.  This  | 
competition  in  turn  results  in  the  assumption  of  heavy  financial  ■ 
risks  by  the  commission  houses,  and  sometimes  the  acceptance  of  ' 
inadequate  security  for  the  funds  advanced.  It  also  probably  tends 
to  keep  out  of  the  commission  business  men  with  small  capital  and 
lines  of  credit.  Moreover,  the  practice  leads  to  a  multiplication  of  ^ 
solicitors  and  to  expenses  for  solicitation  greatly  in  excess  of  those 
incurred  by  commission  houses  operating  in  the  territory  outside  the 
Northwest,  and  thus  has  a  tendency  to  create  high  commission  rates. 
This  is  due  not  only  to  the  fact  that  such  financing  requires  exten¬ 
sive  solicitation  to  secure  the  business  in  the  first  place  but  also  to 
the  necessity  of  maintaining  some  check  upon  the  subsequent  opera¬ 
tions  of  the  financed  elevators. 

As  pointed  out  in  Volume  I,  page  242,  however,  there  is  a  great  ■ 
deal  of  evidence  to  indicate  that  in  a  large  portion  of  the  Northwest  I 
the  elevators  can  borrow  more  cheaply  from  the  commission  houses  fl 
than  from  the  local  banks.  As  long  as  this  continues  to  be  true,  ■ 
it  is  doubtful  if  any  material  improvement  with  reference  to  commis-  S 
sion  house  financing  can  be  expected.  ■ 

The  financing  of  Duluth  commission  houses  by  terminal  elevator  .  I 
operators  tends  to  have  a  restrictive  effect  upon  competition  and 
should  be  eliminated.  Commission  houses  are  the  agents  of  country  fl 
elevator  consignees  for  the  sale  of  their  grain,  and  as  such  it  is  their  S 
duty  to  obtain  the  best  possible  price  for  that  grain.  Arrangements  9 
under  which  they  turn  over  grain  consigned  to  them  to  certain  I 
terminal  elevators  in  return  for  financing  is  not  conducive  to  free  I 
competition  in  the  sale  of  grain  nor  presumably  to  the  consignees  I 
procuring  the  best  obtainable  price  therefor. 


Chapter  VIII. 

THE  GRAIN  BULLETIN. 


Section  1.  Market  news  agencies  in  general. 

Price  information  from  the  terminal  grain  markets  is  made  availa¬ 
ble  to  country  shippers  through  a  variety  of  agencies.^  From  several 
terminal  markets  there  are  issued  one  or  more  daily  market  journals 
or  ''price  currents,”  such  as  the  Daily  Trade  Bulletin  of  Chicago,  the 
Daily  Market  Record  of  Minneapolis,  the  St.  Louis  Market  Reporter, 
and  the  Kansas  City  Daily  Price  Current;  and  these  journals,  or  the 
quotations  contained  therein,  are  available  to  the  trade  generally. 

Actual  bids  for  grain  to  arrive  from  the  country  are  sent  out 
almost  daily  by  terminal  market  dealers  and  afford  a  price  basis  for 
buyers  and  shippers  in  producing  territory.  In  addition,  there  are 
the  daily  telegraphic  dispatches  distributed  by  the  Western  Union 
and  Postal  Telegraph  Cos.  over  local  Morse  wires  or  tickers  through 
the  producing  areas.  By  subscribing  to  either  the  "continuous 
service,”  or  the  "interval  service,”  ^  a  local  grain  dealer  at  a  rail¬ 
road  shipping  point  may  secure  regular  wire  quotations  from  the 
terminal  markets.  Moreover,  the  private-wire  systems  which  radiate 
out  of  Chicago,  through  their  branch  and  correspondent  offices, 
supply  their  customers  and  the  trade  in  general  with  market  price 
information  and  other  market  news.  Exchange  members,  especially 
the  commission  merchants,  often  advise  their  customers  by  wire  of 
important  market  developments  and  send  out  by  mail  daily  market 
letters,  price  currents,  and  other  circulars.  In  the  case  of  line-ele¬ 
vator  systems,  letters,  cards,  and  wire  messages  are  sent  out  as 
instructions  for  local  agents  to  follow  in  buying  grain  and  are  a 
direct  influence  in  determining  the  prices  paid  to  producers. 

The  custom  of  sending  out  buying  prices  for  country  shippers,  i.  e., 
lists  of  prices  with  the  freight,  handling  costs,  and  profit  already 
deducted,  has  developed  more  extensively  in  the  Northwest  than 
in  any  other  producing  section.^  The  Grain  Bulletin,  a  price  card  of 
this  character  issued  daily  by  F.  R.  Durant,  of  Minneapolis,  is  now 
used  very  widely  in  the  territory  tributary  to  Minneapolis  and 
Duluth. 

Section  2.  General  statement  with  reference  to  competitive  conditions 
and  agreements  in  country  buying  in  territory  covered  by  the 
Grain  Bulletin. 

In  Chapter  XI  of  Volume  I  of  this  report  there  is  printed  a  large 
.  number  of  letters  from  the  files  of  the  line-elevator  companies  show¬ 
ing  competitive  conditions  and  many  examples  of  agreements  in 
restraint  of  competition  in  the  buying  of  grain  at  country  stations  in 


1  Seo  Vol.  I,  Chap.  VIII. 

2  See  Vol.  V,  Chap.  II,  sec.  4,  and  footnotes. 

3  Although  line-elevator  companies  in  all  sections  generally  furnish  their  country  agents  with  buying 
prices. 


197 


198 


TERMINAL  GRAIN  MARKETING. 


the  Northwestern  States  tributary  to  the  terminal  markets  of  Minne¬ 
apolis  and  Duluth. 

In  order  to  make  clear  the  conditions  prevailing  in  the  country 
marketing  of  grain  and  some  of  the  conditions  surrounding  the  use  of 
the  Grain  Bulletin  card  in  country  buying  by  those  who  subscribe 
to  it,  as  distinguished  from  Mr.  Durant's  preparation  of  it,  a  brief 
summary  is  here  given  of  part  of  the  voluminous  detailed  evidence 
printed  in  Chapter  XI  of  Volume  I.  Reference  should  be  made  to 
that  volume  for  the  evidence  itself,  chiefly  in  the  form  of  letters, 
since  the  detailed  evidence  gives  perhaps  a  clearer  view  of  the 
situation  than  can  be  had  from  the  summarization  here  made.  The 
question  of  the  use  made  of  the  card  as  a  basis  for  price  agreements 
among  its  subscribers  is  entirely  separate  from  the  question  whether 
in  recent  years  Mr.  Durant  in  issuing  the  card  prices  has  been  in 
collusion  with  the  line-elevator  interests. 

A  review  of  the  mass  of  information  obtained  by  the  Commission 
indicates  that  at  the  average  country  marketing  station,  especially 
in  the  northwestern  grain  States,  there  is  a  considerable  amount  of 
buying  competition  but  that  there  are  frequently  stations  at  which 
competition  is  either  insignificant  or  nonexistent  on  account  of  local 
or  other  agreements. 

The  Commission  is  in  possession  of  hundreds  of  letters  from  the 
files  of  line-elevator  companies  operating  in  the  Northwest  which 
cover  the  period  1912-1920  and  which  clearly  evidence  either  agree¬ 
ments  as  to  country  prices,  grades,  dockages,  etc.,  or  else  such  har¬ 
monious  and  cooperative  action  with  reference  to  these  matters  as 
would  bring  about  practically  the  same  elimination  of  competition 
as  could  be  secured  by  more  specific  agreements.  This  evidence 
relates  principally  to  the  acts  of  the  line-elevator  companies.  Although 
the  lines  appear  to  be  frequently  the  originators  and  instigators  of 
the  agreements  and  arrangements,  the  correspondence  clearly  shows 
that  cooperative,  or  farmers',  and  independent  and  mill  elevators 
are  frequently  parties  to  such  arrangements  and  that  agreements 
and  understandings  affecting  and  often  eliminating  competition  in 
one  or  more  respects  are  bv  no  means  peculiar  to  the  line  companies 
(Vol.  I,  pp.  244-245). 

The  most  active  competition  in  country  grain  buying,  as  well  as 
the  most  frequent  agreements,  understandings,  and  mutual  arrange¬ 
ments,  seem  to  occur  in  the  prices  ofiered.  An  indirect  form  of  price 
competition  occurs  when  some  one  or  more  of  the  local  elevator 
purchasers,  instead  of  grading  and  docking  the  grain  accurately, 
grade  it  higher  than  its  quality  actually  warrants  or  deduct  less 
dockage  than  the  grain  contains.  Obviously,  in  either  event,  the 
result  is  to  give  the  farmer  more  money  for  his  grain  than  he  would 
get  if  accurately  graded  and  docked,  competition  in  grading  and 
docking  being  frequent,  as  well  as  are  agreements  in  reference  to  these 
matters  (Vol.  I,  pp.  254—255).  It  is  believed  by  the  line-elevator 
companies  that  farmers'  elevators  are  especially  prone  to  overgrade 
and  to  underdock. 

There  are  numerous  indications  that  the  mill,  and  especially  the 
farmers'  or  cooperative  elevators,  are  the  most  serious  factors  in 
country  competition.  Both  these  types  frequently  undertake  poli¬ 
cies  in  prices,  grades,  dockages,  etc.,  at  variance  with  the  policies  of 
their  independent  or  commercial  line  competitors. 


THE  GRAIN  BULLETIN. 


199 


Division  of  receipts  at  local  stations  was  frequent  twenty  or  more 
years  ago  by  pooling  agreements,  with  cash  penalties  to  be  paid  by 
those  buying  more  than  their  share.  Most  if  not  all  of  these  old 
pooling  agreements  appear  to  have  been  abandoned.  More  recently 
the  business  at  local  stations  has  often  been  divided  among  elevators 
interested  but  without  any  system  of  penalties.  Occasionally  there 
is  an  understanding  that  if  one  of  the  elevators  at  the  station  falls 
behind  in  its  share  of  receipts  it  is  to  be  allowed  to  pay  a  higher  price 
than  its  competitors,  so  as  to  enable  it  to  catch  up  (Vol.  I,  pp.  282- 
287). 

A  practice,  amounting  in  effect  to  a  pooling  of  receipts,  is  that  of 
closing  or  wrecking  elevators  on  a  rental  basis.  When  the  line  com¬ 
panies  operating  at  a  station  conclude  that  there  are  too  many  eleva¬ 
tors  there  to  enable  a  profitable  handling  of  the  volume  of  grain 
tributary  to  that  point,  they  sometimes  agree  to  close  or  tear  down 
one  of  the  line  houses  at  the  station  upon  agreement  that  the  line 
companies  keeping  open  will  pay  a  certain  sum  in  compensation  to 
the  company  which  closes  or  wrecks  its  house.  In  case  of  closing  it 
is  apparently  the  practice  for  the  agreement  to  take  the  form  of  a 
signed  lease,  the  agreed  sum  being  paid  as  rental.  It  is  claimed  that 
these  practices  existed  for  only  a  few  years  and  applied  to  only  a  few 
companies.  Mr.  Durant,  of  the  Grain  Bulletin,  who  appears  to  have 
been  a  sort  of  clearing  house  for  operations  of  this  character,  states 
that  the  last  time  he  compiled  figures  for  this  purpose  was  the  crop 
year  1915-16.  The  Commission  is  not  in  a  position  to  confirm  this, 
but  the  correspondence  obtained  relating  to  this  particular  matter 
all  bore  a  date  prior  to  1917  (Vol.  I,  pp.  288-293). 

The  correspondence  obtained  by  the  Commission  records  numerous 
instances  where  the  head  offices  of  line  companies  have  directed  their 
agents  to  call  on  their  competitors  with  reference  to  effecting  agree¬ 
ments  or  at  least  more  harmonious  action  on  prices,  grades,  dockages, 
etc.  The  friendly  feeling  frequently,  if  not  usually,  apparent  among 
the  various  line  companies  leads  to  definite  efforts  on  the  part  of 
many  of  the  head  offices  to  keep  the  agents  of  the  different  lines  at 
each  station  working  together  on  a  harmonious  basis,  ‘^buying  grain 
right,”  or,  in  other  words,  at  card  prices,  with  accurate  grading  and 
dockage.  Definite  instructions  are  frequently  issued  to  the  local 
line  agents  unmistakably  designed  to  prevent  competitive  fights,  to 
eliminate  ill-feeling  which  might  develop  into  competitive  warfare,, 
or,  once  such  warfare  has  occurred,  to  put  an  immediate  or  early  stop 
to.  it.  There  are  also  occasional  instances  where  the  lines  manifest 
a  similar  attitude  toward  their  competitors  other  than  the  line 
companies  (Vol.  I,  pp.  296-298). 

Letters  by  line-elevator  companies  summarizing  price 
CONDITIONS  AT  THEIR  VARIOUS  STATIONS. — Line-company  .corre¬ 
spondence  in  the  fall  of  1917  stating  the  competitive  reasons  for  pay¬ 
ing  over  the  list  price  of  the  Grain  Bulletin  card  at  specified  stations 
is  here  quoted: 

[From  Cargill  Elevator  Co.  files.] 

October  30,  1917. 

Mr.  F.  C.  Durant 

( %  Grain  Bulletin'), 

City. 

Dear  Sir:  Below  find  list  of  stations  paying  over  list: 

Clara  City,  Minn. — 1  to  2(i;/over  for  oats,  3  to  4(J;  over  for  barley  and  flax.  One-half 
the  receipts  at  station  going  to  Farmers  Elev.  Co. 


200 


TERMINAL  GRAIN  MARKETING. 


Moynord,  Minn.  1  to  24;  ovor  for  oats  in  ondoavor  to  get  share  of  receipts. 

Milroy,  Minn.—1<^  over  for  oats.  Surrounding  stations  all  over  I4;  or  more. 

StewdTtville,  Minn.  24;  over  for  oats;  3  to  545  over  for  barley.  Farmers  Co  makes 
price. 

Dover,  Minn.  1  to  24;  over  for  oats;  3  to  44;  over  for  barley,  in  endeavor  to  get  share 
of  receipts. 

Airlie,  ifmn.— Oats  1  to  24;  over,  barley  3  to  44;  over,  account  Farmers  and  list  being 
out  of  line  with  Milwaukee  most  of  time. 

Stirum,  N.  D.  1  to  34;  over  Wheat,  Flax  and  barley.  Receipts  almost  entirely 
going  to  h  armors.  ’’ 

(>ete,  N.  List  to  1 4;  over  for  wheat,  barley  and  flax,  account  Farmers  Elev.  Co. 

Honeyford,  N.  D. — Freight  off,  but  getting  no  receipts,  due  mainly  to  practice  of 
competitors  cleaning  grain  for  customers  and  returning  screenings. 

Buffalo,  N.  D.—H  over  for  wheat,  flax  and  barley,  in  endeavor  to  get  share  of 
receipts. 

Hensel,  N..  i).— List  but  running  14  to  short  for  wheat  dockage  account  light 
dockage  taken  by  Farmers  Elev.  Co. 

Garretson,  S.  D.  24;  over  for  oats,  account  local  and  surrounding  markets. 

Willow  Lakes,  S.  D. — 2  to  34;  over  for  wheat,  flax  and  barley.  Farmers  Elev  Co 
taking  nearly  half  receipts  on  markets. 

Mclntire,  la. — Oats  24;  over  account  surrounding  markets.- 

Alvord,  Iowa.  Oats  2  to  34;  over,  barley  3  to  54;  over,  account  Farmers  Elev  Co 
prices. 

Sioux  Center ,  Iowa.  3<t  over  for  oats,  54;  over  for  barley,  account  Farmers  Elev.  Co. 
prices  Farmers’  Co.  taking  three-quarters  of  receipts. 

Hinton,  Iowa.  List  to  24;  over  on  oats  and  barley  in  endeavor  to  get  share  of  business. 

Waver ly,  Minn. — 34;  over  on  rye,  account  Farmers. 

Litchfield,  Minn.  34;  over  on  Rye,  24;  over  on  wheat,  44;  over  on  flax,  34;  over  on 
baney  and  3^  over  on  oats,  account  Equity  Elev.  Co.  and  Independent. 

Benson  Minn.— 2^  over  on  wheat  and  oats,  54;  over  on  flax  and  34;  over  on  barlev 
because  t  armers  are  paying  over.  ’ 

Herman,  Minn.—A^  over  on  Flax  and  barley  and  24;  over  on  oats.  Business  lost 
account  poor  a,gent  trying  to  get  it  back. 

Johnson,  Minn. — l(t  over  on  oats,  account  Graceville. 

DeVillo,  N.  D. — 14;  over  on  wheat,  account  surrounding  markets. 

Clifford  N  D.—U  over  on  wheat,  account  Farmers  and  Independent. 

Koseville,  N.  D.— 14;  over  on  wheat,  account  surrounding  markets. 

Portland,  N.  D. — 14;  over  on  wheat,  account  Farmers. 

Kempton,  N.  D.—U  over  on  wheat,  to  protect  trade  from  Farmers  Elev  Co  and 
Larimore  market.  ’’ 

Finley,  N.  D.—l^  over  on  wheat,  34;  on  barley,  account  Farmers  taking  two-thirds 
of  grain  at  station.  ® 

Dazey,  N.  D.  I4;  over  on  oats,  account  Farmers  paying  over. 

Cooperstown,  N.  D.—2^  over  on  wheat,  44;  over  on  flax  and  54;  over  on  barley,  account 
r  armers  and  two  other  independents  paying  over  and  over-grading 

Eckelson,  N.  D.—2<^  over  on  wheat.  Durum  and  Rye  and  34;  overmen  barley,  account 
farmers  paying  over  and  taking  nearly  all  the  grain. 

Urbana,  N.  D.  I4;  over  on  wheat  and  20  over  on  Durum,  account  The  Farmers 
priC0s. 

Park  River,  iV.  D.— -60  over  on  wheat,  20  over  on  Durum  and  l0  over  on  oats,  to  meet 
over-grading,  under-docking  and  over  list  price  by  the  mill 

an“heVe.7«t  Independent 

D.— 30  over  on  rye— to  meet  competition  of  McLean  Elev.  Co. 

Kidder,  S.  D.— 20  over  oats,  on  account  of  the  two  Independent  Elevators. 

RwhmoTM,  Minn.  -30  over  on  Rye,  account  of  the  mill  taking  rye  with  no  dockage, 
and  wheat  with  less  dockage  than  it  contains. 

Yours  truly, 

Cargill  Elevator  Company. 


[From  files  of  the  Northwestern  Elevator  Co.] 

T>  /-(•  Oct.  31,  1917. 

Grain  Bulletin,  City. 

Gentlemen:  At  Grove  City  we  are  buying  as  our  competitors  permit  us,  being  in 
competition  with  Nelson-Lund  Co.  and  the  Farmers.  Under  the  conditions  that  exist 
there  and  always  have  existed  we  will  be  unable  to  say  that  we  can  ever  come  to  list 
and  our  prices  fluctuate  according  to  conditions  fot  [for]  the  day.  ' 


THE  GRAIN  BULLETIN. 


201 


Our  Willmar  man  advises  that  the  mill  and  himself  follow  what  the  Farmers  Ele¬ 
vator  at  that  point  does  and  would  be  willing  to  come  to  list  if  he  would,  but  they 
say  his  prices  vary  from  day  to  day  and  they  have  to  watch  what  he  is  doing. 

At  Murdock  our  agent  is  working  with  the  Farmers  Elevator  Co.  and  they  would 
be  glad  to  go  to  list  on  everything  if  Kerkhoven  and  De  Graff  on  either  side,  could  be 
brought  into  line. 

At  Benson  the  mill  is  taking  all  the  wheat,  which  is  very  badly  overgraded.  The 
Benson  Market  Co.  are  paying  up  fairly  well  for  oats  and  barley,  and  competition  for 
what  is  left  seems  to  be  very  strong  between  Cargills,  ourselves  and  the  Benson  Market 
Co.  and  our  man  claims  to  be  following  the  prices  the  others  are  setting. 

At  Clontarf  we  are  entirely  guided  by  the  market  at  Hancock,  as  we  are  all  alone 
at  that  point  and  have  to  pay  within  reason  of  the  Hancock  market  on  everything 
from  the  North  because  of  Hancock. 

At  Hancock  we  are  the  only  line  house,  having  to  compete  with  three  independents 
and  a  Farmers  Elevator,  with  no  chance  to  come  to  list. 

At  Walcott  the  Farmers  and  ourselves  are  willing  to  come  to  list  on  everything 
providing  Christine  can  be  brought  to  list  and  remain  there. 

At  Everest  we  are  paying  l(l5  over  list,  inasmuch  as  we  are  alone  there  and  surround¬ 
ing  towns  would  draw  our  business  away  if  we  did  not,  the  territory  being  very  con¬ 
fined  and  small. 

At  Blab  on  our  man  is  paying  1  to  2^  over  list  on  practically  everything,  and  claims 
this  is  necessary  on  account  of  the  Farmers  Elev.  Co.  paying  about  11  to  120  over  the 
market;  Mr.  Taplin  also  advises  us  on  this  point. 

At  Pickert  we  would  be  glad  to  remain  at  list  and  all  the  others  up  there  would  do 
the  same  if  Hipley  could  be  brought  into  line. 

At  Finley  I  understand  the  Farmers,  Cargills  and  the  St.  A.  &  D.  are  all  paying  20 
over  list,  and  as  high  as  50  over  list  on  barley.  Our  man  is  a  new  man  there,  and  of 
course  has  to  buy  on  the  same  prices  that  the  others  set  altho  he  says  he  is  perfectly 
willing  to  come  to  list  at  any  time. 

At  Sharon  our  market  is  being  run  at  list  price  but  being  interfered  with  more  or 
less  on  account  of. Finley,  and  the  agents  are  grumbling  because  some  of  the  stuff  is 
going  away  from  them  and  going  to  Finley. 

At  Pekin  we  are  buying  at  list,  and  also  at  Hamar,  altho  our  man  at  that  point 
claims  he  thought  he  was  paying  over  list  and  the  farmers  thought  he  was  also  inas¬ 
much  as  he  was  getting  a ’great  deal  of  Dark  Nor.  Spring  but  not  so  grading  it.  The 
wheat  has  graded  that  way,  however,  in  this  market. 

At  Arthur,  the  farmers,  as  you  know,  at  that  point  clean  the  wheat  and  pay  for  the 
dockage.  We  have  no  cleaner  so  it  would  practically  mean  an  over  list  basis  for  us. 

At  Blanchard  I  believe  we  are  paying  at  present  10  over  list  but  see  no  reason  why 
the  market  should  not  go  to  list  unless  it  is  due  to  Murray  or  some  stations  competing 
with  Blanchard. 

At  Larimore  we  are  paying  10  over  list.  Our  agent  advises  one  of  his  competitors 
will  not  come  to  list. 

At  Milton  we  have  been  buying  at  list  right  along  but  the  Monarch  did  not  put  the 
10  reduction  in  about  a  month  ago  and  so  we  had  to  come  up  to  their  price,  which  is 
10  over  list.  I  suppose  that  can  be  adjusted  at  the  present  time. 

At  Hillsboro  the  agents  have  all  agreed  to  come  to  list. 

At  Thompson  we  are  buying  some  stuff  at  list  and  some  at  l0  over  list.  I  don’t 
know  what  the  reason  is,  and  our  agent  has  failed  to  advise  us. 

At  Glasston  we  are  at  list. 

At  Hamilton  at  list,  and  at  Neche  at  list. 

At  Ashby  it  is  catch  as  catch  can,  inasmuch  as  he  has  a  farmers  competition  who 
handles  f  to  f  of  the  business  and  we  have  to  pay  whatever  we  can  afford  to  to  get 
what  we  can. 

At  Rothsay  we  cannot  do  any  business  without  paying  over  list,  inasmuch  as  the 
Farmers  Elevator  is  cooperative,  and  they  are  paying  back  to  those  hauling. 

At  Ada  we  can  only  buy  the  coarse  grain  and  have  to  pay  over  list  for  those  inasmuch 
as  the  Mill  Co.  are  buying  all  the  wheat  on  an  OA'^er-grading  basis,  and  are  buying 
oats  and  shipping  them  north  in  mixed  car  load  feed  lots  for  nothern  [northern] 
lumbermen.  They  have  a  sacking  machine  and  everything  to  handle  this  business, 
and  inasmuch  as  they  are  shipping  feed  and  flour  also  they  ship  part  carloads  of  oats 
with  it. 

At  Fisher  we  are  buying  at  list. 

At  Halstad  we  are  paying  1  to  20  over  owing  to  Farmers  competition. 

At  Shelly,  Neilsville  and  Climax,  I  know  of  nothing  to  interfere  with  list  price  basis. 

At  Clara  City  we  pay  10  over  the  Farmers  and  they  allow  us  to  do  so,  but  inasmuch 
as  they  do  not  think  tney  ought  to  come  to  list  and  are  paying  l0  over,  of  course  it 
forces  us  to  pay  20  over.  All  the  buyers  are  on  the  same  basis. 


20^ 


i^RMiNAL  gMin  Marketing, 


b^nard  we  have  been  buying  our  stuff  at,  10  oy^r  list;  All  the  other  compaftie^ 
are  paying  20  over  list.  The  Farmers  are  willing  to  cohie  to  l0  over  list  providing' 
th8  Atlas  and  Thpipe  will  do  the  sam§; 

At  (jranite  Fails  we  buy  the  majority  of  tbe  stuff  arourid  list  pfiee^; 

At  Green  Valley  we  could  buy  everything  at  list  price  if  Marshall  and  Cotton  Wood 
would  hold  the  same  basis. 

,  At  Marshall  we  are  paying  l0  over  list,  as  that  seems  to  be  the  price  the  mill  down 
there  and  tbe  Farniers  Mlfevatof  want  t0  pay. , 

At  Pdofehcbj  Mihh.j  we  biiy  accetdihg  to  What  Tyl0f  and  Bllthtott  are  doing,  which 
at  pfe§ent  seeins  tb  bb  20  bvbf  bji  bat§  ahd  ^  tb  40  qWer  bh, barley; 

At  Riithton  the  i^afinefs  Want  to  pay  20  over  list  fbr  all  the  oats  they  buy,  and  ar@ 
paying  ahywhere  frotti  2  to  50  over  on  barley. 

At  Holland  the  market  has  been  gotten  do.wn  from  40  over  to  20  over  on  bats;  They 
are  buying  barley  some  over  list  also. 

At  Pipestone  we  are  in  competition  with  two  Independents  and  one  Farmer’s 
elevator,  and  have  to  pay  on  the  basis  of  the  market  they  set. 

At  Ihlen  we  are  buying  against  the  Farmers  and  an  Independent,  and  they  hold  the 
market  high  enough.  At  present  we  are  paying  about  30  over  list  on  oats,  and  most 
any  price  on  barley. 

At  Jasper  the  market  can  be  gotten  down  to  20  over  list  anyhow.  It  has  been  3  to  40 
over  in  the  past.  This  only  depends  upon  the  action  of  the  Atlas  and  E  A  Brown. 

At  Garretson  we  are  only  buying  oats,  inasmuch  as  another  station  down  there  takes 
practically  all  the  barley  in  that  country  and  pays  abnormally  high  prices  for  it. 
They  are  paying  10  oyer  qu  oatS;  and  the  Thorpe  Elevator  I  believe  are  paying  20  over. 

At  Danvers  we  are  trying  to  buy  at  listj  but  oUr  competitors  are  overgrading. 

At  Hqllbway  We  have  to  pay  over  list  to  make  bUr  grades  stand  up,  inasmuch  as  oUr 
Coinpetitbr,  the  Farttiers,  are  overgrading.  ^ 

At  Appleton  we  are  paying  1  to  20  over  list  on  various  commodities  to  hold  our  share 
of  the  business  with  the  Farmers. 

At  Bellingham  we  are  buying  at  list  price,  although  the  Farmers  at  that  point  are 
overgrading. 

At  Nassau  we  are  holding  prices  at  about  list. 

At  Albee  we  are  practically  buying  on  list  price  basis.  The  Farmers  are  over¬ 
grading  and  the  Cargill  people  are  paying  over  list  3  to  40. 

At  LaBolt  we  are  buying  on  a  somewhat  over  list  basis  to  compete  with  the  Farmers 
who  are  overgrading. 

At  South  shore  we  are  buying  on  an  over  list  basis  on  account  of  the  Farmers  there 
overgrading. 

Neither  the  Cargills  nor  ourselves  are  doing  anything  at  Forestville.  We  are  paying 
what  we  have  to  to  keep  all  the  stuff,  belonging  to  Forestville  from  going  to  South 
Shore  or  over  to  Waverly  or  down  to  Rauville  all  three  of  which  markets  are  taking 
practically  the  majority  of  the  stuff  from  that  territory. 

At  Vienna  we  are  simply  competing  with  the  Independents  on  the  Milwaukee  Road. 

At  Chokio  we  do  the  best  we  can  and  buy  according  to  grade,  altho  we  may  at  times 
pay  over  list  to  compete  with  Stewart  who  is  overgrading  everything  he  takes  in. 

At  Johnson  we  are  simply  holding  prices  to  keep  the  stuff  coming  to  Johnson  that 
belongs  there  instead  of  going  either  to  Chokio  or  Graceville. 

At  Graceville  the  mill  is  paying  |2.07  for  practically  all  the  wheat  that  comes,  and 
more  or  less  of  its  is  overgraded  I  should  say  about  50  %  of  it. 

On  the  Ellendale  line,  from  Belle  Plains  to  Silver  Leaf  we  are  willing  to  buy  every¬ 
thing  at  list  price  if  the  stations  on  the  Soo  to  the  North  and  the  points  on  the  North¬ 
western  and  Milwaukee  who  are  competitors  of  those  stations  will  do  the  same.  If 
these  stations  are  put  at  list  basis  we  can  buy  all  the  stuff  up  there  at  list  prices ;  other¬ 
wise  we  will  have  to  pay  the  same  as  the  others. 

Yours  truly, 

(Signature  not  decipherable.) 

Gen.  Supt. 


[From  Cargill  Elevator  Co.  files.] 

Nov.  15,  1917. 

Mr.  F.  C.  Durant 

(®/o  Grain  Bulletin), 

City. 

Dear  Sir:  We  are  paying  over  list  at  the  following  stations  and  for  the  reasons 
given; 

Cooperstown,  N.  D. — 20  over  on  wheat  and  30  over  on  barley,  account  Farmers  and 
Erickson  Co. 


THE  GRAIN  BULLETIN. 


203 


Eckelson.—2<i,  over  on  wheat,  and  barley  and  3<l;  over  on  rye,  because  the  Farmers 
are  taking  nearly  all  the  business. 

Urbana. — 20  over  on  wheat  and  Durum  account  the  Farmers. 

Park  River. — 60  over  on  wheat  and  20  over  on  Durum,  account  the  Mill  taking  light 
dockage. 

Dresden. — 20  over  on  wheat  and  oats  and  30  over  on  Durum,  account  the  Inde¬ 
pendent  and  Dresden  Elev.  Co. 

Roseville. — 10  over  on  wheat,  account  surrounding  markets. 

Portland. — 10  over  on  wheat,  account  others  refusing  to  come  to  list. 

Walden. — 50  over  on  barley  account  Farmers. 

Browns  Valley. — 20  over  on  wheat  and  oats  account  Farmers. 

Litchfield.  20  over  on  wheat  and  oats,  40  over  on  barley  and  50  over  on  rye,  account 
Equity  and  Independent. 

Richmond. — 20  over  on  rye,  account  mill. 

DeGraff. — 20  over  on  oats,  account  Independent. 

Benson. — 20  over  on  wheat  and  10  over  on  oats,  account  Farmers. 

Herman. — 40  over  on  flax,  20  over  on  barley,  and  10  over  on  oats,  account  Inde¬ 
pendents. 

Kidder,  8.  D.—H  over  on  barley  and  20  over  on  oats  account  two  Independents. 
Clara  City,  Minn. — 1  to  20  over  on  everything,  account  the  Farmers. 

Milroy,  Minn.—l^  over  on  oats,  account  surrounding  markets. 

Ada,  Minn. — List,  but  the  mill  is  taking  most  all  the  wheat  by  over-grading. 
Stirum,  N.  D. — 20  over  on  everything,  account  the  Farmers. 

Diesem,  N.  D. — 2  to  40  over  in  endeavor  to  get  fair  share  of  receipts. 

Buxton,  N.  D. — 10  over  for  wheat— Farmers’  price. 

Honey  ford,  N.  D. — Freight  off — trying  to  get  share  of  business. 

St.  Thomas,  N.  D. — 20  over  for  wheat — trying  to  get  a  start. 

Hensel,  N.  D. — 1  %  light  on  dockage,  account  the  Farmers. 

Garretson,  8.  D. — 20  over  on  everything,  account  Independents. 

Willow  Lake,  8.  D. — 1  to  50  over  on  everything,  account  Farmers.  ' 

Sidney,  Mont. — 20  over  on  wheat,  account  Ru.ssell  Miller  Mill. 

Yours  truly. 


Cargill  Elevator  Company. 


Section  3.  Early  history  of  daily  price  bulletins  in  the  Northwest. 

It  seems  clear  that  the  custom  of  issuing  price  cards  for  the  use  of 
country  buyers  in  the  Northwest  originated  with  the  millers.  Mr.  L.  D. 
Marshall,  of  Minneapolis,  who  was  active  in  the  country  grain  trade 
of  northern  Minnesota  and  North  Dakota  prior  to  1881  and  there¬ 
after,  reported  positively  that  ^Hhe  custom  of  issuing  price  cards,  or 
notices  equivalent  to  cards,  for  use  of  country  buyers  in  northern 
Minnesota  and  North  Dakota,  originated  with  the  representatives  of 
the  mills  and  the  then  well-lmown  firm  of  David  Dowes  &  Co.,  and 
was  continued  by  the  elevator  companies  when  they  authorized 
their  agents  throughout  the  country  to  purchase  grain  for  them.” 

After  the  organization  of  exchanges  at  Minneapolis  and  Duluth  in 
1881  the  line-elevator  companies  became  the  cluef  buyers  of  grain 
at  country  points,  and  they  issued  their  own  price  lists  to  local  agents. 
Since  it  was  necessary  to  operate  a  system  of  line  elevators  as  a  single 
enterprise,  the  buying  agent  at  each  country  station  was  given  little 
discretion  as  to  the  prices  which  he  should  follow. 

The  Jumper  service. — Prior  to  1891  each  line  company  made  a 
practice  of  teleOTaphing  price  changes  to  its  own  agents  in  the  country 
markets.  In  that  year  one  S.  H.  Jumper  began  to  send  out  quota¬ 
tions  to  grain  buyers  or  their  agents  in  parts  of  North  and  South 
Dakota.  Mr.  Jumper  described  the  origin  and  operation  of  his  service 
to  the  Interstate  Commerce  Commission  in  1906  in  the  following 
testimony:  ^ 

Mr.  Marble.  Where  do  you  reside? 

Mr.  Jumper.  Aberdeen,  S.  Dak. 


<Op.  Cit.,  S.  Doc.  278,  p.  981. 


204 


TERMINAL  GRAIN  MARKETING. 


Mr.  Marble.  What  is  your  business? 
Mr.  Jumper.  I  am  assistant  postmaster. 


* 


* 


* 


* 


* 


Mr.  Marble.  To  whom  do  you  send  your  cards? 

Mr.  Jumper.  I  send  them  to  the  grain  buyers  or  the  agents  of  grain  buyers  over 
that  territory— the  north  half  of  South  Dakota  and  the  south  halfi  and  a  portion  of 
North  Dakota.  ^ 

Mr.  Marble.  You  send  them  to  all  grain  buyers  in  that  territory? 

Mr.  Jumper.  Yes,  sir. 

Mr.  Marble.  Who  compensates  you  for  that  service? 

Jumper.  The  different  companies  which  I  send  them  for  in  Minneapolis.  • 
to  get  buyers  who  make  the  arrangement 

Mr.  Jumper.  Yes,  sir. 

Mr.  Marble.  But  there  are  grain  buyers  there  who  do  not  receive  them*? 

Mr.  Jumper.  They  can  have  them;  I  would  be  glad  to  send  them  to  all  of  them 

Mr.  Marble.  For  a  compensation? 

Mr.  Jumper.  Yes,  sir. 

Mr.  Marble.  What  proportion  do  you  send  them  to  of  the  grain  buvers? 

Jumper.  I  send  them  to  practically  all  of  them  in  a  certain  territory.  • 

Mr.  Marble.  Can  you  state  what  that  territory  is? 

1  from  Twin  Brooks,  on  the  east  side  of  the  State  on  the  Milwau¬ 

kee  road  to  Eureka  and  Evarts,  on  the  other  side  of  the  State,  on  the  Missouri  River- 
Bien  from  Edgeley  on  the  north— that  would  be  the  north  end  of  the  Milwaukee— to 

Keidsville  on  the  south,  a  distance  of  about  100  miles,  on  the  different  roads  in  that 
territory. 

Mr.  Marble.  To  how  many  elevators  do  you  send  those  prices? 

Mr.  Jumper.  About  200.  • 

Mr.  Marble.  Do  you  send  to  any  grain  dealers  who  are  not  grain  buvers? 

Mr.  Jumper.  Qmte  a  lot  of  them  .to  the  millers.  ‘ 

Mr.  Marble.  How  many  of  the  cards  do  you  send  all  told? 

Mr.  Jumper.  I  do  not  send  any  cards. 

Mr.  Marble.  Well,  quotation? 

Mr.  Jumper  I  merely  telephone  or  send  a  telegram,  which  reads:  “Advance 
wheat  oue^half  cent,  or  reduce  it,  or  whatever  it  is.  They  are  not  confirmed  bv  a 
card.  I  did  it  years  ago,  but  I  don’t  now. 

Mr.  Marble.  How  many  buyers  are  advised  by  you  in  that  wav? 

Mr.  Jumper.  I  should  think  about  200.  ’ 

bu^ers^^^^^’  advise  simply  one  buyer  at  a  ^oint,  who  advises  other 

Mr.  Jumper.  I  do.  My  telephone  message,  or  telegraph  message,  goes  to  one 
person,  and  he  notifies  the  other.  &  ,  b  tu  uue 

Mr.  Marble.  The  others  at  that  point? 

Mr.  Jumper.  Yes,- sir. 

Mr.  Marble.  He  notifies  the  others  whom  you  have  told  him  to  notify? 

Mr.  Jumper,  ^s,  sir;  he  had  a  list  of  the  people  who  participate  in  the  expense 

Mr.  Marble.  How  long  have  you  been  doing  that?  ^ 

Mr.  Jumper.  I  comrnenced  in  October,  1891.  I  think  I  originated  this  system  of 
making  prices.  In  October,  1891,  the  prices  were  made  in  our  territory  direct  from 

mneapolis  by  each  line,  and  there  used  to  be  a  string  of  telegrams  come  along 
The  service  was  not  very  good.  Sometimes  when  they  were  transferred,  they  would 
he  over  mght  without  going  from  Aberdeen,  that  being  the  terminal  piint.  I  con- 
of  m^ing  this  cheaper,  and  I  went  down  to  Mnneapohs  and  saw 
the  Eny ire  Elevator  Co.,  and  I  proposed  that  they  send  one  telegram  to  me  and  I 
would  distribute  telegrams  for  40  cents  then;  they  were  to  send  one  telegram  to 

^  would  distribute  them  either  over  the  long-distance  telephone 
starting  of  this  system  of  fixing  prices.  Then  a  year  or 
+  1  ^  ^uought  they  could  save  money  by  notifying  one  buyer,  instead  of  send¬ 
ing  a  telegrarn  to  all  of  them.  At  some  stations  there  are  five  or  six  buyers  at  a  sta- 
tion;  and  that  arrangement  was  made.  That  still  further  saved  money  for  them. 
te^toty'^affed:e(^^^  matter  was  arranged  in  Minneapolis,  then,  rather  than  in  the 

Mr.  Jumper.  The  first  arrangement? 

Mr.  Marble.  Yes,  sir. 

Mr.  Jumper.  Oh,  yes. 

Mr.  Marble.  And  then  did  you  have  a  meeting  of  the  people  here? 


THE  GRAIN  BULLETIN. 


205 


Mr.  Jumper.  No,  sir;  the  thing  was  all  done  in  the  one  office.  I  think  I  have 
never  had  a  message  from  anybody  except  the  Empire  Elevator  Co.  in  the  15  years. 

Mr.  Marble.  The  Empire  Elevator  Co.  send  you  your  prices? 

Mr.  Jumper.  Yes,  sir. 

**■»«•**** 

Mr.  Jumper.  When  we  started  in  1891,  they  first  sent  me  a  letter  giving  the  prices 
for  certain  stations;  and  then,  of  course,  after  that  it  was  advanced  a  cent  or  a  half 
cent  or  reduced  a  cent  or  a  half  cent.  Then,  of  course,  at  the  station  they  kept  their 
own  record. 

Mr.  Marble.  Did  you  know  how  that  price  was  made  up  which  was  sent  to  you 
originally? 

Mr.  Jumper.  No,  sir. 

Mr.  Marble.  Did  you  know  what  elements  it  included? 

Mr.  Jumper.  No,  sir. 

Mr.  Marble.  From  your  observation  as  a  grain  man,  I  will  ask  you,  does  it  in¬ 
clude  a  profit  for  the  dealer  buying  the  grain? 

Mr.  Jumper.  Yes,  sir. 

Mr.  Marble.  Do  you  know  what  profit  it  includes? 

Mr.  Jumper.  I  will  illustrate  that.  I  testified  before  the  Interstate  Commerce 
Commission  at  Washington,  after  conducting  this  business  for  10  years,  and  I  had 
the  records  then  every  day  of  Minneapolis,  as  well  as  Aberdeen,  and  the  average  for 
each  year,  and  perhaps  for  the  10  years,  that  I  testified  to  in  Washington,  was  a  little 
fraction  under  3  cents  profit.  That  was  3  cents  and  the  freight.  For  instance,  if 
the  freight  was  8  cents,  our  spread  would  be  11  cents. 

The  Hoskins  seryice. — ^About  1895  a  country  price  service  was 
being  operated  for  the  use  of  the  line-elevator  companies  by  A.  J. 
Hosluns,  of  Minneapolis,  though  Hoskins  testified  that  the  arrange¬ 
ment  was  started  before  his  time  and  that  there  had  been  a  man  in 
the  office  before  him  that  handled  it. 

******  ^( 

Mr.  Marble.  What  is  your  business? 

Mr.  Hoskins.  I  handle  prices  for  the  elevator  companies  in  the  northern  country. 

Mr.  Marble.  What  do  you  mean  by  “handle  prices?” 

Mr.  Hoskins.  Well,  I  put  out  changes  of  price  every  day.  They  occur  nearly 
every  day,  and  I  have  a  basis,  as  we  call  it,  printed  off  on  a  sheet  and  the  changes 
that  are  to  be  made,  and  send  them  around  to  the  different  elevator  offices. 

******* 

Mr.  Marble,  Have  you  made  your  prices  up  in  the  same  way  from  the  beginning 
of  this  employment? 

Mr.  Hoskins.  I  have  always  gotten  them  from  somebody.  We  have  a  price  com¬ 
mittee  that  gives  me  instructions  each  day  what  price  to  give  out,  and  I  follow  those 
instructions. 

Mr.  Marble.  You  do  not  use  your  own  judgment  as  to  the  price? 

Mr,  Hoskins.  No;  except  in  a  single  day  when  the  committee  is  absent  from  the 
floor,  and  I  try  to  handle  the  thing  the  best  I  could,  but  not  over  a  dozen  days  a  year 
that  way. 

Mr.  Marble.  Who  now  constitutes  that  committee? 

Mr.  Hoskins.  Mr.  Magnusson,  president  of  the  Northwestern  Elevator  Company, 
Mr.  Andrews,  of  Andrews  &  Gage,  and  Mr.  F.  J.  Smith  of  the  Osborn  McMillan  offices 
are  the  active  officers.  Really  Mr.  Magnusson  and  Mr.  Andrews  are  the  active  men. 
Mr.  Smith  comes  around  about  once  a  month,  Mr.  Magnusson  nearly  every  day,  and 
'  Mr.  Andrews  almost  every  day;  and,  then,  I  think  Mr.  Marfield  and  Mr.  Wendel  are 
members  of  that  committee,  but  never  take  any  hand  in  fixing  prices  at  all. 

Mr,  Marble.  What  length  of  time  does  the  committee  serve? 

Mr.  Hoskins,  Well,  until  some  other  committee  is  appointed,  I  suppose.  Mr. 
J.  F.  Cargill  had  charge  of  the  matter  for,  I  should  say,  about  eight  years. 

******* 

Mr.  Koon.  Now,  aside  from  this  arrangement  you  have  been  talking  about,  you 
are  now  sending  out  these  basis  cards  of  yours  to  various  corporations  and  persons? 

Mr.  Hoskins.  Well,  I  distribute  a  notice  among  the  elevator  companies  here  in 
the  city  and  mail  a  few  out  of  town,  and  I  also  send  out  postal  cards. 

Mr.  Koon.^  Do  you  send  the  same  things  to  people  other  than  the  elevator  companies 
here  in  the  city  out  in  the  country? 

Mr.  Hoskins.  Yes,  sir. 


56976°— 22 - 15 


206 


TERMINAL  GRAIN  MARKETING. 


Mr.  Koon.  Do  you  send  to  independent  dealers? 

Mr.  Hoskins.  The  postal  cards;  yes,  sir. 

Mr.  Koon.  Are  they  substantially  the  same  as  you  send  the  people  here? 

Mr.  Koon  [Hoskins].  They  are  the  prices  to  be  paid  at  the  stations  to  which  they 
are  sent. 


*  *  *  *  *  *  * 

Commissioner  Lane.  Was  this  committee  given  power  to  fix  prices? 

Mr.  Hoskins.  They  were  not  given  any  power.  They  were  simply  appointed  as 
a  price  conimittee,  as  I  understand. 

Commissioner  Lane.  What  does  that  mean? 

Mr.  Hoskins.  To  designate  what  changes  of  price  should  be  made  from  day  to  day. 
It  IS  a  case  of  advance  or  reduce  the  price. 

Mr.  McGee.  Based  on  what? 

Mr.  Hoskins.  On  the  market. 

Commissioner  Prouty.  You  say  you  had  meetings  here  at  which  the  margin  was 
determined.  What  do  you  mean  by  ‘‘the  margin?  ” 

Well,  say  they  would  decide  at  a  meeting  that  they  would  buy  wheat 
until  further  notice  on  2  cents  and  fractions. 

Commissioner  Prouty.  Two  cents  and  fractions  above  what?  Go  back  now  to  the 
price  your  committee  fixes.  Your  price  committee  fixes  a  price  and  gives  that  price 
to  you  and  y ou  send  that  price  to  the  elevator  people.  The  margin  is  a  certain  amount 
to  be  charged  above  [below]  that  price  in  the  country,  is  it? 

Mr.  Hoskins.  Yes,  sir. 

Commissioner  Prouty.  So,  when  you  send  to  the  country  station,  you  add  to 
[deduct  from]  the  price  given  you  by  the  price  committee  this  margin  and  the  freight*? 

Mr.  Hoskins.  Yes,  sir. 

Commissioner  Prouty.  And  that  constitutes  the  price  at  the  country  stations*? 

Mr.  Hoskins.  Yes,  sir. 

Commissioner  Prouty.  After  the  margin  has  been  fixed  by  these  gentlemen,  is  it 
not  your  understanding  that  that  is  the  price  that  is  going  to  be  paid  tWe?  What  do 
you  fix  this  margin  for? 

Mr.  Hoskins.  So  as  to  get  a  basis  for  the  price  in  the  country. 

Commissioner  Prouty.  That  they  are  going  to  pay  in  the  country? 

Mr.  Hoskins.  Yes,  sir.® 

*  *  *  *  *  *  * 

In  1907  Hoskins  died  and  his  card  service  was  taken  over  and 
operated  for  several  years  by  F.  R.  Durant,  of  Minneapolis,  who  also 
operated  a  card  service  known  as  the  Grain  Bulletin.®  Subsequently 
the  two  services  wpe  merged  in  the  Grain  Bulletin,  which  was  grad¬ 
ually  extended  to  include  a  large  proportion  of  all  country  elevators 
in  territory  tributary  to  Minneapolis  and  Duluth. 


Section  4.  Development  of  Grain  Bulletin  (Durant’s)  service. 

It  has  frequently  been  alleged  by  certain  farmers’  and  independent 
elevators,  and  also  others,  that  the  Grain  Bulletin  Card  constitutes  a 
price-fixing  mechanism  dominated  by  line  company  interests.  The 
fact  that  Mr.  Durant  was  associated  with  a  line  company  prior  to 
undertaking  this  service,  that  the  Grain  Bulletin  when  first  organized 
was  financed  by  an  association  of  line  companies  and  that  Mr.  Durant 
has  continued,  at  least  until  very  recently,  to  disburse  funds  provided 
by  line  companies  and  other  terminal  market  grain  concerns  for 
political  and  other  purposes,  have  all  tended  to  arouse  suspicion  of 
the  Card  and  its  purposes  and  to  create  the  belief  that  in  some  way 
or  another  it  is  operated  in  the  interest  of  the  line-elevator  companies 
and  against  the  interests  of  both  independent  and  cooperative  eleva¬ 
tors  and  the  producers.  Accordingly,  the  history  and  operating 


5  Op.  cit.,  S.  Doc.  278,  pp.  930,  942,  948,  and  949. 

o  card  service  simlar  to  those  described  was  also  operated  in  Iowa  by  W.  G.  Case.  This  service  had 

testimony  before  the  Interstate  Commerce  Commission  (op.  cit.,  S. 
f  covered  was  later  absorbed  by  the  Grain  Bulletin  service,  although 

It  IS  not  now  covered  by  the  latter  service.  ® 


THE  GRAIN  BULLETIN. 


207 


policies  of  the  Grain  Bulletin  and  the  relations  of  Mr.  Durant  to  the 
fine  companies  have  been  carefully  examined  in  an  effort  to  determine 
to  what  extent  weight  is  to  he  attached  to  such  views. 

Early  organization. — F.  R.  Durant  was  first  an  employee  of  a  line 
company,  later  acted  as  agent  for  an  association  of  these  concerns, 
and  since  1907  has  operated  his  service  as  a  personal  enterprise. 

The  origin  of  the  Grain  Bulletin  Card  is  described  by  Mr.  Durant 
as  follows : 

I  was  in  the  employ  of  one  of  the  line  companies  and  this  company  sent  out  the  mar¬ 
ket  for  all  the  dealers  on  the  Northwestern  road,  in  those  days  it  was  the  rule  for  each 
company  ,to  send  the  markets  to  their  own  buyers  and  these  cards  were  instructions 
to  pay  so  much  until  further  instructions  and  were  signed  by  the  company  sending 
them,  when  these  other  companies  noticed  this  form  it  was  suggested  that  such  a 
form  was  not  proper  when  sent  to  the  buyer  of  some  other  company,  so  the  form  was 
changed  to  show  just  the  values  quoted  for  each  station  and  each  company  instructed 
their  own  buyer  as  to  the  manner  in  which  these  values  were  to  be  used,  and  all 
cards  were  signed  by  me  instead  of  the  company;  this  brought  my  name  to  the  atten¬ 
tion  of  grain  dealers  throughout  the  country,  the  local  dealers  and  small  line  com¬ 
panies  whose  head  office  was  not  located  at  Minneapolis  and  they  asked  for  this  same 
information,  so  a  regular  charge  for  the  service  was  determined  and  all  regular  dealers 
asking  for  the  service  were  given  it.  It  finally  came  to  a  tune  when  the  demand  for 
such  information  was  so  large  that  I  could  not  attend  to  'this  and  also  to  my  work 
with  this  company,  and  believing  there  was  more  of  a  future  in  furnishing  these 
market  quotations  I  gave  up  my  position  to  devote  all  my  time  to  it. 

******* 

The  usefulness  of  this  service  to  the  line  companies  is  explained 
by  Mr.  Durant  in  the  following  language: 

The  first  early  years  we  operated  only  down  in  southern  Minnesota,  northern  Iowa, 
northeastern  Nebraska  and  southern  vSouth  Dakota,  the  old  settled  grain  communities. 
The  real  object  of — real  style  of  the  card  was  due  to  these  gridiron  railroads  down  there. 
The  towns  were  so  close  together  that  it  was  an  easy  matter  for  a  man  to  haul  to  one 
town  or  another,  two  or  three  towns,  *  *  *.  The  telephones  were  not  as  numerous 
as  they  are  to-day,  so  that  the  agents  of  the  company  were  continually  complaining 
such  and  such  a  station  was  offering  more  for  grain  than  they  were  offering  and  they 
conceived  the  idea  that  if  there  was  a  uniform  card  based  on  a  maximum  margin  that 
went  into  those  towns  down  there  they  could  to  a  certain  extent  instruct  their  agents 
that  the  basis  at  these  other  towns  having  the  same  freight  rate  was  identical  with 
their  basis,  and  in  that  way  eliminate  a  good  deal  of  this  confusion  caused  by  these 
stories  that  the  farmers  were  telling. 

The  first  organization  as  formed  in  1902  was  an  association  of 
line-elevator  companies  designed  to  finance  such  a  price-card  service 
to  be  administered  by  F.  R .  Durant.  According  to  him  this  association 
absorbed  the  subscribers  to  the  J.  W.  Brownell  card,  which  (as  he 
recollected  it)  was  put  out  from  Fort  Dodge,  Iowa.  The  organiza¬ 
tion  was  without  articles  of  association  or  officers  until  1905,  when 
Mr.  Durant’s  counsel  advised  that  he  considered  it — 

unwise  to  continue  your  operations  without  a  formal  organization,^  defiintely  and 
specifically  limiting*  and  prescribing  your  objects,  purposes,  and  intentions,  and 
definitely  prescribing  and  limiting  the  powers  and  duties  of  your  officers  and  agents. 

In  1905,  therefore,  the  association  was  formally  reorganized  (al¬ 
though  not  incorporated)  with  18  line-company  members  who  were 
financially  responsible  for  the  service.  The  following  declaration  of 
purposes  was  stipulated  in  the  articles  of  association : 

Recognizing  and  appreciating  the  advantage  of  cooperation  in  securing  and  dissemi¬ 
nating  any  and  all  proper  information  for  our  mutual  convenience,  benefit,  or  pro¬ 
tection,  we,  the  undersigned  purchasers  and  dealers  in  grain,  have  organized  this 
association. 


208 


TERMIISTAI.  GRAIN  MARKETING. 


An  advisory  committee  was  appointed  to  conduct  the  enterprise 
and  determine  ''what  would  be  a  fair  basis  for  the  card.’’^ 

The  articles  of  association  provided  that  no  "regulations  or  by-laws 
shall  be  adopted  by  this  association  in  any  manner  stifling  competi¬ 
tion,  limiting  production,  restraining  trade,  regulating  prices,  or 
pooling  profits.’’  On  legal  advice  they  were  especially  drawn  to 
prohibit  coercive  measures  or  discrimination  of  any  objectionable 
kind.  Any  regular  purchaser,  or  dealer  in  grain,  whose  business  was 
located  within  the  territory  of  the  association  was  eligible  to  mem¬ 
bership,®  if  approved  by  the  advisory  committee  upon  the  payment 
of  a  membership  fee  of  $1  per  year  and  a  subscription  charge  of  not 
to  exceed  $1  per  month.® 

From  1905  to  1907  the  advisory  committee  met  with  some  regu¬ 
larity,  the  Grain  Bulletin  accounts  were  audited  by  officers  of  the 
association,  and  the  service  was  more  or  less  closely  supervised  by  the 
organization.  In  the  fall  of  1907,  however,  Mr.  Durant  extended  his 
territory,  increasing  the  list  of  subscribers,  and  proceeded  to  finance 
the  enterprise  himself.  From  that  time  on  the  old  articles  of  associa¬ 
tion  were  ignored  and -the  association  ceased  to  function,  although  it 
was  never  formally  dissolved.^®  In  1913  he  "formally  assumed  the 
organization  as  an  individual”  and  in  the  following  year  he  stated 
to  the  Department  of  Justice  that — 

The  Grain  Bulletin  is  my  enterprise.  It  is  not  an  organization,  properly  speaking. 
It  is  managed  by  me  and  serves  grain  dealers  who  subscribe  for  the  service.  The  sub¬ 
scribers  have  no  connection  with  each  other  through  me  or  the  Bulletin.  I  have 
spoken  of  the  subscribers  as  an  association  because  I  consult  with  them  as  to  the 
service. 


Section  5.  The  system  in  operation. 

At  present  the  Grain  Bulletin  furnishes  all  country  shippers  or 
buying  agents  subscribing  to  its  card  service  with  daily  country  price 
lists  based  on  the  previous  day’s  market  at  Minneapolis  or  Duluth. 
To  those  subscribing  to  its  supplementary  wire  service  it  also  sends 
telephone  or  telegraph  messages  transmitting  market  changes  imme¬ 
diately  a,fter  the  close  of  the  market.  These  subscribers  also  receive 
notification  by  wire  of  any  important  market  fluctuations  during  the 
day  (Vol.  I,  Chap.  VII,  sec.  l).  There  is  also  furnished  to  the  head 
office  manager  of  each  line  company  a  daily  abstract  of  the  cards 
issued  to  the  local  elevators  of  that  concern. 

For  the  purpose  of  distributing  his  cards  Mr.  Durant  has  divided  the 
territory  covered  by  the  Grain  Bulletin  into  tWo  zones.  These  zones 
are  further  divided  into  groups,  there  being  14  in  all.  The  grouping 
is  based  on  freight  rates,  all  stations  within  any  group  having  approxi¬ 
mately  the  same  freight  rate  to  Minneapolis  or  Duluth,  the  greatest 


7  From  interview  with  Mr.  Durant.  Cf.  also  Mr.  Durant’s  testimony  before  the  Interstate  Commerce 
^®™^ission,  op.  cit.,  S.  Doc.  278,  pp.  965if,  which  contains  further  details  of  the  early  history  of  the  Grain 

membership,  however,  did  not  involve  any  financial  responsibilitv  such  as  that  sustained  by  the 
18  active  members  referred  to  above,  acxjording  to  Mr.  Durant’s  testimony.  Only  those  who  assumed 
financial  responsibility  were  technically  members  and  these  others  were  as  a  matter  of  fact  subscribers 
to  the  service  and  were  so  termed.  (Op.  cit.,  S.Doc.  278,  pp.  96f>-967.) 

®  Cf.  Ill  and  IV  of  the  Articles  of  Association. 

10  Mr.  Durant  stated  to  the  Commission  that  on  Dec.  1,  1914,  he  closed  out  the  Grain  BuUetin  guaran¬ 
tors’  fund,  crediting  the  balance  ($2,842.53)  to  profit  and  loss.  suaidu 

11  The  Gram  Bulletin  has  been  investigated  by  the  Minnesota  Legislature  (1905  and  1913)  bv  State 
railroad  and  warehouse  commissions  in  the  Northwest,  by  the  United  States  Interstate  Commer4  Com- 

(19^),  and  bv  the  United  States  Department  of  Justice  (1914),  and  by  others. 

12  Many  elevators  close  to  Minneapolis,  however,  receive  the  card  before  the  close  of  the  day  on  which 
the  prices  are  based. 


THE  GRAIN  BULLETIN. 


209 


difference  in  a  group  being  one-half  a  cent.  Each  group  contains 
several  mailing  points,  as  indicated  in  the  table  below.  The  stations 
within  each  group  are  classified  by  rate  numbers,  i.  e.,  those  stations 
within  the  group  operating  on  the  same  tariff  for  the  five  grains  and 
flax  are  classed  under  a  rate  for  the  convenience  of  the  main  office. 
This  number  is  referred  to  to  find  the  freight  charge  which  must  be 
deducted  from  the  basis  price  before  the  card  is  sent  out. 

The  table  below  shows  the  general  arrangement  of  groups  and 
mailing  points  for  the  Grain  Bulletin  card  service: 

Group  organization  of  the  Grain  Bulletin  service  {1920). 


Group 

No. 

Territory. 

Mailing  points. 

Number 
of  cards 
dis¬ 
tributed 
(May  5, 
1920). 

1 

Southern  Minnesota . 

Minneapolis,  Minn . 

570 

Bingham  Lake . 

75 

2 

fioiitb  Dakota.  .  . . 

Aberdeen . 

171 

Minneapolis . 

184 

Madison . 

99 

a 

Sflntion  of  cftntra.1  Minnesota . . 

Minneapolis . 

139 

4 

do  . . . 

. do . 

38 

Alonof  riorthPTri  honnda.rv  of  South  Dakota- ....  . 

64 

Aberdeen . 

115 

Morthem  half  of  Minnesota . 

Miiin68<polis . 

295 

7 

Aloucr  pastern  honndarv  of  North  Dakota . . 

. do . 

235 

Q 

TrrAcmIcir  «5<v»tinn  in  bJorth  Dn.lrntfl.  . 

. do . 

392 

Q 

SA/^tinn  in  nnrtb Mnrt.h  TTnlrnta . 

. do . 

155 

Devils  Lake . 

42 

in 

Hoptin-n  alonor  P.anadian  honndarv  in  North  Dakota . . 

Minneapolis . 

161 

ini 

. do." . 

212 

A vj • • • • 
11 . 

Ponfrol  Mnrth  TAalrota  alonor  pa<t  shore  of  MiSBOllH  Tt.iver.. 

. do . 

155 

Mandan . 

58 

12 . 

Devils  Lake . 

76 

Mandan . 

116 

Aberdeen . 

73 

1*^ 

*‘Cr  IT  ”  M on  tan  a,  . . . . . . 

Great  Falls . 

134 

Bozeman . 

23 

Forsyth . 

37 

Total  number  of  groups . 

Total  number  of  mailing  pokints 
Totalnumber  of  cards . 

The  BASING  SHEET.— The  prices  sent  to  indiv^ual  stations  by  the 
Grain  Bulletin  office  are  computed  from  a  basing  sheet  which  sets 
forth  terminal  values  for  given  varieties  and  weights  of  grain  less  a 
handling  margin.  The  daily  card  prices  are  computed  by  subtracting 
freight  charges  from  the  appropriate  figures  on  the  basing  sheet. 
The  following  is  the  sheet  used  on  May  5,  1920: 


14 

9 

3,655 


210 


TERMINAL  GRAIN  MARKETING. 


Form  31.— SPECIMEN  OF  BASING  SHEET  USED  BY  THE  GRAIN  BULLETIN  OFFICE  ON 

MAY  5,  1920. 

Northern  points.  Southern  points. 

G.  F.  12  11  lot  10  9  8  7  6  Nor.  spring.  5  4  3  2  1 

305  305  300  305  300  300  300  300  300  No.  1  58tt  300  300  300  300  300  ' 

300  300  295  300  295  295  295  295  295  No.  2  57#  295  295  295  295  295 

295  295  290  295  290  290  290  290  290  No.  3  5^  285  285  285  285  285 

275  275  270  275  270  270  270  270  270  No.  4  53#  265  265  265  265  265 

261  261  261  261  261  261  261  261  261  No.  5  50#  255  255  255  255  255 

40-49#  otherwise  No.  5,  H  per  pound  less  than  No.  5;  other  light-weight  wheat  depends  on  quality. 

Grps.  1-2-3-4  &  5  No.  1  Dark  Nor.  5(t!  #2  5<t!  3  &  4  50  lower  grades  20  more  than  Nor. 

Grps.  6-7-8  &  9  No.  1  Dark  Nor.  100  #2 100  3  &  4  50  lower  grades  20  more  than  Nor. 

Grps.  11  No.  1  &  2  Dark  Nor.  150;  #3 150:  #4 100  lower  grades  20  more  than  Nor. 

Grps.  10-10^  &  12  No.  1-2  Dark  Nor.  200;  #3  200  #4  1.50  lower  grades  50  more  than  Nor. 


Durum  in  spring  100  less  spring  grade. 


Hard  winter. 


290 

285 

No.  1  60# 

285 

285 

285 

285 

285 

285 

280 

No.  2  58it 

280 

280 

280 

2KO 

9ftfl 

275 

270 

No.  3  56# 

270 

270 

270 

270 

270 

260 

255 

No.  4  54# 

260 

260 

260 

260 

260 

251 

246 

No.  5  51# 

250 

250 

250 

250 

250 

Durum. 

275 

275 

275 

275 

275 

275 

275 

275 

275 

No.  1  60# 

275 

2/2 

272 

272 

272 

272 

272 

272 

272 

272 

No.  2  58# 

272 

267 

267 

267 

267 

267 

267 

267 

267 

267 

No.  3  56# 

267  (The  same  as  sroun  5.1 

260 

260 

260 

260 

260 

260 

260 

260 

260 

No.  4  54# 

260 

256 

256 

256 

256 

256 

256 

256 

256 

256 

No.  5  51# 

256 

40-50#  otherwise  No.  5,  30  per  pound  less  than  No.  5;  other  light-weight  durum  depends  on  quality. 

Grps.  6-7-8-9  &  11  No.  1  &  2  amber  20;  #3  20  lower  grades  20  more  than  duruin. 

Grps.  lO-lOJ-12  No.  1  &  2  amber  20;  #3  20  lower  grades  20  more  than  durum. 

Amber  2  cents  more  than  diumn  at  southern  points. 

Spring  in  durum  4  cents  less  durum  grade. 

Red  durum  7  cents  less  than  durum. 


Flax. 


433 

(The  same  as  group  6.) 

438 

No.  1 

435 

428 

433 

No.  2 

430  (The  same  as  group  5.) 

423 

N.  G. 

420 

Oats. 

98 

(The  same  as  group  6.) 

97 

No.  3  26# 

97 

97  97  97  97 

96 

94 

No.  4  23# 

94 

94  94  94  94 

10  discount  per  pound  under  26#. 


Corn. 

55#  yel.  shell  163  163  163  163  163 
50  discount  per  pound  under  55#. 

White  10;  mixed  20;  ear  50  discount. 

Barley. 

156  No.  2  46#  159 

(The  same  as  group  6.)  152  No.  3  44#  1.55  (The  same  as  group  5.) 

146  No.  4  41#  149 

20  discount  per  pound  under  46#. 


Rye. 

(The  same  as  group  6.)  203  No.  2  54#  199  (The  same  as  group  5.) 

10  discount  per  pound  under  54#. 

North  Dakota. 

No.  1  mill  oats  dockage  $27.00 

No.  2  mill  oats  dockage  $22.00  Speltz  cwt.  $2.72. 

No.  3  miU  oats  dockage  $17.00 


The  card  service. — The  system  followed  in  making  up  the  cards 
is  as  follows:  After  the  closing  price  committees  (Chap.  IX)  of  the 
Minneapolis  and  Duluth  exchanges  have  arrived  at  the  closing  values 
for  the  day  the  lasing  sheet  is  made  up  in  Mr.  Durant’s  office.  That 
is,  Mr.  Durant  estimates  the  closing  values  generally  on  the  basis  of 


THE  GRAIN  BULLETIN. 


211 


1 

^Ho-arrive’^  prices/^  and  from  these  figures  deducts  a  certain  han¬ 
dling  margin  to  cover  the  shipper’s  operating  costs  and  profits.  As 
will  be  explained  presently,  the  ‘‘handling  margin”  was  prior  to  1917 
altered  on  request  of  local  buyers.  From  the  prices  recorded  on  the 
basing  sheet,  freight  rates  to  the  nearest  terminal  (as  per  published 
tariffs)  are  deducted  and  the  prices  resulting  from  this  computation 
are  sent  out  to  the  country  markets  on  post  cards. 

As  Mr.  Durant  has  frequently  stated,  each  card  represents,  in  theory, 
a  minimum  price  list^^  for  buyers  at  the  country  station  where  it  is 
received.  The  prices  examined  by  the  commission  below  tend  to  verify 
this  statement.  In  the  majority  of  cases  country  elevators  have  not 
followed  the  card  without  deviation,  and  these  deviations  from  the 
card  have  tended  to  be  over  rather  than  under  the  list.  (Sec.  7.) 

The  following  is  a  specimen  of  the  card  as  sent  out  May  5,  1920. 

Form  32.— GRAIN  BULLETIN  CARD  (DURANT’S). 

Minneapolis,  Minn.,  May  5, 1920. 


No.  1  nor.  spring  58#  test . 290 

No.  2  “  “  57#  “  285 

No.  3  “  “  55#  “  280 

No.  4  “  “  55#  “  260 

No.  5  “  “  50#  “  246 


40-49#  otherwise  No.  5,  30  per  pound  less  than  No.  5;  other  light-weight  wheat 
depends  on  quality.  No.  1  and  2  dark  nor.,  200;  #3  200;  #4,  150;  lower  grades  50 
more  than  nor. 


Durum  in  spring,  100  less  SPG.  grade. 

Durum.  Winter. 

No.  1  60#  test . - .  260:1- 

No.  2  58#  “  .  257  :  2- 

No.  3  56#  “  .  252:3- 

No.  4  54#  “  .  245:4- 

No.  5  51#  “  . 241:6- 

40-50#  otherwise  No.  5,  30  per  pound  less  than  No.  5  other  light-weight  durum 
depends  on  quality.  No.  1  and  2  amber  20;  #3,  20;  lower  grades  2  cents  more  than 
durum.  Spring  in  durum  40  less  durum  .grade;  red  durum  70  less  than  durum. 

No.  1  flax  424  No.  2;  419 . N.  G. .  409 

No.  3  oats  26#  test .  89 

No.  4  “  23#  “  .  85 

10  disc  .'per  pound  under  26#. 

No.  2  barley  46#  test . 144 

No.  3  “  44#  “ .  140 

No.  4  “  41#  “  . 134 

20  disc,  per  pound  under  46#. 

No.  2  rye  54#  test . HO 

10  disc,  per  pound  under  54#. 

No.  1  mill  oat  dockage . cwt. .  110 

No.  2  “  “  “  . - .  “  •  85 

No.  3  “  “  “  .  “  60 

Timothy  cwt.:  Speltz  cwt . 245 

#226  nor.  5^ . . . ^  • 

The  Grain  Bulletin. 


As  shown  below,  the  closing  to-arrive  price  is  not  invariably  the  basis.  The  reasons  for  following 
to-arrive  rather  than  spot  quotations  are  apparent.  Several  days  must  elapse  between  the  time  of 
of  purchase  in  the  country  and  the  time  of  subsequent  dehvery  for  sale,  or  to  apply  on  sale,  at  the  terminal. 
The  quoted  Minneapolis  or  Duluth  to-arrive  price  indicates  the  value  of  grain  tobe  delivered  at  the  terminal 
market  within  20  days  of  the  date  of  sale.  Accordingly  this  price  offers  a  more  accurate  basis  for  country 
values  than  would  be  true  of  spot  quotations.  The  closing  prices  usually  are  quoted  as  a  range.  Mr. 
Durant  has  stated  that  the  low  of  the  to-arrive  range  is  usually  employed  in  the  territory  where  the  P^jer 
varieties  are  grown,  notably  the  southern  territory— southern  Minnesota  and  South  Dakota— and  the  high 
in  the  better  territory — northern  Minnesota  and  North  Dakota  and  Montana.  An  examination  of  the 
basing  sheet  above  shows  that  northern  point  basis  prices  for  wheat  run  higher  as  a  rule  than  those  for 

southern  points.  _ _ ^  ^  j  xi. 

The  Minnesota  grain  and  inspection  department  stated  (May  6, 1920)  that  most  dealers  preferred  the 
Grain  Bulletin  card  quotations  for  the  reason  that  it  furnished  a  minimum  station  value  for  a  guide  in 
buying,  and  also  gives  average  values  on  lower  grades  of  grain  which  are  not  furnished  by  other  agencies. 


212 


TERMINAL  GRAIN  MARKETING. 


The  above  card  was  sent  to  a  station  in  group  10^  under  rate  54. 
On  the  day  it  was  mailed  the  closing  to-arrive  price  of  No.  1  north- 
wheat  at  Minneapolis  ranged  from  S3. 10  to  $3.15  per 
bushel.  On  the  Grain  Bulletin  basis  sheet  (see  above)  the  price  for 

S3. 05,  allowing  a  margin  of  10  cents  off  the  high 
ot  the  to-arrive^^  close  (note  13)  for  the  elevator’s  cost  and  profit.^® 
1  he  freight  cost  to  be  deducted  under  rate  5-1  for  wheat  shipped  from 
this  station  (after  allowing  a  3  per  cent  war  tax  and  reducing  to  a  per 

1  cents.  Subtracting  this  from  the  basis  price 

(S3. 05)  left  a  country  price  of  $2.90,  which  was  listed  for  ‘‘No.  1  Nor. 
spring  58it  test”  on  the  Grain  Bulletin  card  (Form  32). 

It  should  be  made  clear  that  the  basis  sheet  shows  only  so-called 
normal  margins  off  the  terminal  prices,  i.  e.,  does  not  provide  for 
unusual  market  influences,  either  in  the  country  or  the  terminal  mar¬ 
ket.  Mr.  Durant  has  stated  that  it  has  been  the  practice  each  crop 
year  to  start  the  cards  off  on  the  same  basis  at  all  stations.  In  prac¬ 
tice,  however  (prior  to  the  war),  many  of  the  cards  were  put  on  a 
special  basis,  being  adjusted  on  the  request  of  local  buyers.  Con¬ 
sequently  a  card  index  was  kept  of  stations  receiving  special  cards 
and  it  was  necessary  to  consult  the  memoranda  in  Siis  index  after 
iiormal  card  prices  had  been  made  up  from  the  basis  sheet  to 
determine  the  card  price  for  those  stations  on  a  special  basis.  The 
memoranda  generally  showed  the  name  or  initials  of  the  local  concern 
requesting  a  change  in  the  Grain  Bulletin  prices,  as  appears  in  the 
following  extracts  from  the  index  used: 


LuVerne,  N.  D.: 

8/25/16  Griffith  Bros,  thru  McCabe 
W  &  D  11  off  Dili,  high 
Flax  13  “  “  “ 

Oats  6  “  “  “ 

‘  ‘  average 


i  i 


Barley  16 
Lovell,  N.  D.: 

9/27/15  Print  with  Cooperstown 
Accnt  8/21/16 
10/16/16 

Far  Cooperstown  ‘  ‘ 

Litchfield,  Minn.; 

9/7/15  Wheat  &  dur  6  off  low  arr  Flax  8  off  low  arr 
Farmers  Oats  4  off  arr  Corn  &  rye  6  oh  arr 
Bly  6  off  arr 
Lisbon,  N.  D.; 

2/14/16  Equity-wht  dur  Bly  12  off  high 

2/a  rye  12  off  low  Flax  14  Oats  7  off  high 
Lemert,  N.  D.:  ® 

9/13/15  Wht.  &  dur  11  off  high  VC  F.  J.  S. 


/  ; 


Id  1917  Mr.  Durant  claimed  that  there  had  never  been  a  time  when 
more  than  6  per  cent  of  the  stations  receiving  the  card  were  on  a 
^ecial  basis.  Some  few  months  after  the  outbreak  of  the  war  Mr. 
Durant  f c)ok  the  position  that  under  the  conditions  prevailing  it 
would  not  do  to  discriminate  between  towns  at  all  and  abolished  all 
special  cards.  The  practice  does  not  appear  to  have  been  reem- 
ployed,  as  according  to  Mr.  Durant  no  special  cards  have  been  used 
since  that  Iinie,  all  stations  being  ‘^on  the  normal  basis  with  the 
exception  of  a  few  stations  where  the  freight  rate  break  comes  so  that 
a  very  small  town  would  have  a  basis  1  cent  lower  than  a  much 


at  «■?  other  of  the  northern  points  and  all  of  the  southern  the  price  was  set  on  the  basins  sheet 

at  $3,  or  10  cents  off  the  low  of  the  “to-arrive”  close  $3.10  (note  13).  ^  ^  casing  sneet 


THE  GRAIN  BULLETIN. 


213 


larger  competing  town.''  In  such  case  the  cards  for  the  small  town 
have  been  printed  on  the  same  basis  as  those  of  the  larger. 

Card  prices  July  to  October,  1920. — While  the  closing  ‘'to- 
arrive"  prices  are  probably,  as  previously  indicated,  most  fre¬ 
quently  employed  as  a  basis  from  whioh  to  determine  the  card  price, 
this  is  dependent  largely  upon  the  market  conditions,  and  the  basis 
may  change  frequently,  especially  when  market  conditions  are 
abnormal.  This  can  be  illustrated  by  the  situation  in  1920  with 
reference  to  wheat.  During  the  summer  and  fall  of  1920,  after  the 
resumption  of  future  trading,  the  methods  employed  by  Mr.  Durant 
in  determining  the  country  prices  for  wheat  reflected  the  uncertain 
market  conditions. 

From  July  15  to  31,  he  reports  that  the  card  was  based  at  freight 
and  10  cents  off  the  ^  to-arrive'  values."  For  the  first  six  days  of  this 
period  the  to-arrive  and  spot  quotations  were  identical,  both  showing 
a  premium  of  about  40  cents  over  the  December  option.  On  and 
after  July  21  the  to-arrive  prices  began  to  show  a  discount  with 
reference  to  the  ‘^spot."  This  appears  from  the  following  closing 
price  figures  for  No.  1  dark  northern  spring  wheat: 


[High  of  closing  prices.] 


Date. 

“Spot.” 

“To- 

arrive.” 

December 

future. 

Date. 

“Spot.” 

“To- 

arrive.” 

December 

future. 

1920. 

July  15 . 

16 . 

17 . 

19  . 

20  . 

21 . 

22 . 

23 . 

$3.10 
3. 05 
2.  95 
2.90 
2.95 
3. 00 
3.05 
3.10 

$3.10 
3.05 
2. 95 
2.90 
2.  95 
2.95 
3. 00 
3.00 

$2. 67i 
2.57 

2.  49 
2.57 
2.56J 
2.54 

2. 56J 
2.  55i 

1920— Continued. 

July  24 . 

26 . 

27  . 

28  . 

29  . 

30  . 

31  . 

$3. 05 
2. 95 
2. 80 
2.  75 
2.  80 
2.70 
2.50 

$3.00 
2.90 
2. 70 
2.60 
2. 60 
2.  45 
2.  32 

$2. 511 
2.  43i 
2.  31 

2.  30i 
2. 30i 
2. 221 
2.17 

From  August  2  to  and  including  August  26  the  December  option 
was  used  as  a  basis,  apparently  with  a  view  to  giving  the  country 
shipper  an  opportunity  to  hedge.  No  handling  margin  was  allowed 
on  this  basis  because  of  the  discount  on  future  prices.  ^‘The  card 
was  based  at  freight  off  the  value  of  the  December  future,^®  either 
Minneapolis  or  Duluth,  whichever  was  the  higher."  Also,  ‘‘from 
and  after  August  10"  freight  rates  were  taken  from  the  new  tariffs 
to  be  effective  August  26.  Moreover,  “from  and  after  August  21 
wheat  values  were  for  the  new  crop,  old  crop  selling  from  5  to  10 
cents  more  for  a  time."  The  closing  prices  during  this  period  (for 
No.  1  dark  northern  spring  wheat)  were  as  follows: 


[High  of  closing  prices.] 


Minneapolis. 

December  future. 

Minneapolis. 

December  future. 

Date. 

“Spot.” 

“To- 

arrive.” 

Minne¬ 

apolis. 

Duluth. 

Date. 

“  Spot.” 

“To- 

arrive.” 

Minne¬ 

apolis. 

Duluth. 

1920. 
Aug.  2 

$2.  40 

$2. 281 

$2. 13| 

$2. 131 

1920. 
Aug.  14 

$2.  80 

$2. 59i 

$2. 34i 

$2. 371 

3 

2. 50 

2. 44 

2.  29 

2.29 

16 

2.80 

2.  521 

2.321 

2. 341 

4 

2. 60 

2.48J 

2.  33i 

2.  32 

17 

2.  85 

2. 56i 

2.  36i 

2. 38i 

5 

2. 70 

2.  56 

2. 41 

2.41 

18 

2.  85 

2.56 

2.  36 

2.371 

6 

2.85 

2.  53i 

2. 38i 
2.  35i 

2.  42 

19 

2.  80 

2.  53| 

2.  33| 
2.331 

2.36 

7 

2.  75 

2.  48^ 

2.35 

20 

2.  70 

2.501 

2.  341 

9 

2. 75 

2.  46| 
2. 57i 

2.31| 

2.  34 

21 

2. 60 

2.  48 

2.31 

2. 32 

10 

2.80 

2.37i 

2.39 

23 

2.  47 

2.411 

2. 261 

2.27 

11 

2. 90 

2.63i 

2.38i 

2.381 

24 

2.  55 

2.  441 

2.291 

2. 30 

12 

2. 95 

2. 69 

2.  44 

2. 441 

25 

2. 60 

2.50i 

2. 30i 

2. 31  i 

13 

2.90 

2. 65i 

2. 40i 

2.42f 

26 

2.60 

2.  501 

2. 301 

2.311 

16 1,  e.,  freight  from  the  local  country  station  deducted  from  the  price  of  the  future. 


214 


TERMINAL  GRAIN  MARKETING. 


From  August  27  to  October  26  Mr.  Durant  used  the  ‘Ho-arrive^^ 
price  basis,  with  freight  and  10  cents  off,  to  determine  the  prices 
quoted  on  the  card.  (The  Duluth  to-arrive  price  was  used  on  Sep¬ 
tember  3,  Minneapolis  being  followed  on  all  other  days  up  to  and 
including  October  26.)  The  closing  prices  during  this  period  were  as 
follows : 

[High  of  closing  prices.] 


Date. 

“Spot.” 

“To-arrive.” 

Decem¬ 

ber 

future. 

Ordinary. 

Fancy. 

1920. 
Aug.  27 

$2.  55 

$2.  511 

$2. 311 

28 

2.52i 

2. 471 

2.321 

30 

2. 55a 

2.501 

2. 301 

31 

2. 57 

2.  52 

2. 32 

Sept.  1 

2. 581 

2.531 

2. 331 

2 

2. 681 

2.631 

2. 381 

3 

2.59a 

2.  541 

$2. 641 

2. 391 

4 

2. 58 

2.53 

2. 63 

2.38 

7 

2. 661 

2.611 

2. 661 

2.411 

8 

2.691 

2.641 

2.691 

2.  44-1 

9 

2.  721 

2.671 

2.  73| 

2.  47f 

10 

2. 70 

2. 65 

2. 75 

2.  45 

11 

2.  70 

2.65 

2. 75 

2.45 

13 

2. 751 

2.  731 

.  2.831 

2.  481 

14 

2.65i 

2.601 

2.  701 

2.  40| 

15 

2. 651 

2.601 

2.  70| 

2.  40f 

16 

2.63f 

2.  58| 

2.  68| 

2. 38| 

17 

2. 67 

2. 62 

2. 72 

2.  42 

18 

2.651 

2.601 

2.701 

2.  401 

20 

2. 641 

2.591 

2. 691 

2.  391 

21 

2.57f 

2. 52| 

2.621 

2.  321 

22 

2. 611 

2.561 

2.661 

2.  361 

23 

2. 611 

2.  561 

2. 661 

2.361 

24 

2.  531 

2.481 

2.  581 

2.  28l 

25 

2.  451 

2. 351 

2. 451 

2.201 

27 

2. 511 

2.  411 

2. 511 

2.261 

Date. 

“Spot.” 

“To-arrive.” 

Decem¬ 

ber 

future. 

Ordinary. 

Fancy. 

1920. 
Sept.  28 

$2.50f 

$2.  40| 

$2. 501 

$2. 251 

29 

2.  531 

2.  431 

2. 531 

2. 281 

30 

2.451 

2.351 

2. 451 

2.201 

Oct.  1 

2. 36 

2. 31 

2.36 

2. 101 

2 

2.311 

2.261 

2.311 

2.111 

4 

2.15 

2. 10 

2.15 

2.00 

5 

2. 101 

2.051 

2.151 

1.9.51 

6 

2.181 

2. 131 

2.23a 

2.  03a 

7 

2.  201 

2. 151 

2. 251 

2. 051 

8 

2.151 

2. 101 

2. 151 

2.001 

9 

2. 19 

2. 14 

2. 19 

2.04 

11 

2.261 

2.  211 

2.261 

2.111 

12 

2.  251 

2.201 

2.  251 

2. 101 

13 

2. 281 

2. 231 

2. 281 

2. 131 

14 

2. 26| 

2.  21| 

2.261 

2.  Ilf 

15 

2.331 

2.281 

2.331 

2.181 

16 

2.291 

2.  244 

2.291 

2. 141 

18 

2.  251 

2. 231 

2.271 

2. 121 

19 

2. 18 

2. 16 

2.  21 

2.06 

20 

2. 16 

2. 14 

2. 17 

2.04 

21 

2.11 

2.09 

2. 12 

1.99 

22 

2. 15 

2. 13 

2. 16 

2.03 

23 

2. 121 

2. 101 

2. 131 

2.001 

25 

2.101 

2. 081 

2.111 

1.98 

26 

2. 18 

2. 16 

2. 19 

2.06 

The  column  of  prices  headed  fancy  applied  only  to  hard  spring 
wheat  of  higher  milling  value  than  the  general  run  and  grown  largely 
in  western  North  Dakota  and  Montana.  From  and  after  September 
13  this  quality  of  wheat  was  quoted  on  cards  in  that  territory.” 
The  use  of  this  quotation  showing  a  premium  on  fancy  wheat  was 
discontinued  on  October  20,  since  only  a  small  quantity  of  such  wheat 
was  appearing  in  the  markets. 

The  wire  service. — By  arrangement  with  the  telephone  compa¬ 
nies  and  through  the  regular  commercial  telegraph  service  the  Grain 
Bulletin  operates  a  wire  service  in  addition  to  the  card  and  on  a  dif¬ 
ferent  subscription  basis.  Subscribers  to  this  supplementary  service 
are  furnished  by  wire  with  prices  immediately  upon  the  close  of  the 
market  each  day,  which  prices  are  subsequently  con&med  by  the 
card.  They  are  also  furnished  with  important  changes  in  the  market 
during  trading  hours  and  often  in  time  to  apply  on  purchases  during 
the  day.  Although  the  telephone  companies  make  concessions  in 
providing  open  wires  promptly  after  the  close  of  the  market  and  in 
relaying  messages,  there  are  no  special  contracts  and  no  leased  wires. 
Mr.  Durant  has  described  the  services  as  follows : 

It  is  a  very  good  revenue-producing  thing  for  the  telephone  companies,  and  they 
give  me  excellent  service.  I  get  the  telephone  calls  out  of  here  frequently  in  five 
minutes  or  seven  minutes,  whereas  anybody  putting  in  an  individual  call  sometimes 
waits  two  or  three  hours  to  get  it;  but,  you  see,  they  are  ready  for  me  at  1.20  every 
day.  I  have  a  private  phone  right  to  the  toll  board.  I  take  down  my  receiver,  and 
almost  invariably  the  operator  will  say,  “Here  is  Minot”  just  as  quick  as  I  take  down 


THE  GRAIN  BULLETIN. 


215 


the  receiver,  or  “Here  is  Aberdeen,”  or  some  other  place.  I  get  it  immediately. 
Then,  just  as  soon  as  I  am  through  with  that  station,  she  generally  has  another  one 
ready  for  me. 

That  is,  Mr.  Durant  is  given  open  circuits  successively  to  a  few 
distributing  points,  from  which  the  messages  are  relayed  promptly 
to  the  numerous  stations  at  which  the  service  has  wire  subscribers. 
The  messages  -are  usually  received  by  a  designated  elevator  manager 
or  operator  at  each  station,  who  agrees  to  distribute  the  same  to  the 
other  subscribers  before  making  use  of  them  in  the  local  market. 

The  Montana  service. — In  1916  the  Grain  Bulletin  service  was 
organized  in  Montana  through  the  agencv  of  the  Northwestern  Grain 
Dealers’  Association.  The  secretary  oi  that  association  at  Great 
Falls  acted  as  a  local  distributing  agent.  The  following  circular 
letter,  issued  in  September,  1916,  to  Montana  shippers,  is  a  compre¬ 
hensive  statement  of  the  entire  service  as  viewed  by  its  promoters : 

The  grain  dealers  of  Montana,  wishing  to  obtain  a  more  equitable  and  economical 
arrangement  for  the  dissemination  of  information  relating  to  the  terminal  value  of 
grain  handled  by  them,  have,  through  the  Northw'estern  Grain  Dealers’  Association 
arranged  with  the  Grain  Bulletin,  of  Minneapolis,  to  establish  their  quotation  service 
throughout  the  State. 

The  Grain  Bulletin  was  established  some  15  years  ago  to  meet  such  a  condition  as 
now  exists  in  Montana.  It  does  not  undertake  to  dictate  to  its  subscribers  what  they 
shall  pay  for  grain,  but  collects  all  information  at  the  terminal  markets  of  value  in 
determining  what  may  be  paid  at  individual  stations  after  deducting  freight  to  ter¬ 
minal,  cost  of  operating,  other  fixed  expense,  and  a  reasonable  margin  of  profit. 
Then,  with  this  information  before  him,  the  subscriber  is  in  position  to  know  just 
what  he  can  afford  to  pay,  and,  as  the  information  is  as  a  rule  posted  in  the  elevator, 
the  producer  too  may  see  what  is  a  fair  value  for  his  grain. 

An  office  has  been  opened  in  Great  Falls  by  the  Grain  Bulletin,  in  room  434,  Ford 
Building,  at  which  the  information  will  be  compiled;  other  distributing  points  in  the 
State  will  be  established  as  there  is  necessity  for  them.  After  being  compiled  the 
quotations  for  the  day  will  be  printed  on  postal  cards  and  mailed  to  the  individual 
stations  by  the  first  mail  after  the  close  of  the  market.  Bulletins  are  also  issued  from 
time  to  time  giving  valuable  information  relating  to  unusual_  terminal  conditions 
which  subscribers  may  take  advantage  of  for  their  own  protection  if  they  so  desire; 
in  other  words,  it  is  with  the  subscriber  to  make  such  use  of  the  information  sent  out 
by  the  Grain  Bulletin  as  best  suits  his  and  his  patrons’  interests. 

Of  the  elevators  in  Minnesota,  North  and  South  Dakota,  which  are  tributary  to 
Minneapolis  and  Duluth  more  than  90  per  cent  are  subscribers  to  this  service,  and 
for  several  years  past  the  service  has  been  in  use  on  the  main  line  of  the  Great  Northern 
in  Montana  and  on  the  Northern  Pacific  and  Milwaukee  in  the  extreme  eastern  part 
of  the  State. 

For  this  service  the  Grain  Bulletin  makes  a  charge  of  90  cents  per  month,  payable 
quarterly  in  advance,  or  $10  per  year  if  paid  in  advance,  the  reason  for  the  reduced 
rate  by  the  year  being  that  the  one  payment  effects  a  saving  in  bookkeeping,  sta¬ 
tionery,  postage,  and  exchange. 

In  addition  to  this  card  service  the  Grain  Bulletin  maintains  a  system  of  advising 
each  station  of  the  day’s  market  change  immediately  after  the  close  of  the  market  by 
phone  or  telegraph ,  the  report  of  change  being  sent  to  one  dealer  at  each  station  and 
by  this  dealer  shared  with  all  others  at  that  station;  for  this  service  a  charge  just 
sufficient  to  cover  the  cost  of  rendering  it  is  made,  proportioned  equally  among  the 
dealers  at  each  station. 

The  subsequent  development  of  the  wire  service  in  Montana  is 
illustrated  by  a  letter  sent  in  confirmation  of  a  telegram  advising 
fluctuations  in  the  market: 

Northwestern  Grain  Dealers’  Association, 

_  Great  Falls,  Mont.,  December  1,  1916. 

A*.  T.  Rohlf, 

Manager  Equity  Cooperative  Association,  Highwood,  Mont. 

Dear  Sir:  November  29  we  wired  you  and  hereby  confirm,  as  follows: 

“Northwestern  Grain  Dealers’  Association, 

“(Care  of  A.  T.  Rohlf,  Manager  Equity  Cooperative  Association,) 

Highwood,  Mont. 


216 


TERMINAL  GRAIN  MARKETING. 


“Wheat  up  two.  Winter  up  two.  Durum  up  five.  Flax  up  six.  Give  this  also  to 
the  other  elevators  in  High  wood.  Letter  follows.” 

This  is  in  accordance  with  the  plan  of  uniform  distribution  of  market  quotations 
now  being  put  into  effect,  whereby  one  message  goes  to  each  group  of  elevators  for 
use  of  all  in  that  group,  we  paying  initial  expense  and  prorating  at  end  of  month 
equally  to  all  in  the  group.  This  wire  will  be  sent  to  you  for  one  week  for  all  in  your 
group.  And  not  to  be  used  by  any  in  the  group  until  all  have  had  it.  The  next  week 
the  Gallatin  Valley  Milling  Co.  will  get  it  for  all  in  the  same  way.  And  the  next 
week  the  Greely-Schmidt  Elevator  Co.  will  get  it  in  the  same  way,  and  after  they 
have  had  it  for  a  week  it  will  come  back  to  you  and  make  the  rounds  all  over  a^ain 
in  the  same  fashion.  ' 

Yours,  truly,  > 

Northwestern  Grain  Dealers’  Association, 

- - ,  Secretary. 

Extent  of  the  Grain  Bulletin  service. — In  a  letter  written 
July 26, 1912, Mr.  Durant  stated  that  “from  the  mainline  of  the  North¬ 
western  Kailroad  between  Mankato  and  Kapid  City  to  the  Canada 
line  the  card  is  being  used  by  all  line  companies  and  full  85  per  cent 
of  the  independent  and  farmers’  companies. 

This  was  brought  about  by  the  fact  that  in  this  new  territory  the 
card  is  a  buying  card  and  shows  the  prices  to  be  paid  at  each  station 
regardless  of  any  other  station  not  affected  by  it.”  The  statistics  of 
country  elevators  indicate  that  in  1918  the  Grain  Bulletin  card  was 
used  by  the  great  bulk  of  the  country  elevators  in  Minnesota,  North 
and  South  Dakota,  pd  Montana;  and  that  in  Minnesota  and  North 
and  South  Dakota  its  wire  service  was  used  by  the  great  majority 
of  country  elevators  reporting  the  employment  of  wire  services. 

In  the  fall  of  1906  approximately  1,275  cards  were  sent  out  daily, 
90  going  to  farmers’  elevators,  275  to  independent  dealers,  and  the 
renmmder,  or  about  75  per  cent,  to  line-elevator  companies’  agents. 
In  October,  1921,  out  of  4,084  elevator  subscribers  only  1,645  were 
line  elevators,  while  1,487  were  farmers  and  952  independents.  In 
other  woids,  practically  60  per  cent  of  the  elevator  subscribers  were 
nonJme  houses.  This  shift  has  been  due  to  the  relatively  more  rapid 
lUCTease  in  the  number  of  nonline  as  compared  with  line  houses. 

Cost  of  the  service.— For  years  prior  to  1917  the  charge  per 
elevator  for  the  Grain  Bulletin  card  was  90  cents  per  month. 

In  that  year  the  charge  was  first  raised  to  $1  and  subsequentlv 
under  the  increased  postage  rates,  to  $1.25  per  month.  Kegular 
toll  rates  are  paid  for  the  telephone  service  and  charges  are  prorated 
to  individual  stations  on  the  basis  of  actual  toll  charges  plus  the 
compensation  of  Mr.  Durant’s  agents  at  distributing  points.  The 
telephone  charges  in  1917  varied  from  about  $10  to  about  $40  per 
country  elevator  per  year.  Mr.  Durant  states  that  this  wire  service 
IS  lurmshed  at  cost  and  that  his  own  compensation  is  paid  out  of  the 
revenues  from  the  card  service.  He  also  states  that  this  service, 
because  ot  the  variation  in  number  of  subscribers  from  year  to  year 
has  sometimes  been  operated  at  a  loss.  To  quote:  “For  instance' 
m  1911-12  the  loss  was  over  $500  and  in  1917-18  the  gain  was  $32.” 
However,  the  proprietor’s  drawings  (salary  or  compensation)  are 
included  in  the  expenses.  Mr.  Durant’s  books  have  not  been  audited 
smce  1907,  and  no  profit-and-loss  statement  has  been  made  public 
since  that  time.  He  estimated  in  1917  that  the  entire  service 
(including  wire  messages)  was  costing  about  $100,000  a  year,  of  which 
wire  expenses  constituted  $60,000  to  $70,000.  The  cost  per  elevator 
was  probably  50  per  cent  more  in  1920  than  in  1914. 


17  For  detail  see  Vol.  I,  Chap.  VIIR  s(ic.  3 


THE  GRAIN  BULLETIN. 


217 


S  Section  6.  Failure  of  the  State  Bulletin. 

There  has  been  at  least  one  attempt  in  the  Northwest  to  substitute  a 
'State  quotation  service  for  that  operated  by  Mr.  Durant.  In  1913  the 
.'Minnesota  Legislature  by  joint  resolution  instructed  the  railroad  and 
’Warehouse  commission  of  that  State  ^Mo  prepare,  issue,  and  furnish 
:  to  subscribers  a  price  card  showing  the  market  price  for  each  grade  and 
>kind  of  grain  at  terminal  markets  for  each  day,  together  with  other 
:  necessary  information  under  such  rules  and  regulations  as  to  the  service 
f  and  price  to  be  paid  by  the  subscribers  as  the  commission  may  deem 
reasonable.’’^® 

Pursuant  to  the  resolution  this  commission  proceeded  to  publish  an 
“^official  price  bulletin”  at  a  subscription  price  of  $1  per  month 
‘^subject  to  changes  which  will  eventually  make  the  service  self- 
sustaining  and  no  more.  ”  This  bulletin,  however,  indicated  only  the 
closing  prices  for  grain  both  ‘‘spot”  and  “to-arrive”  at  Minneapolis 
and  Duluth  as  determined  by  the  closing  price  committees  of  the 
I  respective  exchanges.  The  State  commission  did  not  furnish  prices 
ifor  delivery  at  country  markets,  although  there  was  “placed  in 
I  the  hands  of  every  local  warehouseman  in  the  State  of  Minnesota 
I  a  card  which  showed  the  terminal  handling  charges  that  would  ordi- 
I  narily  be  assessed  against  a  consignment  of  grain,  except  the  freight, 

I  and  this  card  invited  the  attention  of  the  local  agent  to  the  question 
of  freight,  directing  him  to  go  to  the  local  freight  agent  for  that 
1  information.  ”  That  is,  they  attempted  to  provide  the  local  elevator 
]  manager  with  all  data  necessary  to  enable  him  to  calculate  his  own 
]  price  hut  did  not  attempt  to  calculate  it  for  him. 

The  history  and  abrupt  termination  of  this  service  is  described  by 
F.  W.  Eva,  the  then  chief  inspector  of  grain,^^  as  follows: 

Notices  were  published  in  a  number  of  the  daily  papers,  advising  that  these  cards 
'  would  be  prepared  and  would  be  sent  out.  In  addition  to  this  a  circular  letter  was 
prepared  by  the  department  and  forwarded  by  mail  to  the  agent  or  operator  of  every 
focal  warehouse  in  the  State,  inviting  him  to  subscribe  for  the  Price  Bulletin.  Ap- 
:  proximately  1,500  of  these  letters  were  sent  out.  The  commission,  in  directing  that 
these  letters  be  sent,  fixed  a  price  of  $3  for  a  three  months’  subscription.  We  received 
I  replies  from  60  out  of  the  1,500  or  more,  who  became  subscribers  for  three  months. 
A  little  later  we  received  another  subscriber’s  request  for  the  bulletins,  so  that  the 
largest  number  of  subscribers  at  any  time  to  this  bulletin  was  61. 

*  *  *  At  the  expiration  of  all  of  these  subscriptions,  none  of  them  were  renewed, 
1  in  fact,  the  department  received  letters  from  a  large  number  of  the  61  asking  that 
I  these  bulletins  be  stopped,  as  they  were  of  absolutely  no  value  to  them — that  they 

preferred  the  Grain  Bulletin’s  price  cards. 

*  *  *  At  the  investigation  of  the  grain  business  of  the  State,  there  was  con- 
!  siderable  discussion  by  members  of  the  investigating  committees  of  the  house  and  the 
I  senate,  particularly  of  the  house  committee,  of  the  price  cards  published  by  the 

Grain  Bulletin  of  Minneapolis  and  these  bulletins  were  denounced  in  rather  emphatic 
terms,  "^ile  there  were  some  features  of  the  price  cards  sent  out  by  the  Grain 
Bulletin  that  needed  amendment  or  change,  the  fact  that  the  official  price  card  offered 
by  the  commission  met  vdth  absolutely  no  encouragement  and  with  a  refusal  even 
to  receive  it,  plus  the  further  fact  that  those  who  did  receive  it,  in  a  large  measure, 
wrote  their  preference  for  the  Grain  Bulletin’s  cards,  would  indicate  that  the  local 
warehouse  buyer  was  possibly  better  able  to  take  care  of  himself  than  had  been  antici¬ 
pated.  The  resolutions  directed  the  sending  of  the  cash  closing  prices  for  the  one 
crop  year  to  all  who  subscribed,  but  when  our  61  subscril^ers  refused  to  further  pay 
for  or  accept  the  service  the  department  had  no  other  alternative  but  to  stop  sending 
the  cards. 


18  Report  of  the  Chief  Inspector  of  Grain  to  the  Railroad  and  Warehouse  Commission,  1914,  p.  12.  _ 

19  Annual  Report  of  the  Chief  Inspector  of  Grain  to  the  Minnesota  Railroad  and  Warehouse  Commission, 
1914,  pp.  13-16. 


218 


TERMINAL  GRAIN  MARKETING. 


Section  7.  Variations  in  normal  margins  of  Grain  Bulletin  Card. 

The  normal  handling  margins  deducted  by  Mr.  Durant  from  ter¬ 
minal  market  prices  in  making  up  the  card  show  considerable  varia¬ 
tions,  not  only  as  between  different  grains  but  also  as  between  differ-  . 
ent  grades  of  the  same  grain  and  as  between  crop  years,  etc. 

Between  grains. — According  to  Mr.  Durant  the  narrowest 
normal  margin  is  maintained  on  oats  with  corn  approximately  the 
same.  The  margins  on  wheat,  rye,  and  especially  barley,  are  wider 
normally  than  on  either  of  these  two  grains  and  the  widest  margin  is  ■ 
on  flax.  Mr.  Durant  states  that  in  determining  these  differences  a 
variety  of  factors  are  considered,  such  as  (a)  relative  normal  selling  ^ 
values  of  the  different  grains,  (b)  the  weight  of  the  legal  bushel,  (c)  ^ 

the  total  number  of  bushels  of  the  commodity  marketed,  {d)  the 
quality  of  the  crop,  (e)  opportunity  to  hedge,  (/)  a  sufficient  carrying 
charge.  Using  the  Government  crop  estimates  for  1921-22  and  the  ' 
percentage  shipped  out  of  the  county  where  grown  for  1920-21,  to 
determine  the  theoretical  volume  of  each  grain  handled  Mr.  Durant 
gives  the  following  as  the  hypothetical  results  for  a  North  Dakota 
elevator  handling  100,000  bushels  on  the  margins  in  use  in  November, 
1921: 


Wheat .  67, 100  bushels,  at  7  cents. .  $4,  697  ^ 

Oats .  7,  500  bushels,  at  4  cents..  300  - 

Barley .  10,  500  bushels,  at  8  cents. .  840  I 

Rye .  10,  200  bushels,  at  7  cents. .  714  I 

Flax .  3,  300  bushels,  at  17  cents. .  561  I 

Corn .  1, 400  bushels,  at  5  cents..  70  J 


100,  000  7, 182 

It  will  be  noted  that  approximately  two-thirds  of  the  grain  handled' 
is  wheat  and  that  the  average  margin  is  only  a  little  over  7  cents  per 
bushel  on  all  grains  and  flax  combined. 

Between  different  grades  of  the  same  grain. — The  risk 
in  handling  the  lower  grades  of  grain  is  greater  than  for  the  higher ' 
grades.  As  no  ^Uo-arrive’’  quotations  are  available  for  the  lower  , 
grades,  the  basis  on  the  lower  grades  is  arrived  at,  Mr.  Durant  states, 
by  considering  the  discount  prevailing  on  the  daily  sales  and  apply-  ; 
ing  that  discount  to  the  higher  grade  which  is  quoted  ^Ho-arrive.’^  •; 
The  quality  grown  in  the  several  sections  of  the  territory  tributary  to  I 
Minneapolis  is  considered,  and  the  test  weight  per  bushel  is  a  factor,  r; 
the  lower  grades  having  lower  test  weights  per  bushel.  The  effort  is  ['] 
made  to  reflect  at  least  the  normal  margin  on  each  grade.  In  addi-  j 
tion,  hedging  can  not  protect  the  buyer  so  closely  on  the  lower  grades  J 
because  the  relation  between  the  future  and  such  lower  grades  flue- -  j 
tuates  more  frequently  and  to  a  greater  degree  than  that  between  f  j 
the  future  and  the  standard  grades.  ^  j 

Between  different  years. — According  to  Mr.  Duranffs  rec-  ; 
ollection,  the  normal  margin  (on  wheat  ?)  in  1900  and  for  some  years , . 
subsequent  thereto  was  rarely  more  than  3  cents  per  bushel,  while  in  ] 
1915  and  a  few  years  prior  thereto  it  was  rarely  less  than  6  cents.  In  ^  j 
determining  the  normal  margin  one  of  the  most  important  factors  is 
the  cost  of  operation,  i.  e.,  labor,  taxes,  insurance,  supplies,  etc.,. 
Salaries  of  managers  and  agents  have  advanced  to  a  considerable  | 
extent,  and  whereas  10  or  15  years  ago  the  maximum  paid  was  ! 


THE  GRAIN  BULLETIN. 


219 


probably  in  the  neighborhood  of  $1,000  per  year,  this  maximum  is 
now  probably  as  high  as  $2,500  per  year,  while  the  average  has  ad¬ 
vanced  in  proportion.  Terminal  charges  for  commission  inspection 
and  weighing  have  increased  considerably  since  1914.  Years  ago  the 
charge  for  inspection  and  weighing  was  as  low  as  15  cents  per  car  for 
each.  Now  weighing  is  $1.25  per  car,  and  inspection  on  corn  and 
flax  $1.25  per  car,  and  $1  per  car  on  other  grains. 

The  Rowing  of  other  crops  than  wheat  has  also  been  a  factor  in 
increasing  the  normal  margins  over  a  period  of  years. 

A  good  illustration  of  the  effect  of  expense  factors  in  the  variations 
in  normal  margins  from  year  to  year  is  the  situation  during  the  last 
two  crop  years.  The  normal  margin  for  wheat  for  the  crop  of  1920 
allowed  by  the  Grain  Bulletin  was,  according  to  Mr.  Durant,  9  cents. 
Owing  to  the  great  decline  in  commodity  values,  however,  which  he 
estimated  would  heavily  reduce  the  items  of  interest  and  insurance, 
he  decreased  the  normal  wheat  margins  for  the  crop  of  1921  to  7  cents. 

Other  variations.— Besides  the  foregoing,  which  are  factors  in 
the  variations  in  the  normal  margins  of  a  more  or  less  continuous  and 
permanent  character,  numerous  other  changes  in  margins  are  made 
owing  to  temporary  and  unusual  conditions.  In  October,  1907,  grain 
buyers  were  notified  that  the  banks  could  not  continue  to  supply 
currency  for  the  purchase  of  grain  at  country  points.  A  wider 
margin  was  at  once  made,  and  while  it  is  Mr.  Durant’s  recollection 
that  it  was  slightly  reduced  within  a  day  or  two,  the  normal  margin 
was  not  restored  until  money  conditions-  became  normal  again.  There 
have  also  been  occasions  when  temporary  shortage  of  box  cars  or 
severe  storms  have  made  necessary  a  change  in  the  normal  margins 
for  a  time.  In  another  case  a  variation  in  the  margin  was  made  for  a 
time  owing  to  temporary  rules  promulgated  by  certain  railroads 
limiting  the  movement  of  their  equipment.  When  future  trading  was 
discontinued  in  May,  1917,  there  was  no  ^Ho-arrive”  market  and  cash 
wheat  values  fluctuated  from  10  to  25  cents  daily.  The  Grain 
Bulletin  reflected  this  condition  to  country  buyers  by  maintaining  a 
wider  buying  margin  in  order  to  afford  them  as  much  protection  as 
possible. 

In  1918-19,  with  the  Government  minimum  price  in  effect,  Mr. 
Durant  employed  a  normal  margin  of  7^  cents  on  wheat  when  the 
actual  selling  price  did  not  exceed  the  Government  minimum.  When 
the  actual  selling  price  at  the  terminal  market,  however,  was  greater 
than  the  Governrnent  minimum,  he  increased  the  normal  margin  up  to 
10  cents  on  account  of  the  increased  risk,  on  the  theory  that  the 
only  protection  the  buyer  had  in  the  absence  of  future  trading  was 
the  Government  minimum  price. 

Variations  as  between  stations. — The  Grain  Bulletin  has  been 
the  object  of  a  greater  volume  of  complaint  on  account  of  the  varia¬ 
tions  in  margins  and  prices  as  between  local  markets  than  for  any 
other  one  fact.  This  subj ect  will  be  developed  in  the  following  section, 
in  connection  with  the  relation  of  the  Grain  Bulletin  to  country  price 
competition  in  general  and  the  question  as  to  whether  the  line- 
elevator  interests  at  present  influence  the  local  list  prices  of  the  Grain 
Bulletin. 


220 


TERMINAL  GRAIN  MARKETING. 


Section  8.  Question  as  to  influence  of  line-elevator  interests  on  the 
Grain  Bulletin  price  card. 

Eelation  of  Grain  Bulletin  to  country  price  competition 
IN  GENERAL.— The  relation  of  the  Grain  Bulletin  to  country  price 
competition  in  general  was  discussed  in  Chapter  XI,  Volume  I,  of 
this  report  (p.  268  ff).  In  that  volume  detailed  evidence  is  given 
bearing  out  the  statements  which  are  here  excerpted  from  Volume  I 
as  a  review  of  the  situation.  The  matter  referred  to  is  as  follows: 

From  a  careful  examination  of  the  correspondence,  it  appears  reasonably  safe  to 
conclude  that  as  a  matter  of  general  policy  the  line  companies  endeavor  so  far  as 
possible  to  stick  to  card  or  list  prices.  This  policy  of  the  line  elevator  companies  in 
attempting  to  hold  the  markets  at  which  they  operate  to  the  Grain  Bulletin  card 
or  list  price  is  presumably  based  upon  the  fact  that  the  card  deducts  from  terminal 
market  prices,  not  only  freight,  but  also  a  handling  margin  of  several  cents,  which 
is  sufficiently  liberal  to  cover  both  expenses  and  a  margin  of  profit.  If  this  card  or 
list  price  can  be  maintained,  therefore,  the  line  house  is  usually  assured  of  a  profit 
subject  only  to  being  able  to  procure  a  fair  volume  of  grain. 

It  is  difficult  to  estimate  how  important  a  part  this  card  plays  in  the  competition 
of  country  elevators.  The  fact  that  it  quotes  a  buying  price  for  each  station  and  is 
generally  in  use  throughout  the  Northwest  would  appear,  in  a  technical  way,  to 
facilitate  agreements  by  reason  of  the  fact  that  the  elevators  at  each  point  thus  have 
a  minimum  buying  price  upon  which  agreements  or  understandings  could  readily 
be  based.  Secondly,  the  technical  method  of  distribution  of  Grain  Bulletin  tele¬ 
phonic  and  telegraphic  price  changes  offers  a  means  of  facilitating  agreements.  Fre¬ 
quently  the  agents  work  in  rotation  in  receiving  and  delivering  the  changes,  one 
doing  it  one  week,  another  the  next,  and  so  on,  and  this  system  supplies  good  oppor¬ 
tunities  for  talking  over  prices,  etc.  (Vol.  I,  p.  270). 

Although  the  indications  are  that  the  lines  greatly  prefer  to  stick  to  list  prices  and 
to  grade  and  dock  correctly  and  direct  a  great  deal  of  energy  to  procuring  these  results 
through  agreements  or  understandings,  or  otherwise,  it  is  also  their  policy  to  meet 
competition  whenever  necessary.  As  a  rule,  this  is  to  be  interpreted  to  mean  that 
the  line  company  will  pay  whatever  prices  its  competitors  pay.  The  indications 
are,  however,  that  the  lines  are  not  usually  mlling  to  go  further  than  this.  In  other 
words,  while  the  line  companies  frequently  go  over  the  list  in  the  prices  which  they 
pay,  the  indications  are  that  they  tend,  on  the  whole,  to  follow  rather  than  to  lead 
their  competitors  in  bidding  up  the  local  market  prices  (Vol.  I,  p.  275). 

This  policy  of  merely  meeting  competitors’  prices  is  due  not  only  to  the  fact  that 
the  line  companies  desire  to  buy  at  the  lowest  prices  possible  and  endeavor  to  hold 
the  markets  to  that  basis  but  also  to  the  influence  of  the  State  laws.  In  several  States 
laws  have  been  passed  with  reference  to  buying  grain  which  make  it  illegal  for  the 
line  companies  to  discriminate  in  prices  between  stations  except  to  meet  competition; 
so  that  if  the  price  is  raised  at  one  station,  except  it  be  to  meet  competition  at  that 
station,  the  price  must,  theoretically  at  least,  be  raised  at  all  stations  of  the  line  com¬ 
pany  within  that  State,  if  such  company  is  to  avoid  possible  charges  of  discrimination 
(Vol.  I,  p.  277). 

In  meeting  competition  there  are  numerous  indications  that  the  line  companies 
have  not  infrequently  worked  together  in  endeavoring  not  only  to  prevent  competition 
among  themselves,  but  also  to  take  business  from  their  competitors  of  other  types 
(Vol.  I,  p.  280). 

Question  whether  past  influence  of  line  elevators  on 
PRICE  CARD  STILL  PERSISTS. — As  stated  in  section  7,  the  Grain  Bul¬ 
letin  has  been  the  object  of  a  greater  volume  of  complaint  on  account 
of  variations  in  margins  and  prices  as  between  local  markets  than  for 
any  other  one  fact.  The  history  of  the  policy  of  the  Durant  card 
service  with  reference  to  variations  of  margin  as  between  stations 
is  here  reviewed. 

Prior  to  1912  (according  to  Mr.  Durant)  opinion  was  obtained  from 
the  attorneys  general  of  three  of  the  States  served  by  the  Bulletin 
to  the  effect  that  the  cards  would  be  on  a  legal  basis  if  they  indi¬ 
cated  the  highest  prices  which  any  dealer  was  willing  to  pay  at  a 
given  station.  That  is,  the  cards  should  reflect  competitive  con- 


THE  GRAIN  BULLETIN. 


221 


ditions  rather  than  any  arbitrary  or  theoretical  arrangement  of 
margins.  This  policy  was  stated  by  Mr.  Durant  as  follows: 

*  *  *  The  card  for  one  station  has  nothing  to  do  with  the  card  to  any  other  sta¬ 
tion  even  if  the  freight  rate  is  the  same;  we  have  always  maintained  that  the  local 
conditions  at  each  station  determines  the  price.  *  *  *  The  card  represents  the 
paying  price  and  is  used  as  such  by  over  80  per  cent  of  the  farmers’  companies. 

It  is  important  to  examine  those  factors  which  have  influenced 
the  Grain  Bulletin  in  thus  adjusting  prices  and  margins  for  a  given 
country  market. 

(1)  At  the  outset  it  is  clear  that  Mr.  Durant  did  not  always  prior 
to  1917  wait  for  a  request  to  raise  or  lower  the  card,  but  made 
adjustments  for  different  sections  based  on  varying  crop  conditions. 
The  following  extract  from  correspondence  (Sept.  17,  1913)  shows 
this  policy  as  applied  to  barley  and  wheat: 

*  *  *  The  writer  remembers  well  explaining  to  you  some  time  ago  that  barley 
sometimes  has  a  different  value  from  different  parts  of  the  country  and  that  it  was 
necessary  for  us  to  make  the  break  in  the  price  somewhere,  and  for  convenience  we 
have  always  taken  the  State  line;  this  does  not  happen  only  in  the  territory  in  which 
you  are  interested  but  wherever  it  is  necessary.  Last  year  in  certain  parts  of  North 
Dakota  we  quoted  a  different  price  for  wheat  than  in  other  parts  on  account  of  the 
condition  of  the  wheat. 

(2)  Prior  to  1913  the  data  obtained  show  that  Mr.  Durant  altered 
the  cards  for  particular  stations  on  the  request  of  either  an  individual 
country  elevator  or  a  line. 


Office  of  Clinton  Farmers’  Elevator  Co., 

Clinton,  Minn.,  Aug.  31,  1912. 

The  Grain  Bulletin,  Minneapolis,  Minn.  • 

Gentlemen:  Our  list  for  flax  you  are  making  about  22<t;  below  Mpls.  to  arrive. 

Please  keep  it  about  14$  below  Mpls.  to  arrive. 

Yours,  truly,  ^  ^  ^ 

Clinton  Farmers  Elv.  Co., 

(Signed)  By  F.  M.  Beaty. 


September  1st,  1912. 

Farmers’  Elevator  Co.,  Clinton. 

Gentlemen:  Yours  of  August  31st  received  and  noted;  on  account  of  the  discount 
on  October  flax  we  have  been  using  that  month  as  our  basis,  but  we  find  that  it  will 
not  do  to  do  so  and  to-morrow  will  send  the  cards  out,  using  the  “to-arrive’  and  will 
figure  Clinton  14  cents  off,  as  you  request. 

Yours,  very  truly,  ^ 

The  Grain  Bulletin. 

frd. 


The  Northwestern  Elevator  Co.* 

Minneapolis,  Minnesota,  Oct.  19,  1912. 

Mr.  F.  R.  Durant,  City. 

Dear  Sir:  It  seems  that  conditions  at  Willmar,  Minn.,  are  such  that  we  vill 
eventually  have  to  get  our  card  there  on  a  basis  of  freight  off  on  all  kinds  of  gmin. 
I  want  you  to  advance  the  card  at  Willmar  1$  per  day  until  we  get  to  a  point  where 
it  is  freight  off,  and  then  let  it  stay  there  until  matters  will  write  themselves,  w^hen  1 

will  notify  you. 

Yours  truly,  „  .  Maonuson.  Prest. 


*  Minneapolis  line. 


56976°— 22 - 16 


222 


TERMINAL  GRAIN  MARKETING. 


Minneapolis,  Minnesota,  Sept.  10,  1912. 

F.  R.  Durant, 

The  Grain  Bulletin  Building. 

Dear  Sir:  We  telephoned  you  this  morning  to  make  Broadland  and  North ville 
card  on  wheat  2(1;  over  normal  and  Hitchcock  4<i;  over  normal,  beginning  today.  The 
card  to  be  sent  these  stations  today  on  this  basis  whether  or  not  there  are  other  c^hanges. 
Yours  truly, 

G.  W.  Van  Dusen  &  Co.,* * 

F.  0.  Yeats. 


FOY-OK  Minneapolis,  Minn.,  November  15th,  1912. 

The  Grain  Bulletin  Building. 

Gentlemen:  Please  carry  the  list  2<1;  over  normal  on  flax,  and  1<1;  over  normal  on 
all  other  kinds  of  grain,  except  oats,  at  Parkers  Prairie,  Minnesota,  until  further 
notice. 

Yours  truly, 

Northland  Elevator  Co.,* 

FJS-K  By  F.  J.  Smith. 


Minneapolis,  Minn.,  September  18th,  1912. 

McIntyre  &  Weir,  Ba,ntry. 

Gentlemen:  Yours  of  the  17th  received  and  noted,  this  matter  of  having  a  different 
price  at  stations  having  the  same  freight  rate  has  been  thoroughly  considered  and 
some  years  ago  we  referred  the  matter  to  the  Attorney-Generals  of  the  three  states 
and  find  that  they  consider  that  the  highest  price  that  any  dealer  is  willing  to  pay  for 
grain  at  any  particular  station  is  the  price  of  grain  at  that  station  without  regard  to 
what  is  being  paid  at  any  other  station. 

So  far  as  this  being  caused  by  the  domination  of  certain  line  companies  is  concerned 
our  records  will  bear  us  out  in  saying  that  the  card  has  been  advanced  at  more  stations 
at  the  request  of  Farmers’  Elevator  Co’s  than  by  line  companies. 

We  do  not  know  just  the  situation  at  Bantry  but  do  know  that  we  are  frequently 
requested  to  advance  the  card  because  some  buyer  insists  in  paying  over  the  car^ 
or  of  over  grading  the  grain. 

******* 
Yours  very  truly. 

The  Grain  Bulletin. 

FED 


Minneapolis,  Minn.,  December  7th  1912. 

New  London  Milling  Co.,  Willmar. 

Gentlemen: 

******* 

Some  years  ago  after  advice  from  our  attorney  and  consultation  with  the  Legal 
departments  of  the  three  states  in  which  we  operate,  adopted  the  custom  of  making 
the  cards  represent  the  buying  prices  when  requested  to  do  by  any  subscriber  and 

recognizing  the  highest  price  anv  subscriber  was  willing  to  pay  as  the  station  price. 
*  '*  *'  *  *  *  * 

Yours  very  truly. 

The  Grain  Bulletin. 
frd 


From  the  early  organization  of  the  Grain  Bulletin  to  the  present 
time  line  companies  have  tried  to  use  the  card  as  a  buying  list  which 
should  be  followed  by  local  agents,^®  rather  than  as  a  basing  sheet 

*  Minneapolis  line. 

*0  Cf.  the  following  letter  to  a  local  agent: 

“Sioux  City,  Iowa,  October  22, 1911. 

“Agent  McCaull  Webster  Elevator  Co. 

“Dear  Sir:  Effective  Monday,  October  26th,  the  price  on  all  kinds  of  grain,  as  shown  on  your  regular 
card,  are  tc)  be  the  price  that  we  want  you  to  pay  at  your  station.  In  many  instances  the  margins  have 
been  too  wide  and  this  has  caused  an  indiscriminate  overlist  paying  which  we  wish  to  cut  out  entirely. 

“Please  confer  with  your  line  company  competitors  and  your  independent  dealers  at  your  station  upon 
receipt  of  this  letter  and  arrange  with  all  dealers  at  your  station  to  pay  the  price  as  shown  on  the  card. 
If  the  price  is  too  high  or  too  low,  advise  me  promptly  at  Sioux  City.  *  * 

See  also  Vol.  1,  Ch.  XI,  secs,  13-11. 


THE  GRAIN  BULLETIN. 


223 


for  bidding  in  the  local  market;  and  they  have  consistently  tried  to 
persuade  other  buyers  to  follow  this  policy.  So  long  as  line  company 
head  office  managers  need  only  instruct  local  agents  to  keep  to  list’^ 
the  Grain  Bulletin  is  a  great  assistance  to  their  buying  operations 
(Vol.  I,  Ch.  XI,  sec.  14),  but  the  tendency  of  their  competitors  to 
bid  up  the  country  market  and  pay  over  list  has  frequently  upset 
these  instructions.^^  As  prior  to  1913  the  card  could  be  adjusted 
in  a  single  market  on  the  request  of  the  .line  companies  and  (as  Mr. 
Durant  has  stated)  certain  stations  were  operated  without  profit,  it 
is  probable  that  it  may  have  aided  these  companies  in  local  price¬ 
raising  wars  against  their  competitors.^^ 

(3)  After  the  passage  of  the  so-called  antidiscrimination  laws  in 
the  four  Northwest  States  it  became  illegal  for  a  line-elevator  com¬ 
pany  to  discriminate  between  stations  in  prices  paid  for  grain  unless 
such  discrimination  should  be  clearly  warranted  by  local  competitive 
conditions.^*  Accordingly,  Mr.  Durant  took  the  position  that  he 
could  not  adjust  prices  on  request  of  a  line  company  (except  as  to 
their  whole  system).  Thus,  though  he  continued  to  do  so  for  other 
types  of  elevators,  in  December,  1914,  he  wrote  to  a  farmers’  elevator 
company: 

We  will  at  any  time  change  the  card  basis  on  request  of  a  local  dealer,  but  always 
decline  to  make  any  change  at  the  request  of  a  line  company.  *  *  * 

And  again,  in  1917,  writing  to  a  small  country  line: 

*  *  *  for  a  number  of  years  it  has  not  been  the  practice  to  slip  up  the  card 
unless  the  request  came  from  the  operator  of  a  single  elevator;  in  other  words,  it  will 
not  be  done  for  a  line-elevator  company. 

The  situation  described  in  the  foregoing  paragraphs  is  summarized 
in  the  stenographic  report  of  an  interview  with  Mr.  Durant  as  follows : 

Mr.  Durant:  *  *  *  Shortly  after  that  the  four  states  here,  that  is.  North  and 
South  Dakota,  Minnesota,  and  Montana,  passed  this  anti-discrimination  law,  you  know. 
Of  course  that  gave  me  the  opportunity  to  refuse  to  do  anything  of  that  kind. 

Judge  Burns:  What  was  the  date  of  the  passage  of  that  act? 

Mr.  Durant:  In  Minnesota  it  was  at  the  last  session.  That  was  the  1917  session. 

Judge  Burns:  Had  you  done  any  of  that  since  the  passage  of  that  statute? 

Mr.  Durant:  No,  except  where  the  operator  of  a  single  elevator  would  request  it. 
There  might  be  more  elevators  but  the  law,  you  know,  says  that  the  operator  of  more 
than  one  elevator - 

Judge  Burns:  You  mean  where  there  was  just  a  single  elevator  that  was  not  buying 
in  different  points,  but  you  would  not  furnish  an  elevator  that  was  buying  at  more 
than  one  point  different  cards? 

Mr.  Durant:  When  they  had  it  in  North  Dakota- and  South  Dakota  and  Montana 
yes.  I  applied  it  to  Minnesota  even  before  the  law  was  passed. 


Vol.  I,  Ch.  XI,  secs.  13-16,  discuss  line  elevator  price  policy  and  the  use  of  the  card  in  connection 
therewith. 

**  E.  g.,  see  the  following  letter  from  a  Minneapolis  concern: 

[Country  elevators  in  the  hard-wheat  belt  on  the  Great  Northern  Railway.] 


Winter-Truesdell-Ames  Co.,  Graen  Merchants,  654  Chamber  oe  Commerce, 

Minneapolis,  Minn.,  1-il-lS. 

The  Grain  Bulletin,  Minneapolis. 

Dear  Sir.s:  Confirming  our  telephone  message  to-day,  we  would  ask  you  to  have  the  card  to  Alberta 
sent  out  freight  oft,  less  commission,  on  \vheat  and  flax,  from  this  date  on  until  further  notice,  and  oblige, 

Yours,  truly,  ^  ^ 

(Signed)  L.  G .  Truesdell, 

j^AS.  Secty.  &  Ireas. 


M  See  North  Dakota  Laws,  1913,  ch.  287,  sec.  1  (North  Dakota  Compiled  Laws,  1913,  sec.  3043);  South 
Dakota  Laws,  1913,  ch.  356,  sec.  1  (South  Dakota  Revised  Code,  1919,  ch.  18,  sec.  4366);  Minnesota  Laws, 
1917,  ch.  377,  sec.  1;  and  Montana  Laws,  1913,  ch.  8,  sec.  1. 

Vol.  I,  Ch.  XI,  sec.  16. 


224 


TERMINAL  GRAIN  MARKETING. 


Mge  Burns  :  At  the  time  you  say  you  discontinued  the  practice  as  a  result  of  the 
St.  Paul  investigation,  before  that  time  you  had  been  practicing  this  considerably 
or  not?  ’ 

Mr.  Durant:  Yes,  these  cards  will  show  it. 

Judge  Burns:  On  the  same  day,  how  many  differing  cards  did  you  send  out? 

Mr.  Durant:  It  would  be  pretty  hard  to  answer  that  as  to  cards. 

Judge  Burns:  It  was  probably  back  there  under  the  old  regime  that  you  sent 
several,  for  instance,  you  might  send  one  card  to  one  point  carrying  one  figure  and 
another  to  another  point  carrying  another  figure.  In  other  words,  it  was  rather  the 
general  practice  before  that  time.  . 

Mr.  Durant:  Yes,  it  was  although  I  don’t  suppose  at  any  time  it  covered  10  per 
cent  of  the  stations. 

******* 

(4)  As  a  result  of  Mr.  Durant’s  attitude,  following  the  passage  of 
the  antidiscrimination  laws,  the  correspondence  indicates  that  ad¬ 
justments,  at  particular  local  stations  presumably  desired  and 
satisfactory  to  the  line  companies,  were  effected  by  arrangements 
with  cooperative  or  independent  competitors  to  request  a  change  in 
the  card,  either  directly  or  through  the  line  company: 


„  ^  Minneapolis,  Minn.,  Nov.  4th,  1913. 

Grain  Bulletin, 

Minneapolis,  Minn. 

Gentlemen:  We  hereby  confirm  the  action  of  Andrews  Grain  Co.*  to  send  the 
prices  for  us  on  l<t!  wider  margin  as  soon  as  possible. 

Yours  resp. 

New  York  Mills  Farmers  Elev.  Co. 
FRD  Per  Chas.  G.  Hyry,  Treas. 


The  Northwestern  Elevator  Company,* 

A  T.  Benson,  12-8-15. 

C.  A.  Magnuson,  Prest., 

Mpls,  Minn. 

Dear  Sir:  *  *  *  Jenson  tells  me  that  the  agents  from  Benson-De  Graff-Mur- 
dock  and  Kerkhoven  met  at  Murdock  last  night  and  agreed  to  have  the  card  at  those 
stations  reduced  one  cent  on  all  grains. 

Mr.  Johnson  the  Farmers  agent  at  Kerkhoven  was  to  call  up  the  Grain  Bulletin 
this  morning,  and  have  him  reduce  the  card. 


* 


Yours  truly, 


Jas.  Hanna. 


Grain  Bulletin,  Minneapolis,  Minn.  ,  Sept.  6,  1915. 

Minneapolis,  Minn. 

Dear  Sir:  Herewith,  letter  from  Mr.  Nelson,  Agent,  Farmers  Elev.  Co.,  Litchfield 
Minn.,  giving  you  basis  of  price  he  wants  the  Litchfield  list  made  on.  ’ 

Now  this  letter  was  sent  in  by  Mr.  H.  P.  Hanson  our  Superintendent 
Yours  truly, 

Cargill  Elevator  Company.* 


Northwestern  Elevator  Co  * 

Mr.  F.  R.  Durant,  Minneapolis,  Minn.,  Av^.  17,  1915. 

Chamber  of  Com.  City. 

Dear  Sir:  I  understand  the  Farmers  Elevator  Go’s  at  Hope,  Pickert,  Blabon  and 
Arthur,  also  at  Finley  N.  D.,  wish  to  buy  their  grain  on  a  certain  basis  off  the  terminal 
markets  If  they  ivill  request  you  to  send  out  the  card  on  that  basis,  make  the  card 
on  that  basis  and  send  it  to  us. 

Yours  truly, 

C.  A.  Magnuson,  Prest. 

♦Minneapolis  line,  — —  . 


THE  GRAIN  BULLETIN. 


225 


(5)  Mr.  Durant  apparently  cooperated  with  the  lines  in  this  last 
mentioned  policy,  at  least  for  a  time,  as  the  following  letter  indicates. 


June  5th,  1913. 

McCabe  Bros.,  Duluth. 

Gentlemen:  Replying  to  yours  of  the  3rd,  there  is  so  much  objection  to  reducing 
the  margin  in  North  Dakota  from  the  present  basis  that  we  do  not  see  how  we  can 
comply  with  your  suggestion. 

This  Unfair  Discrimination  Law  makes  the  companies  feel  that  it  is  necessary  to 
maintain  the  card  on  a  uniform  margin  throughout  the  state  otherwise  the  companies 
in  the  territory  with  you  would  be  paying  less  in  the  rest  of  the  state. 

What  we  are  trying  to  do  is  to  ^et  the  Farmers’  companies  to  make  requests  and  where 
they  do  ask  for  a  narrower  margin  we  feel  justified  in  complying  and  make  all  cards  at 
that  station  the  same. 

If  any  of  your  agents  can  get  such  evidence  as  would  protect  both  you  and  us,  that 
the  local  dealers  as  (sic)  paying  above  the  card  and  you  will  send  it  to  us  for  our  files 
we  will  advance  the  card. 

Yours  very  truly. 


The  Grain  Bulletin, 
F.  R.  Durant. 


(6)  Finally,  as  indicated  above,  Mr.  Durant  during  the  war  took 
the  position  that  there  should  be  no  discrimination  between  stations, 
abolished  the  special  cards  and  has  not  since,  according  to  his  own 
statements,  reemployed  them  except  on  freight  rate  breaks. 

Section  9.  Mr.  Durant  and  the  line  companies. 

Promotion  of  the  Grain  Bulletin  by  line  companies. — It  is 
evident  that  the  Grain  Bulletin  service  is  conveniently  adapted  to 
line-elevator  purchasing  methods,^®  and  that  the  service  has  always 
been  advocated  by  these  concerns  as  against  other  sources  of  price 
information.  For  example,  the  Powers  Elevator  Co.  (Minneapolis) 
wrote  Mr.  Durant,  September  25,  1912,  as  follows: 


I  inclose  a  letter  received  from  Mr.  Boardman,  our  auditor,  who  has  spent  a  few  days 
at  Dawson. 

You  will  note  that  he  has  succeeded  in  inducing  the  Farmers’  Elevator  Co.  to  sub¬ 
scribe  for  your  daily  card  and  to  cut  out  the  C.  N.  D.  service  altogether,  except  the 
closings. 

No%y,  I  would  suggest  that  you  write  them  a  letter  yourself  and  solicit  their  sub¬ 
scription,  also  to  urge  them  to  join  us  in  dividing  the  expense  of  notifying  Dawson  of 
the  changes  by  phone  and  wire.  If  you  are  successful  and  things  work  smoothly,  I 
think  we  can  perhaps  induce  them  to  give  up  the  C.  N.  D’s.  altogether. 

Again,  August  21,  1916,  the  Empire  Elevator  Co.  (Minneapolis) 
wrote  the  Grain  Bulletin  in  regard  to  the  market  at  Shields,  N.  Dak. : 


Do  not  let  the  farmers  elevator  there  stop  taking  the  wire  changes,  or  the  card,  or 
anything  else. 

While  this  might  be  taken  as  an  indication  of  ulterior  motives,  it 
is  at  least  conceivable  that  a  belief  in  the  efficiency  of  the  Grain 
Bulletin  service  may  be  in  part  responsible  for  this  attitude.  Thus 
on  October  20,  1916,  W.  K.  Powers  (Powers  Elevator  Co.)  explained 
the  advantages  of  the  Grain  Bulletin  service  to  a  local  agent  as  fol¬ 
lows: 

Is  the  new  farmers’  organization  subscribing  for  the  Grain  Bulletin  card?  Are  they 
satisfied  to  work  with  us  in  getting  in  the  phone  changes  with  the  understanding  that 
the  expense  be  divided? 

It  will  be  greatly  to  their  interest  to  cut  out  the  CND’s,  using  the  Grain  Bulletin 
service  entirely — ^you  see  the  CND’s  quote  the  market  from  two  to  four  times  a  day — 
the  opening,  the  1.30,  the  noon,  and  the  closing  prices,  and  these  quotations  go  out 
regardless  of  the  fluctuations  (or)  differences.  On  the  other  hand,  the  Grain  Bulletin 


Vol.  I,  Ch.  XI,  sec.  14. 


226 


TERMINAL  GRAIN  MARKETING. 


people  use  some  judgment  in  making  changes— the  discounts  on  poor  stuff  are  varying 
continuously.  If  the  market  drops  3<t  ten  minutes  after  the  opening,  the  Grain 
Bulletin  get  out  the  change,  but  the  CND’s  wouldn’t  show  the  decline  for  an  hour 
later. 

Let  me  know  just  what  the  farmers  are  doing  on  price  matters. 

Reply  on  this  sheet. 

Yours,  truly, 

Powers  Elevator  Co, 
By  W.  K.  P.,  Mgr. 

On  the  other  hand,  it  is  also  reasonably  certain  that  the  lines  have 
preferred  that  only  the  Grain  Bulletin  should  be  used,  in  order  that 
all  the  elevators  at  each  point  may  have  a  common  bujdng  basis,  thus 
aiding  in  keeping  the  price  situation  in  the  local  market  undisturbed. 

Mr.  Durant’s  position  politically.— Mr.  Durant  has  long  acted 
as  a  representative  of  the  line  companies  in  promoting  their  polit¬ 
ical,  legislative,  and  other  interests  in  the  Northwest.  He  freely 
stated  to  J.  E.  Templeton,  of  Helena,  Mont.,  in  a  letter  dated 
March  18,  1915,  that — 

The  line  elevators  here  use  me  to  keep  in  touch  with  all  matters  which  are  of  general 
interest  to  them  in  the  conduct  of  their  business  in  the  several  States,  and  if  you  are  so 
disposed  and  will  advise  me  from  time  to  time  of  matters  which  you  wish  called  to 
their  attention  I  am  in  a  position  to  do  so  and  will  be  glad  to  do  it. 

Examination  of  the  Grain  Bulletin  accounts  from  1913  to  1918 
disclosed  a  special  account  maintained  during  those  years  by  con¬ 
tributions  from  various  Minneapolis  grain  interests  for  legislative 
purposes  &nd  disbursed  by  Mr.  Durant.  The  following  extracts  from 
a  formal  interview  indicate  'the  nature  of  these  transactions  : 

Mr.  Twining.  That  is  a  line-elevator  account  purely,  is  it? 

Mr.  Durant.  Why,  yes.  I  would  not  have  thought  of  it  in  that  way,  but  I  think 
that  will  cover  it. 

Mr.  Flannery.  That  is,  by  a  line-elevator  company  account  the  money  that  is 
contributed  by  the  line  elevator  for  this  legislative  purpose  is  kept  in  a  special 
account?  .  ^ 

Mr.  Durant.  Yes. 

******* 

Mr.  Twining.  Mr.  Frank  A.  Cousins,  $391.25.  FRDS.  (Employee  of  Occident 
Elevator  Co.,  at  Bismarck  during  the  legislative  session.) 

Mr.  Durant.  That  was  for  special  expenses  at  Bismarck  during  the  session  of  the 
legislature. 

Mr.  Twining.  He  is  an  employee  of  the  Occident  Elevator  Co.? 

Mr.  Durant.  He  was  at  that  time. 

Mr.  Twining.  On  March  22,  1913,  Occident  Elevator  Co.,  $100 

Mr.  Durant.  That  was  additional  for  F.  A.  Cousins. 

******* 

Mr.  Twining.  May  25,  1915,  F.  H.  Ellis,  $200. 

Mr.  Durant.  There  is  a  counter  entry  for  that.  I  never  knew  why,  but  the  Imperial 
Elevator  brought  me  a  check  for  $200  and  asked  me  to  give  a  check  to  F.  H  Ellis  one 
of  their  employees,  for  a  similar  amount.  ’ 

Mr.  Twining.  August  14,  G.  F.  Ewe,  $44.18. 

Mr.  Durant.  That  was  an  item  of  expense  incurred  by  Mr.  Ewe  going  to  Duluth 
on  some  matter  which  was  of  interest  to  all  the  elevator  companies.  I  don’t  remember 
just  what  the  matter  was. 

Mr.  Twining.  On  November  1, 1915,  there  was  a  payment  of  $50  to  J.  F.  McKenney. 

Mr.  Durant.  J.  F.  McKenney  is  an  employee  of  mine  and  he  did  some  special 
work  for  the  elevator  companies  in  relation  to  bad -order  cars  which  I  thought  ought  to 
be  borne  by  all  the  elevator  companies  and  put  into  this  account. 

******* 

Mr.  Twining.  This  may  have  been  my  inability  to  see  correctly,  but  from  February 
to  June,  for  instance,  for  a  long  time,  I  was  not  able  to  find  checks.  There  would  be 


*«“F.  R.  D.  S.” — Frank  R.  Durant,  special  account. 


THE  GRAIN  BULLETIN. 


227 


$100  drawn  on  the  FRDS  account  for  which  I  could  not  find  any  check,  and  they 
come  contemporaneous  with  checks  to  G.  C.  Dargis  for  $50. 

Mr,  Durant,  In  making  up  the  check  for  currency  for  the  pay  roll  I  would  add 
$100  for  use  on  the  campaign  fund  from  week  to  week  and  it  would  be — the  currency 
would  be — brought  down  to  me.  There  are  a  number  of  those  items  you  will  find  from 
the  12th  of  May  to  the  30th  of  June, 

Mr.  Twining,  October  25,  $250. 

Mr.  Durant.  That  was  to  get  money  at  hand  to  be  paid  on  small  amounts  on  cam¬ 
paign  expenses. 

Mr.  Twining.  August  22,  cashier’s  check  to  George  J.  Smith  for  $1,000. 

Mr.  Durant.  That  was  a  campaign  fund  in  North  Dakota. 

Mr.  Twining.  Mr.  Smith  was  assisting  the  line-elevator  companies  in  a  campaign 
there?  * 

Mr.  Durant.  Yes;  assisting  the  grain  trade. 

Mr.  Twining.  August  30,  1917,  Van  Dusen  Harrington  Co.,  $100.  Those  items 
run  along  about  every  month, 

Mr.  Durant.  You  will  find  they  stop  right  there.  That  was  a  wind-up  on  the  legis¬ 
lative  expense  of  the  1917  legislature. 

The  explanation  of  numerous  other  items  from  this  account,  as 
made  by  Mr.  Durant,  appears  in  the  Appendix,  Exhibit  A. 

Among  the  letters  found  by  the  Commission  which,  concern  political 
and  allied  subjects  are  the  following; 

[Copy  of  Western  Union  telegram.— Collect.] 

Pierre,  S.  D.,  Feh.  5,  1913. 

F.  R.  Durant, 

902  Chamber  of  Commerce,  Minneapolis. 

One  eighty  four  [an  anti-price  discrimination  bill]  still  in  Committee  May  come  out 
today,  you  have  time  write  all  friends. 

J.  J.  Wilson, 

1101  A. 


[From  files  of  the  Northwestern  Elevator  Company.] 

South  Dakota  Legislature. 

SESSION  1913. 

Results: 

House  Bill  [[5:  Anti-Discrimination  Bill  introduced  by  Ruhlman.  This  bill  would 
have  made  it  necessary  for  those  having  more  than  one  elevator  to  pay  the  same  prices, 
freight  considered  at  all  stations,  and  would  have  prevented  you  meeting  a  higher 
price  paid  by  a  competitor  having  only  one  elevator;  the  Bill  was  killed  in  committee. 

House  Bill  ^[112:  A  bill  similar  to  #4;  killed  in  committee. 

House  Bill  P52:  A  bill  repealing  the  Fire  distance  law;  it  passed  the  House  but  was 
killed  on  floor  of  Senate, 

Senate  Bill  [[46:  A  bill  making  it  necessary  for  all  elevators  in  which  grain  is  stored 
to  put  up  a  bond,  this  bill  passed  and  becomes  law  July  1st,  1913. 

Senate  Bill  [[176:  This  bill  taken  with  Senate  bill  [[46  makes  it  compulsory  for 
elevators  to  use  storage  tickets  for  all  grain  two  days  after  it  is  weighed  in  to  an  elevator 
unless  checked  out  in  that  time,  this  will  cut  out  the  issuing  of  slips  and  is  a  good 
measure;  passed  and  will  become  law  July  1st,  1913. 

House  Bill  [[4:  Introduced  by  Berg.  This  bill  allowed  Farmers’  Elevator  companies 
to  divide  up  their  profits  with  both  stockholders  and  nonstockholders]  this  bill  was 
amended  striking  out  “non-stockholders”  leaving  it  harmless;  it  passed. 

House  Bill  [[278:  This  was  a  scale  bill  and  required  that  all  grain,  coal  and  stock 
scales  should  have  two  fifty  pound  U.  S.  Standards  weights  handy  at  each  scale  so  that 
farmers  could  test  scales  when  they  were  selling  grain  or  stock  or  buying  coal,  if  this  bill 
had  passed  it  would  have  made  it  necessary  for  every  elevator  to  buy  test  weights  for 
both  grain  and  coal  scales,  bill  was  killed  in  committee. 

House  Bill  ^160.  This  bill  made  the  Sheriff  of  each  county  a  scale  inspector,  and 
made  it  necessary  to  have  all  scales  tested  twice  each  year,  and  the  owner  of  the  scale 
had  to  pay  the  Sheriff  for  the  testing;  the  bill  was  so  amended  in  committee  that  it 
was  killed  on  the  floor. 


228 


TERMINAL  GRAIN  MARKETING. 


House  Billjtl84:  Another  Anti-Discrimination  Bill  by  Ruhlman,  was  amended  in 
House  comniittee,  but  the  amendment  was  knocked  out  by  Ruhlman  on  floor,  in  the 
Senate  the  bill  remained  in  the  Judiciary  Committee  until  within  a  few  days  of  the  end 
of  the  session  it  was  reported  out  with  several  amendments,  and  on  the  floor  the  fol¬ 
lowing  amended  [amendment]  was  added:  “  Provided,  however,  that  any  person,  Armor 
corporation  buying  such  commodities  in  more  than  one  section,  communitv,  locality  or 
city  may  raise  prices  in  any  given  section,  community,  locality  or  city  to,  but  not  above 
the  prices  paid  by  other  persons,  firms  or  corporations  bu5ang  such  commodities  in 
such  section,  community,  locality  or  city  when  necessary  to  meet  actual  legitimate 
c9mpetition  in  such  section,  community,  locality  or  city  without  being  held  to  have 
violated  the  proyisions  of  this  act.”  This  amendment  was  not  at  all  satisfactory  to 
those  interested  in  passing  the  bill  but  they  accepted  it  and  the  bill  will  become  law 
July  1st,  1913.” 


[Copy— The  Northwestern  Elevator  Co.] 


Van  Dusen  Harrington,  Co., 

Minneapolis,  Minn. 


Minneapolis,  Minn.,  Nov.  12,  1913. 


G^tlemen:  When  in  New  Orleans  October  14th,  15th  and  16th,  as  a  delegate  to 
Hie  Gram  Dealers’  National  convention,  the  matter  of  each  member  contributing 
Ten  Dollars  to  be  used  in  paying  the  travelling  expenses  of  the  Committee  on  Legis¬ 
lation  whenever  it  became  necessary  for  all  or  any  of  them  to  go  to  Washington,  came 
up  for  discussion  and  some  wanted  to  contribute  from  Fifty  to  Two  Hundred  Dollars 
for  that  purpose. 

I  made  the  point  that  each  member  should  share  in  that  legitimate  expense  and 
said  I  did  not  believe  there  was  a  single  member,  either  in  Minneapolis  or  Duluth 
that  would  not  send  a  check  for  Ten  Dollars  for  this  purpose  if  it  was  understood  and 
1  ^ered  to  take  it  up  with  the  members  in  the  Northwest  who  had  failed  to  remit. 

By  data  before  me  today,  I  find  that  you  have  overlooked  it.  Now  let  me  say 
emphatically,  with  every  assurance,  that  no  organization  can  concentrate  more  effi- 
ciently  on  Congress  when  it  comes  to  Anti-Futures  Legislation  than  the  National  Body 
of  Grain  Dealers  through  its  Legislative  Committee  and  through  its  adherent  members 
and  piGESG  rGniGMbGr  that  thG  nGxt  SGssion  of  CongrGSs  will  suiGly  havG  soniG  drastic 
Legislation  of  this  kind  that  will  need  to  be  met  by  most  strenuous  work  in  order  to 
keep  It  wRhin  bounds  and  in  my  opinion  it  will  only  be  by  having  the  support  of  the 
National  Body  of  Gram  Dealers,  and  through  them  the  State  organizations  that  the 
Gram  1  rade  will  be  able  to  do  business  along  present  or  similar  lines,  therefore,  will 
you  today  mail  your  check  for  Ten  Dollars  to  J.  F.  Coucier,  Sec’y.  and  Treas.,  Grain 
Dealers  Natl.  Ass’n.,  Toledo,  Ohio,  so  that  the  legislative  Committee  be  not  ham¬ 
pered  by  having  to  pay  their  own  traveling  expenses  when  they  are  working  for  vou 
and  me.  a  j 


Will  you  please  notify  me  so  I  can  check  your  name  off  the  list. 
Very  truly  yours. 


C.  A.  Magnuson  (signed). 


[Copy  of  a  copy. 

TVT  A  A  TIT  7th,  1914. 

Mr.  A.  A.  Moritz, 

Redjield, 

Dear  ^r:  Yours  of  the  6th  received,  we  are  making  the  adjustment  you  suggest 
between  Rockham  and  Zell. 

Election  time  is  most  here,  if  there  are  any  men  you  think  might  need  some  assist¬ 
ance  and  will  send  us  their  names  we  will  get  busy. 

Yours  very  truly 

The  Grain  Bulletin. 


[Copy  of  a  copy.] 

Mr.  R.  P.  Baird, 

Fargo. 

Dear  Baird;  Have  taken  the  liberty  of  sending  you  by  express  some  mail  which 
1  wish  to  get  to  members  of  the  North  Dakota  Legislature  and  wished  mailed  some- 
wnere  in  N.  D.  instead  of  Minnesota,  in  order  that  you  may  not  think  I  am  trying  to 
put  anything  over  on  you  I  enclose  a  copy  of  the  contents. 

If  you  will  just  place  these  in  the  mail  I  will  greatly  appreciate  it. 

Yours  very  truly, 


THE  GRAIN  BULLETIN. 


229 


[J.  L.  McCaull,  Pres’t.  D.  Webster,  V-Pres,  &  Treas.  C.  A.  Growl,  Sec’y.] 

The  McCaull-Webster  Elevator  Co., 

Minneapolis,  Minn.,  March  12,  1915. 

Mr,  F.  R.  Durant, 

Chamber  of  Commerce. 

Dear  Sir;  Please  note  the  attached  copy  of  letter  I  have  written  to  Mr.  Van 
Dusen,  Mr.  Harrington  and  Mr.  Ewe: 

I  wish  you  would  see  that  Mr.  Wilson  and  Mr.  Moritz  "are  properly  compensated  for 
their  efforts  in  this  connection. 

Very  truly  yours, 

J.  L.  McCaull,  President. 

JLM.C-M 


[Copy  of  a  copy.] 


Mr.  F.  C.  Van  Dusen, 
Mr.  C.  M.  Harrington, 
Mr.  G.  F.  Ewe. 


March  12,  1915. 


Gentlemen:  As  a  member  of  a  Committee,  which  has,  for  several  years,  been  a 
close  observer  of  legislative  matters  in  South  Dakota,  I  desire  to  state  that  during  all 
that  period  legislative  matters  in  that  State,  so  far  as  they  related  to  the  grain  trade, 
have  been  more  closely  watched  and  more  efficiently  handled  than  in  any  State  in 
the  West  or  Northwest  with  which  I  am  at  all  familiar. 

The  results  obtained  are  due  primarily  to  the  very  efficient  and  careful  manner  in 
which  Mr.  J.  J.  Wilson  and  Mr.  Adolph  Moritz  have  interviewed  and  reasoned  with 
the  various  members  of  the  Legislature.  They  have  at  no  time  requested  any  action 
that  was  unfair  to  the  public,  and  which  was  not  eminently  fair  to  the  grain  trade. 
The  results  they  have  secured  bear  out  most  completely  the  above  statement. 

The  past  session  of  the  Legislature  is  most  remarkable  for  the  fair  disposition  mani¬ 
fested  toward  the  grain  trade,  and  I  conceive  it  to  be  the  cumulative  results  of  the 
efforts  put  forth  by  Mr.  Wilson  and  Mr.  Moritz. 

The  passage  of  the  law,  making  it  possible  for  elevator  people  to  deliver  stored  grain 
at  terminals,  is  of  inestimable  value  to  the  grain  trade  in  that  State.  I  mention  this 
only  as  one  of  the  very  many  benefits  resulting  from  the  earnest  and  faithful  labors 
of  Mr.  Wilson  and  Mr.  Moritz. 

The  Van  Duzen-Harrington  Co.,  is  to  be  congratulated  upon  having  two  such 
efficient  men  upon  their  staff. 

In  this  connection  it  is  appropriate  to  say  that  the  watchful  eye  and  the  ceaseless 
activity  of  Mr.  F.  R.  Durant  in  connection  with  legislative  matters  has  been  of  the 
greatest  value  to  the  grain  trade  of  the  Northwest,  and  I  know  of  no  one  who  could 
surpass,  if  indeed  they  could  equal,  his  vigilance  and  valuable  achievements  in  this 
connection. 

Very  truly  yours. 


...... 

President. 


JLMcC-M 


[G.  M.  Palmer,  Pres.  F.  E.  Crandall,  Sec’y.  Jay  Hubbard,  Treas.  Hubbard  &  Palmer  Co.  Grain  Ele¬ 
vators  on  C.  St.  P.  M.  &  O.  Ry.] 

Mankato,  Minn.,  May  17,  1915. 

F.  R.  Durant, 

Grain  Bulletin,  Minneapolis,  Minn., 

Dear  Sir:  We  enclose  a  list  of  names  to  whom  we  would  like  to  have  you  send 
copies  of  the  pamphlet  recently  issued  by  the  Co-operative  Journal  with  reference  to 
the  equity  exchange.  Please  advise  if  you  will  attend  to  this,  and  oblige 
Yours  truly, 

FEC:  LK  (signed)  Hubbard  &  Palmer  Co. 

F.  E.  Crandall,  Sec’y. 


230 


TERMINAL  GRAIN  MARKETING. 


IG.  M.  Palmer,  Pres.  F.  E.  Crandall.^^c’y.^  g|t”p“M.1;  STy.J  '='»■ 


F.  R.  Dueant,  Mankato,  Minn.,  May  B5,  1915. 

Minneapolis,  Minn., 

Dear  Sir:  Enclosed  please  find  list  of  names  to  whom  we  will  ask  you  to  send  the 
pamphlet  regarding  the  Equity  Exchange.  ^ 

Yours  truly, 

TTR'P-T  IT  /  .  Hubbard  &  Palmer  Co. 

ENCL  ^  (signed)  F.  E.  Crandall,  Sec’y. 


Minneapolis,  Minn.,  Jan.  29th,  1917. 

Gentlemen:  It  has  conie  to  my  notice  that  the  North  Dakota  Agricultural  Experi¬ 
ment  Station  through  its  Field  Agent  James  E.  Boyle  is  making  certain  inquiries  of 
the  elevator  compames  relating  to  the  business  done  at  their  elevators  in  North  Dakota 

comply  with  this  request  at  present  and  take  this  oppor¬ 
tunity  to  further  sugges.  that  in  the  future  all  similar  requests  be  referred  to  me  before 
they  are  complied  with  in  order  that  the  same  action  may  be  oaken  by  all  compSi 

(signed)  F.  R.  Durant. 


[Copy  of  a  copy.] 

Hon.  T.  H.  Girling,  St.  Paul, 

^  ’■“dical  bunch  should  get  in 

thSr  ifatomr^HnsTo)  to^iYrr^esriti^  ^ 

Perhaps  you  can  work  some  trades  for  25  and  against  26 
Yours  truly, 

F.  R.  Durant 


[GRAND  FORKS  HERALD. 


North  Dakota’s  Greatest  Newspaper. 
J.  C.  Bacon,  Business  Manager.] 


Morning,  Evening  and  Sunday. 


Mr 


F  R  Durant  Grand  Forks,  North  Dakota,  April  18,  1917. 

The  Grain  Bulletin,  Minneapolis,  Minn. 

Dear  Durant:  Your  letter  to  J.  D.  was  turned  over  to  me,  and  I  was  laboring  under ! 
the  imj^ession  that  he  had  answered  the  same  before  giving  it  to  me.  I  asked  him  ' 
about  it,  and  he  says  that  he  has  not  answered  it.  ‘ 

We  can  get  out  most  any  kind  of  a  pamphlet  you  would  care  for  on  the  Non-Partisan 
L^gue,  but  It  would  be  rather  hard  for  me  to  give  you  a  price  on  the  same  until  suchi 
time  as  we  had  compiled  the  matter  which  we  would  put  into  the  bulletin.  This  of! 

J®  A  ®  of  them  as  you  wished.  However, 

yo  Pe^footed  an  organization  composed  of  members  from: 
all  over  the  State  which  is  to  be  known  as  the  Anti-Socialist  Union,  and  its  object; 
will  be  to  co^teract  the  effect  of  the  Non-Partisan  League.  To  do  this,  many; 
pamphlets  and  buUetins  will  doubtless  be  issued  and  they  will  doubtless  be  just  the* 

want.  Personally,  I  feel  that  this  matter  will  have, 
to  be  done  by  a  lot  of  pamphlets  and  a  lot  of  newspaper  publicity  rather  than  byj 
any  one  pamphlet,  as  there  are  many  questions  which  loom  up  so  large  that  they  could  1 
not  be  treated  in  a  single  pamphlet.  &  '^1 

I  expect  to  be  in  the  cities  before  so  very  long,  and  will  be  glad  to  meet  and  talk! 
this  proposition  over  with  you.  | 

there  will  be  a  meeting  of  the  executive  committee  of  thei 
Anti  Socialist  Union  at  which  time  definite  plans  for  the  campaign  will  be  outlined 
V  ery  truly  yours. 


JFB-HO 


.  J.  F.  Bacon, 

Business  Manager,  Grand  Forks  Herald  Co. 


THE  GRAIN  BULLETIN. 


231 


[From  files  of  the  Northwestern  Elevator  Co.] 


^  ^  June  23,  1517. 

Mr.  F.  R.  Durant, 

Cham  of  Com.,  City. 

Dear  Sir:  Enclosed  please  find  a  file  of  papers  which  came  to  me  from  Asher 
Howard.  Evidently  Howard  has  paid  out  $G05.47  for  which  he  ought  to  be  reim¬ 
bursed.  Between  yourself  and  Mr.  McHugh,  I  think  it' ought  to  be  arranged  so  as 
to  collect  this  money  so  as  to  reimburse  him.  Please  advise  me  as  to  what  method 
you  wish  to  pursue  in  order  to  do  it.  It  might  be  taken  up  possibly  at  the  meeting 
that  is  proposed  on  account  of  the  letter  I  wrote  you  in  relation  to  Martinson,  but 
that  would  not  cover  it  all.  This  is  a  matter  for  the  whole  Chamber,  and  ought  to 
be  made  up  in  that  way.  At  any  rate  I  think  you  and  Mr.  McHugh  can  figure  out  a 
way  to  do  it. 

Yours  truly, 

(Signed)  C.  A.  Magnuson,  Prest. 

ENCL. 


Mr.  Durant  agent  for  elevator  pools,  etc. — Mr.  Durant  testi¬ 
fied  in  1906  that  prior  to  1905  he  had  charge  of  agreements  to  divide 
the  grain  at  country  stations,  but  that  he  was  told  that  after  January 
1,  1905,  his  services  would  not  any  longer  be  required  in  that  con¬ 
nection.*  As  detailed  in  Volume  I,  Chapter  XI,  section  18,  however,  he 
was  as  late  as  1916  in  charge  of  the  arrangements  of  the  various  line 
elevators  for  closing  or  wrecking  elevators  on  a  rental  basis. 

Section  10.  Extent  to  which  card  is  followed. 

In  order  to  test  the  charge  that  the  Grain  Bulletin  constitutes  a 
price-fixing  mechanism  two  methods  were  employed.  In  the  first 
place,  schedules  were  sent  to  several  thousand  country  elevators  in 
the  Northwest  inquiring  as  to  the  use  made  of  the  Grain  Bulletin  card. 
Secondly,  daily  prices  actually  paid  in  the  country  by  340  elevators 
of  various  types  for  the  years  1912-13  to  1916-17  were  compared 
with  the  card  prices  on  identical  days  for  those  stations  for  the  pur¬ 
pose  of  determining  the  extent  of  deviations  in  actual  prices  from 
the  card  prices. 

Replies  to  the  schedule  which  asked  the  following  questions  were 
received  from  3,299  companies  of  all  classes: 

(1)  Do  you  receive  the  grain  market  report  or  ‘‘card’’  sent  out  by 
the  Grain  Bulletin  of  Minneapolis  ? 

(2)  If  so,  do  you  or  do  you  not  foUow  or  try  to  follow  the  quotations 
relating  to  grain  values  which  appear  upon  such  “cards”  and  mes¬ 
sages  in  buying  grain  ? 

(3)  If  so,  state  fully  to  what  extent  you  follow  such  quotations  in 
the  matter  of  buying  grain  at  your  station. 

(4)  Are  you  instructed  by  anyone  in  authority  over  you  to  follow 
such  “cards”  and  messages  in  the  matter  of  buying  grain? 

(5)  If  so,  by  whom  ? 

Of  the  replies  received,  91  had  to  be  discarded  because  they  made 
no  answer  to  questions  2,3,4,  and  5  above,  and  49  of  the  replies  were 
too  indefinite  to  be.  classified.  Also,  683  companies  reported  that 
they  did  not  take  the  card.  Eliminating  these  replies,  there  remained 
2,476  upon  which  conclusions  could  be  based. 


232 


TEKMINAL  GRAIN  MARKETING, 


These  replies  were  classified  under  the  following  headings,  adopted 
from  the  character  of  the  replies : 

(a)  Follow  the  card.^^ 

(h)  Try  to  follow  card. 2* * 

(c)  Follow  card  as  nearly  as  practicable.^^ 

(d)  Follow  card  to  a  certain  extent.^*^ 

(e)  Pay  over  card  at  times.^^ 

(/)  Follow  card  depending  on  competition.^^ 

(g)  Pay  over  card  on  one  grain. 

(h)  Pay  over  card  on  two  or  more  grains. 

(i)  Pay  over  card.^^ 

(j)  Card  used  as  a  basis.^^ 

(^)  Do  not  follow  card.^^ 

The  results  of  the  tabulation  of  the  schedules  as  thus  classified 
according  to  type  of  reporting  elevator  appear  in  the  following  table: 


Tabulation  of  replies  to  inquiry  into  use  made  of  the  Grain  Bulletin  card  at  country 

markets,  1918. 


Classification. 

Line 

elevator 

agents.i 

Cooperative 

elevator 

companies. 

Independ¬ 
ent  ele¬ 
vators. 

Mill-owned 

individual 

elevators. 

Total. 

Num¬ 

ber. 

Per 

cent. 

Num¬ 

ber. 

Per 

cent. 

Num¬ 

ber. 

Per 

cent. 

Num¬ 

ber. 

Per 

cent. 

Num¬ 

ber. 

Per 

cent. 

(a)  Follow  the  card . 

662 

53 

254 

23 

131 

31 

26 

37 

1, 073 

43 

(&)  Try  to  foUow  card . 

57 

5 

32 

4 

26 

6 

2 

3 

117 

5 

(c)  Follow  card  as  nearly  as  practicable. 

104 

8 

42 

6 

28 

7 

6 

8 

180 

7 

(d)  FoUow  card  to  a  certain  extent . 

54 

4 

76 

10 

30 

7 

4 

6 

164 

7 

(c)  Pav  over  card  at  times . 

55 

5 

59 

8 

51 

12 

12 

17 

177 

7 

(/)  Follow  card  depending  on  competi- 

tion . 

128 

10 

21 

3 

26 

6 

3 

4 

178 

7 

tg)  Pay  over  card  on  one  grain . 

40 

3 

53 

7 

26 

6 

2 

3 

121 

5 

(h)  Pay  over  card  on  two  or  more  grains. 

53 

4 

79 

11 

31 

7 

3 

4 

166 

7 

(i)  Pay  over  card . 

29 

2 

35 

5 

21 

5 

2 

3 

87 

4 

(j)  Card  used  as  a  basis . 

35 

3 

41 

6 

26 

6 

3 

4 

105 

4 

(k)  Do  not  foUow  the  card . 

30 

3 

38 

5 

32 

7 

8 

11 

108 

4 

Total  not  foUowing  card  abso- 

lutely . 

585 

47 

476 

•  65 

297 

69 

45 

63 

1,403 

57 

Total  repUes  tabulated . 

1,247 

100 

730 

100 

428 

100 

71 

100 

2,476 

100 

t  1  Includes  mill-owned  lines. 


From  these  replies  it  appears  that  1,073  elevators,  or  43  per  cent, 
followed  the  card.”  It  is  to  be  noted,  however,  that  53  per  cent  of 
the  lines  so  reported,  but  only  37  per  cent  of  the  mills,  31  per  cent 
of  the  independents,  and  23  per  cent  of  the  cooperatives.  In  other 


u  Without  qualification. 

28  Actual  replies  were— “aim  to  follow  card,”— “endeavor  to  follow  card.” 

29  Actualreplies  were— :“as  close  as  possible”— “as  close  as  I  can”— “as  near  as  I  can” — “to  the  best  of 
my  ability”— “the  best  I  know  how”— “almost  entiiely”— “very  close”— “closely”— “most  always”— 
“almost  to  full  extent.” 

*oA.ctual  replieswere— “attimes”— “on  some  grains”— “partly”— “to  some  extent”— “to  a  good  ex¬ 
tent”— “sometimes”— “somewhat”— “most  of  thetime”— “generally”— “usually”— “pretty  closely”— 
“reasonably  close”— “fairly  well”— “in  most  cases”— “imder  on  one  of  more  grains”— “except  on  one  or 
more  grains”— “not  always”~“not  entirely”  -“not  altogether”— “hardly  ever.” 

*1  Actual  replies  on  question  of  paying  over  the  card  were— “sometimes”— “in  some  cases”— “in  some 
Instances”— “frequently”— “occasionally”— “quite  often”— “generally”— “usually”— “most  of  the 
time”— “often”— “once  in  a  while”— “if  card  is  too  low”— “if  margin  is  too  big.” 

*2  Actual  replies  were — “compelled  to  follow  to  meet  competition” — “as  near  as  competition  will  per¬ 
mit”— “except -when  competition  makes  it  necessary”  (to  depart  from  the  card  price)— “depending  on 
competition”— “local  conditions  govern”— “unless  competition  bids  more.” 

Not  qualified. 

Actual  replies  were— “used  as  a  basis”— “used  as  a  guide”— “used  to  keep  line  on  other  buyers”- 
“used  to  get  an  idea  what  to  pay”— “used  as  a  reference”— “used  to  follow  fluctuations”— “as  relative  to 
changes  on  grades”— “for  comparison  of  prices  of  grades”— “on  spreads  between  grades”— “used  according 
to  best  judgment.”  &  & 


THE  GRAm  BULLETIN. 


233 


words,  one-third  of  the  nonline  elevators  reported  following  the 
card  without  variation.  It  is  not  clear  from  these  replies,  more¬ 
over,  whether  they  ‘^followed’’  the  card  as  a  basis  or  whether  they 
actually  paid  the  card  prices.  For  this  reason,  therefore,  it  would 
not  be  sate  to  conclude  that  all  elevators  reporting  that  they  follow’^ 
did  in  fact  pay  card  prices.  The  remaining  operators  indicated  that 
they  did  not  or  could  not  follow  the  card  without  some  variation, 
and  108,  or  4  per  cent,  stated  flatly  that  they  did  not  follow  the  card. 
Further  analysis  shows  that  of  the  number  who  stated  flatly  that 
they  followed  the  card  662,  or  a  majority  of  this  class,  were  the  agents 
of  line  companies.  Also,  in  the  next  five  classes  (b,  c,  d,  e,  and/) — 
where  an  effort  to  follow  the  card  was  shown — 398  out  of  816,  or 
practically  half,  were  the  agents  of  line  companies.  It  appears  that 
85  per  cent  of  the  agents  of  line-elevator  companies  either  followed 
the  card  or  made  an  effort  to  do  so,^®  but  that  47  per  cent  of  them 
were  not  able  to  follow  it  absolutely.  Among  the  other  classes  of 
dealers  a  majority  of  each  class  failed  to  follow  the  card  absolutely, 
although  (adding  a,  h,  c,  d,  e,  and/)  a  majority  of  each  class  made 
some  effort  to  do  so. 

In  order  to  further  test  the  use  made  of  the  card,  the  prices  paid 
for  certain  grades  of  grain  by  340  country  elevators  at  representative 
country  markets  in  the  four  Northwestern  States  were  compared 
with  the  Grain  Bulletin  quotations  of  the  same  day^®  for  the  same 
stations  for  the  five-year  period  1912-13  to  1916-17. 

The  results  of  these  comparisons,  which  were  made  for  Nos.  1  and  3 
northern  (spring  wheat).  No.  3  white  oats,  and  No.  2  rye,  are  shown 
in  Appendix  Tables  38  to  41.  From  these  tables  it  appears  that 
instances  of  correspondence  between  prices  actually  paid  for  grain 
and  Grain  Bulletin  card  prices  constituted  a  relatively  negligible  pro¬ 
portion  of  the  total  price  comparisons  for  each  of  these  grades  of 
grain  in  each  year.  The  proportion  of  deviations  over  the  card 
ranged,  as  a  rule,  from  60  to  80  per  cent  of  the  total  number  of  com¬ 
parisons  with  the  card,  and  the  deviations  below  from  40  to  20  per 
cent.  A  very  substantial  proportion  of  the  deviations  from  the  card 
amounted  to  as  much  as  2  cents.  In  connection  with  these  figures 
reference  is  made  to  the  conditions  of  competition  and  of  agreements 
in  restraint  of  competition  in  country  buying  in  this  territory  during 
this  same  period  as  set  forth  in  other  sections  of  this  chapter. 

Section  11.  Conclusion. 

The  statistical  evidence  obtained  indicates  that  the  card  is  used 
chiefly  as  a  basis  for  buying  by  a  majority  of  elevators;  that  varia¬ 
tions  therefrom  are  exceedingly  numerous  and  frequently  substantial ; 
and  that  in  the  great  majority  of  cases  these  variations  tend  to  be  over 
the  card  price,  thus  giving  the  farmer  a  higher  price  than  that  figured 
on  the  card.^^ 


«  Line  company  agents  are  usually  instructed  to  follow  the  card  in  the  absence  of  special  instructions 
and  when  competition  does  not  make  it  impossible. 

38  The  same  day  was  used  on  account  of  the  fact  that  so  many  of  the  elevators  receive  wire  changes  during 
the  day  that  the  prices  they  pay  are  often  based  on  the  Grain  Bulletin  prices  of  that  day  and  not  of  the 
day  preceding.  As  a  further  check  on  the  test,  however,  the  prices  were  also  compared  with  the  card 
quotations  issued  on  the  previous  day,  but  the  results  were  not  substantially  different  from  those  given 
in  the  table.  For  example,  this  test  showed  for  deviations  of  2  cents  or  more  on  No.  1  northern  wheat  in 
1914-15, 36.86  per  cent  as  compared  with  38.87  per  cent  in  the  table  here  published.  And  the  percentage  of 
deviations  on  this  grade  of  wheat  for  1915-16  by  the  second  method  was  44.28  as  compared  with  45.93  in  the 
table.  Both  tests  showed  departures  from  the  card  price  in  a  majority  of  the  comparisons  made. 

*7  Obviously  this  means  that  the  elevator  narrows  the  buying  margin  allowed  in  making  up  the  card  and 
tends  to  support  repeated  statements  by  Mr.  Durant  that  the  card  furnishes  a  minimum  buying  price  to  the 
country. 


234 


TERMINAL  GRAIN  MARKETING. 


As  appears  from  Volume  I  of  the  report,  however,  the  card  has 
been  repeatedly  and  continuously  employed  as  a  basis  for  price  agree¬ 
ments  and  similar  arrangements  entered  into  on  the  initiative  of  ele¬ 
vator  managers  in  the  country  markets  or  through  line  officials  at  the 
terminal  markets.  Repeatedly  it  has  been  either  agreed  or  mutually 
understood  that  card  prices  only  should  be  paid  by  the  elevators  at  a 
station,  and  certain  technicalities  of  the  service  facilitate  the  card’s, 
employment  in  connection  with  such  price  agreements.  This  use  of 
the  card  for  price-fixing  purposes,  however,  is  attributable  chiefly  to 
the  price  policies  of  the  various  country  elevators,  particularly  the 
lines.  It  IS  probably  safe  to  infer  that  many  of  the  elevators  report¬ 
ing  to  the  Commission  that  they  followed  the  card  were  doing  so  as 
the  result  of  such  agreements.  In  this  connection  it  is  perhaps  worth 
noting  that  the  lines  which  are  most  frequently  the  instigators  and 
participants  in  the  agreements  and  understandings  regardmg  prices 
are  also  the  most  consistent  according  to  their  returns  in  following 
the  card. 

It  is  also  clear  that  the  Grain  Bulletin  was  originally  organized  and 
financed  by  the  Minneapolis  line-elevator  companies;  that  Mr.  Du¬ 
rant  in  the  early  years  acted  for  the  line-elevator  companies  in  pooling 
arrangements,  and  until  a  comparatively  recent  date  handled  for 
them  matters  pertaining  to  the  closing  and  leasing  of  country  eleva¬ 
tors,  as  well  as  receiving  and  disbursing  funds  for  political  and  legis¬ 
lative  purposes  on  behalf  of  these  concerns. 

The  service  first  developed  as  a  line-elevator  institution,  and  it 
seems  fairly  certain  that  prior  to  1913  the  line-elevator  companies 
largely  influenced  the  policy  of  the  card,  and  that  it  was  operated  to 
a  greater  or  less  extent  in  their  interest. 

One  indication  that  this  was  the  situation  is  found  in  the  fact  that 
prior  to  1912  Mr.  Durant  would  adjust  the  card  for  a  particular  station 
on  the  request  of  a  line  company  (as  a  part  of  a  general  policy  of 
making  the  card  reflect  the  highest  price  which  any  elevator  at  a 
station  was  willing  to  pay).  It  thus  became  possible  for  the  line  to 
have  the  card  price  raised  to  a  point  which  would  allow  no  profit  at 
any  station  where  it  might  wish  to  destroy  competition,  and  there 
are  numerous  indications  that  the  card  thus  became  an  instrument 
which  was  employed  by  the  line  companies  in  local  price-raising  wars 
of  this  character. 

Furthermore,  by  impHcation  at  least,  Mr.  Durant  has  admitted 
the  influence  of  the  line  companies  prior  to  1913,  as  appears  in  the 
following  letter: 


Minneapolis,  Minn.,  August  28,  1916.  ‘■- 

Mr.  D.  B.  Johns,  Secfy.,  ‘ 

Litchfield.  . 

Dear  Sir:  Yours  of  the  26th,  received  and  noted,  we  trust  that  in  the  very  near  I 
future  to  be  able  to  comply  with  your  request. 

Prior  to  1913  what  you  say  about  our  being  influenced  by  Line  Elevator  companies  ‘ 
might  have  been  true  but  since  that  time  it  has  not  been. 

Yours  very  truly,  '  . ' 

frd.  The  Grain  Bulletin.; 


The  passage  of  the  State  antidiscrimination  laws  in  1913  marked  • 
a  change  in  the  policy  of  the  Gmin  Bulletin.  From  that  time  till 
1917  Mr.  Durant  took  the  position  that  he  would  adjust  the  card 
basis  at  the  request  of  local  elevator  managers  but  not  at  the  request 


THE  GRAIN  BULLETIN. 


235 


of  the  line  (unless  for  the  line  as  a  whole).  So  far  as  can  be  judged  by 
his  correspondence  this  policy  was  adhered  to  during  this  period.^* 
With  the  closing  out  of  the  guarantors  fund  in  1914,  the  Grain  Bulletin 
may  be  said  to  have  become  financially  independent  of  the  line  ele¬ 
vators.  In  1917,  under  war  conditions,  Mr.  Durant  dropped  the 
policy  of  adjusting  prices  upon  request  (special  cards)  and  has  not 
resumed  this  plan  so  far  as  any  evidence  has  been  obtained. 

Mr.  Durant’s  miscellaneous  political  and  other  activities  in  behalf 
of  the  line  companies  continued  after  1913.  These  activities  natur¬ 
ally  caused  suspicion  as  to  the  independence  of  the  Grain  Bulletin. 

In  conclusion,  it  may  be  said  that  so  far  as  evidence  has  been  found 
Mr.  Durant  does  not  appear  to  be  operating  the  card  at  the  present 
time  in  the  interest  of  any  particular  class  of  subscribers,  or  as  a  price- 
fixing  mechanism,  whatever  he  may  have  done  in  the  past  and  what¬ 
ever  his  present  relations  with  the  line  companies  may  be  in  political 
and  other  activities. 

In  view  of  all  the  facts  recited  the  Commission  is  of  the  opinion 
that  some  form  of  Government  regulatior  '  ‘  ’ 


State  or  Federal,  is  probably  desirable. 


tion  should  take  the  Commission  is  not  prepared  to  state  without 
making  a  much  more  detailed  and  careful  canvass  of  the  situation. 
So  far  as  present  information  goes,  however,  it  is  believed  that  such 
regulation  and  supervision  should  not  be  too  detailed,  but  at  least 
regular  reports  to  some  Governmental  agency  should  he  required. 
These  reports  might  be,  for  example,  a  continuous  daily  record  of  the 
terminal  market  base  prices  employed,  whether  ‘Ho-arrive,”  ‘^spot,” 
or  ‘^future,”  the  handling  margins  allowed  and  methods  of  ascertain¬ 
ing  and  computing  same,  with  explanations  of  any  differences  as  be¬ 
tween  different  grains,  etc.  Kecords  of  any  special  adjustments  made 
should  also  be  supplied,  together  with  reasons.  Another  method 
would  be  to  require  that  a  full  report  of  this  character  should  be  made 
at  the  beginning  of  each  crop  year;  any  subsequent  report  to  be  made 
only  when  there  are  any  changes  or  deviations  in  the  handling  margins, 
base  prices,  etc. 

All  such  reports  should  be  made  matters  of  public  record.  The 
Governmental  agency  should  of  course  be  directed  to  confer  with  Mr. 
Durant  in  regard  to  any  changes  made  and  to  raise  objections  and  dis¬ 
cuss  the  changes  with  him,  but  it  is  doubted  that  Governmental  su¬ 
pervision  should  extend  further  than  this. 

Lest  there  be  misinterpretation,  it  should  be  clearly  understood  that 
these  recommendations  are  not  advanced  upon  the  theory  that  there 
are  irregularities  in  the  operation  of  the  Grain  Bulletin  service  to-day, 
but  because  of  the  important  influence  of  the  card  on  buying  prices 
and  of  the  large  uncontrolled  and  unsupervised  discretion  vested  in  a 
single  individual  who  is  responsible  for  computing  and  sending  out 
these  prices. 

To  adopt  the  foregoing  recommendations  proposed  by  the  Commis¬ 
sion  should  tend,  it  is  believed,  to  insure  not  only  that  the  card  prices 
will  be  at  all  times  fair  and  just  country  prices,  but  also  that  the  card 
will  not  in  the  future  be  influenced  by  any  particular  class  of  sub¬ 
scribers,  as  it  has  been  in  the  past. 

83  As  pointed  out,  the  lines  were  able  from  1913  to  1917  to  obtain  adjustments  at  local  stations  through 
procuring  nonline  competitors  to  request  the  change  in  the  card.  Since  this  involved  the  consent  and 
cooperation  of  the  latter,  it  is  probably  safe  to  conclude  that  adjustments  thus  procured  were  indicative  of 
agreements  and  cooperation  at  the  stations  affected.  That  Mr.  Durant  was  privy  to  this  situation  is  certain 


Chapter  IX. 

PRICE  OF  CASH  GRAIN  AND  CLOSING  PRICE  COMMITTEES 


Section  1.  Cash  prices  reported. 

The  rules  of  many  of  the  exchanges  require  that  some  record  be 
kept  of  actual  transactions  in  cash  grain/  and  even  where  there  is 
no  such  specific  requirement  by  rule  ^  it  is  generally  the  custom  to 
do  so.  More  or  less  detailed  records  of  the  prices  at  which  cash 
grain  is  sold  are  kept  at  all  the  principal  markets.  At  the  smaller 
markets  the  records  of  sales  are  usually  less  extensive  on  account  of 
the  smaller  volume  of  transactions,  though  these  records  may  as  a 
matter  of  fact  present  more  complete  information  as  to  transactions 
at  those  markets  than  do  the  records  of  the  larger  ones,  on  account 
of  a  more  satisfactory  system  of  reporting  sales.  Most  of  the  daily 
newspapers  at  the  important  terminal  markets  carry  accounts  of 
the  cash  grain  trading  each  day,  including  certain  reports  as  to  cash 
prices.  Prices  so  reported,  however,  are  usually  merely  the  close 
or  the  high  and  low,  or  both. 

At  several  of  the  markets,  as  Chicago,  Minneapolis,  Duluth,  and 
Kansas  City,  there  is  published  a  daily  market  bulletin  or  price 
current  which  prints  a  detailed  record  of  the  prices  at  which  numerous 
individual  cars  of  grain  are  sold.  These  publications  show  the  kind 
and  grade  of  grain,  the  prices,  and  the 


price.  Notations  are  also  usually  made 


various  cars  as  ‘‘smut,’’  “musty,”  etc.'’ 


1  Minneapolis,  Kansas  City,  Omaha,  Indianapolis,  and  Cincinnati  (Vol.  11,  Chap.  V,  sec.  18).  For  fur-  > 

ther  information  on  the  quotation  services  of  the  exchanges,  see  also  Vol.  11,  Chap.  VII.  '  ' 

2  Chicago  and  Duluth. 

3  The  following  statement,  as  published  for  the  Kansas  City  market  (May  10, 1921),  will  illustrate  the 


practice; 


. ; 


KANSAS  CITY  CAR-LOT  GRAIN  SALES. 


Actual  sales  of  cash  grain  as  posted  on  the  board  of  trade  to-day  were: 

Hard  wheat. - 

Dark  hard — No.  1. — 1  car,  $1.43. 

No.  2  dark  hard. — 2  cars,  $1.45,  1  at  $1.44,  2  at  $1.43. 

No.  3  dark  hard. — 1  car,  $1.45,  5  at  $1.44, 1  at  $1.43. 

No.  4  dark  hard. — 2  cars,  $1.43. 

No.  5  dark  hard. — 1  car,  musty,  $1.39. 

Hard — No.  1. — 1  car,  $1.39i,  8  at  $1.39,  10  at  $1.38;  smutty,  1  at  $1.38,  1  at  $1.36,  2  at  $1.35. 

No.  2  hard. — 7  cars,  $1.39,  9  at  $1.38,  15  at  $1.37;  smutty,  4  at  $1.36,  3  at  $1.35,  6  at  $1.34. 
jVb.  3  hard. — 2  cars,  $1.36,  1  at  $1.35,  8  at  $1.34;  smutty,  1  at  $1,38,  3  at  $1.34,  2  at  $1.32. 

No.  4  hard. — 1  car,  4  per  cent  rye,  $1.38,  2  at  $1.33,  1  at  $1.32;  smutty,  2  at  $1.31,  1  at  $1.30. 

No.  5  hard. — 1  car,  smutty,  $1.34, 1  at  $1.32,  1  at  $1.30, 1  smutty,  $1,30;  musty,  1  at  $1.35, 1  car,  1  pe 
H.  D.,  $1.33, 1  smutty,  $1.32. 

Sample  hard. — 1  car,  L.  W.,  musty,  $1.32,  1  smutty,  H.  D.,  $1.28. 

Red  wheat — No.  1. — 2  cars,  $1.52,  1  L.  S.,  $1.52. 

No.  2  red. — 1  car,  $1.49,  1  at  $1.48,  1  at  $1.46. 

No.  3  red. — 1  car,  $1.43. 

No.  4  'red. — 1  car,  B.  H.,  $1.35. 

Sample  red. — Wild  weevil,  1  car,  $1.49, 1  musty,  $1.40,  1  light  test,  $1.37,  1  onions,  $1.32,‘l  at  $1.32. 
Mixed  wheat. — No.  1. — 1  car,  $1.40,  1  at  $1.39,  2  at  $1.38. 

No.  2  mixed. — 1  car,  $1.45,  1  at  $1.44,  1  at  $1.37,  1  durum,  $1.32. 

No.  3  mixed. — Smutty,  1  car,  $1.31, 1  at  $1.30. 

Sample  mixed. — 1  car,  L.  W.,  musty,  $1.33. 


55  cents. 

No.  6  white,  1  car,  B.  H.,  45  cents. 

No.  2  yellow,  3  cars,  56  cents,  1  B.  H.,  55  cents. 
No.  3  yellow,  1  car,  54  cents. 

No.  5  yellow,  1  car,  54§  cents. 

No.  2  mixed,  1  car,  high  color,  54 J  cents,  1  at  53 J 


No.2white,7  cars,  55^ cents,  1  at  55 cents,  1  B.  II., 


CORN. 


1  WlAll/O.  JL  V/Oil  ^  j.  Xl-LU.Ol»y^  0£7 

No.  3  mixed,  1  car,  95  cents. 

Milo  maize.  No.  3,  2  cars,  $1.08,  1  No.  4  or  better. 


No.  3  white,  2  cars,  38^  cents,  1  at  38  cents. 
Kafir,  No.  2  white,  1  car,  97  cents. 

No.  3  white,  1  car,  95  cents,  1  at  93  cents. 

No.  4  white,  1  car,  89  cents,  1  musty,  89  cents. 


OATS,  ETC. 


at  $1.08, 1  mixed,  $1.05. 


cents. 

No.  3  mixed,  4  cars,  51  i  cents. 
No.  5  mixed,  1  car,  52  cents. 


Cane  seed,  1  car,  35  per  cent  kafir  and  milo,  20 


per  cent  wheat,  95  cents. 

Barley,  No.  3,  1  car,  55^  cents. 

No.  4  barley,  1  car,  54  cents,  1  at  53  cents. 
Millet,  1  car,  98  cents, 


236 


CASH  GRAIN  PRICE  QUOTATIONS. 


2^7 


The  sources  from  which  tRese  publications  secure  the  price  records 
are  the  exchanges,  or  members  thereof,  and  the  actual  methods  of 
collecting  them  vary  with  the  different  markets. 

At  Minneapolis  the  cash  traders  on  the  floor  are  required  by  rule 
of  the  exchange  to  report  all  sales  of  cash  grain  received  from  country 
points.  These  transactions  are  then  posted  on  the  exchange  black¬ 
board  and  are  published  daily  by  the  Minneapolis  Daily  Market 
Record. In  addition  to  the  record  of  actual  transactions  there  are 
posted  each  day  at  the  close  of  the  market  the  closing  prices  of  cash 
grain  as  determined  by  the  closing  price  committees.  (See  sec.  2, 
below.) 

Records  of  actual  sales  of  cash  grain  on  the  Chicago  Board  of 
Trade  are  made  public  daily  and  appear  in  the  Chicago  Daily  Trade 
Bulletin.  The  method  by  which  these  prices  are  collected  differs 
radically  from  that  at  Minneapolis.  Mr.  Mauff,  secretary  of  the 
board  of  trade,  stated  in  reply  to  a  question  as  to  whether  or  not  all 
sales  were  reported  daily,  that  they  were  “supposed  to  be  so 
reported  but  no  means  of  knowing  whether  a  member  holds  back  or 
not.  To  him  it  would  be  vital  to  report,  otherwise  customers  would 
complain  if  not  in  the  official  record  of  prices.’’ 

The  method  of  collection  is  described  by  the  secretary  of  the  board 
of  trade  as  follows: 

The  Cleveland  Telegraph  Company  (Vol.  II,  p.  125,  and  Vol.  V,  p.  56)  has  two 
employees  whose  duty  it  is  during  market  hours  to  move  around  among  the  sample 
tables  and  those  making  contracts  in  cash  property,  and  gather  all  the  prices  they 
can  in  these  cash  transactions.  This  method  does  not  insure  the  collection  of  every 
quotation  on  cash  property,  as  in  the  case  of  contracts  for  future  delivery,  but  is 
sufficient  to  insure  the  gathering  of  most  of  the  cash  prices.  Members  to  these  cash 
transactions  are  generally  willing  and  glad  to  notify  the  reporter.  These  quotations 
are  also  retained  on  slips  of  paper  and  sent  to  the  telegraph  operator  whose  duty  it 
is  to  send  them  on  the  wires.  These  cash  prices  are  transmitted  over  the  wires  at 
12:00  o’clock  and  at  the  close  of  the  market.  These  slips  are  also  put  on  the  spindle 
with  the  other  quotation  slips. 

At  1:15  o’clock  P.M.,  .the  close  of  the  market,  the  Chief  Operator  of  the  Cleveland 
Telegraph  Company  makes  a  list  of  the  high,  low  and  closing  prices  of  each  com¬ 
modity,  including  cash  transactions,  and  these  are  sent  out  by  the  operator  of  the 
Cleveland  Telegraph  Company  on  the  wires  immediately  following  the  close  of  the 
market.  None  of  these  high,  low  and  closing  prices  are  published  by  the  Exchange. 
All  that  is  done  towards  their  publication  is  they  are  put  on  the  telegraph  wire,  as 
above  stated.  -  . 

After  the  close  of  the  market  the  quotations  on  these  slips  which  are  placed  upon  the 
spindles  are  recorded  by  employes  of  the  Cleveland  Telegraph  Company  in  books 
under  each  date,  so  that  these  books,  to  which  the  exchange  and  all  of  its  members 
have  access,  furnish  a  permanent  record  of  every  change  in  contracts  for  future  de¬ 
livery  rnade  on  the  floor  of  the  exchange  and  such  changes  in  the  price  of  gash  grain 
transactions  as  these  employes  are  able  to  learn  from  the  parties  to  the  cash  trade. 

******* 

The  quotations  give  the  highest  cash  sales  and  the  lowest  cash  sales  that  these 
employes  are  able  to  collect  from  the  parties  to  the  transactions. 

At  Kansas  City  the  members  of  the  board  of  trade  are,  quoting 
from  a  letter  from  the  secretary,  “obliged  to  report  every  sale  within 
15  minutes.”  The  exchange  furnishes  members  with  slips  on  which 
sales  are  noted,  and  from  these  slips  a  clerk  from  the  secretary’s 
office  posts  on  a  blackboard  all  cash  sales.  From  this  blackboard 

*  It  should  be  noted  that  all  original  sales  of  cash  grain  are  not  reported,  a  statement  by  the  assistant 
secretary  of  the  exchange  being  “practically  all  sales  reported,’' 

56976°— 22 - 17 


238 


TERMINAL  GRAIN  MARKETING. 


the  Kansas  City  Daily  Price  Current  ^’secures  the  record  of  cash 
sales  which  it  publishes  daily. 

vSince  all  sales  are  recorded,  the  high  and  low  prices  for  the  day 
necessarily  are  published.  When  no  sales  of  any  grade  of  grain 
occur  on  any  day  the  Cash  Market  Committee  ®  names  a  price  which, 
''in  their  judgment,  the  grain  would  have  brought.”^  Such  prices 
are  designated  as  nominal.^  This  committee  also  is  charged  with 
seeing  that  sales  are  promptly  reported  and  posted.  At  those  markets 
where  it  is  not  required  that  all  cash  sales  be  reported  the  record 
of  sales  is  almost  certainly  not  complete.  At  other  markets  the  word¬ 
ing  of  the  rules  is  such  that  not  every  cash  sale  is  reported.  Thus 
Minneapolis  requires,  under  the  rules,  reports  of  all  sales  of  "cash 
grain  seed  from  country  points.”  Obviously  such  a  rule  does  not 
require  the  report  of  resales  of  cars  and,  according  to  the  report  of 
the  secretary,  these  are  not  included.  Consequently  scalped  cars  do 
not  figure  in  the  price  records  of  the  Minneapolis  exchange  (Chap.  XI). 

At  most  exchanges  it  has  also  been  stated  that,  where  a  sale  is 
reported  at  a  certain  price,  cars  subsequently  sold  at  the  same  price 
are  not  always  reported,  the  commission  house  having  in  the  original 
sale  a  price  record  by  which  his  consignor  can  confirm  the  sale  price 
reported  to  him.  At  Chicago  and  Peoria  cash  sales  may  be  made 
between  buyers  and  sellers  on  private  terms  (P.  T.  transactions), 
and  the  prices  at  which  these  transactions  are  effected  are  not  re¬ 
ported.  In  consequence  such  transactions  are  not  published  in 
these  daily  records  of  prices. 

Section  2.  Closing  prices. 

The  Minneapolis  and  Duluth  markets  are  peculiar  in  that  on  these 
two  exchanges,  as  contrasted  with  others,  committees  composed  of 
exchange  inembers  make  up  each  day  cash  closing  prices  for  the 
various  grains.  At  Minneapolis  there  are  two  of  such  committees, 
one  for  wheat  and  the  other  for  coarse  grains.  Each  committee  is 
usually  composed  of  three  or  four  members. 

A  description  of  the  processes  involved  in  making  up  these  closing 
prices  as  given  by  the  two  Minneapolis  committees  in  1921  is  as 
lollows:  ® 

CASH  WHEAT  CLOSING  PRICES,  MINNEAPOLIS  CHAMBER  OF  COMMERCE. 

The  closing  quotations  for  cash  wheat  are  based  on  the  prevailing  future.  The  three 
members  of  the  committee  on  closing  quotations  on  wheat  meet  at  the  close  of  the 
market  H-ud  pool  the  knowledge  which  they  have  gained  in  the  course  of  the  morning 
frorn  their  various  associates  as  to  the  premium  or  discounts  over  or  under  the  pre¬ 
vailing  future  which  are  being  paid  in  the  market.  In  case  of  any  question  each  of 
them  go  around  to  the  different  buyers  and  sellers  and  find  out  what,  in  their  judg¬ 
ment,  is  the  market. 

The  close  is  not  based  on  the  cash  sales  during  the  day  neither  on  the  range  of  such 
sales  nor  on  the  average  of  them.  It  might  happen,  lor  example,  that  the  buyers 
were  in  the  course  of  the  morning  paying  a  certain  permium  for  wheat,  but  before  the 
close  be  filled  up  or  not  willing  to  take  wheat  at  the  early  premiums  and  therefore 

J>  The  secre^ry  of  the  Board  of  Trade  of  Kansas  City  states  that  this  is  "the  official  Price  Current  of  the 
Kansas  City  Board  of  Trade. 

®  Appointed  by  the  directors. 

7  From  a  letter  from  secretary  of  Kansas  City  Board  of  Trade. 

8  The  method  of  making  up  the  closing  prices  each  day  is  in  general  much  the  same  at  Duluth  as  at  Min¬ 
neapolis,  and  in  consequence  no  description  of  the  practice  at  Duluth  is  given.  In  this  connection  atten¬ 
tion  is  directed  to  the  fact  that  the  statement  on  p.  324  of  Vol.  II.  to  the  effect  that  the  Duluth  close  is  the 
highest  price  which  any  of  the  large  operators  is  willing  to  pav,  is  erroneous  and  is  based  on  a  misunder¬ 
standing  of  the  situation  at  the  time  when  that  volume  of  the  report  was  written. 


CASH  GRAIN  PRICE  QUOTATIONS. 


239 


the  closing  quotations  would  be  based  on  the  later  premiums  as  the  earlier  premiums 
could  not  be  obtained  at  the  close. 

On  the  other  hand,  it  might  happen  that  buyers  were  in  the  market  strong  at  the 
close,  offering  and  paying  premiums  higher  than  those  paid  earlier  in  the  morning  and 
then  the  closing  quotations  would  be  based  on  the  later  premiums. 

Briefly  then,  the  members  of  the  committee  find  out  what  premiums  or  discounts 
are  being  offered  and  paid  for  wheat  by  buyers  who  are  in  the  market  for  reasonable 
quantities  of  wheat  at  the  close,  and  then  apply  these  premiums  or  discounts  to  the 
closing  quotation  of  the  prevailing  future  thus  making  the  closing  quotations  for  cash 
wheat.  ^ 

COARSE  GRAIN  CLOSING  PRICES,  MINNEAPOLIS  CHAMBER  OF  COMMERCE. 

The  closing  price  committee  for  coarse  grains,  in  closing  the  market  daily,  endeav¬ 
ors  to  show  actual  trading  prices  existing  at  the  close  of  each  session.  In  determining 
these  prices,  representative  buyers  and  sellers  are  questioned  as  to  trading  baS 
current  during  the  day,  posted  sales  compared  with  range  of  futures  and  such  informa¬ 
tion  checked  by  the  committee  from  their  personal  knowledge  of  the  day’s  trading. 
As  demand  fluctuates  frequently,  special  effort  is  made  to  learn  if  the  day’s  price 
basis  still  maintains  at  the  close. 

Methods  of  handling  the  various  grain  prices  differ  in  some  particulars  as  detailed 
herewith. 

Barley:  Prices  on  cash  barley  do  not  follow  futures  so  closely  as  other  grains, 
perhaps  due  to  barley  grades  not  accurately  reflecting  buyers’  different  requirements 
"vmich  are  variously  governed  by  weight,  plumpness,  color,  cleanness,  condition  and 
character.  The  course  of  barley  futures  may  reflect  the  general  market  movement, 
but  cash  prices  are  seldom  based  closely  thereon.  It  follows  that  closing  prices  must 
therefore  be  more  or  less  arbitrary  to  the  judgment  of  the  committee  and  since  the 
market  is  so  largely  a  “sample  ”  proposition,  barley  has  been  grouped  for  closing  quo¬ 
tations  in  three  classes: — choice  to  fancy,  medium  to  good,  and  lower  grades.  In 
quoting  a  range  of  value  on  these  groups,  various  factors  are  considered;  the  relative 
quality  of  the  receipts,  the  cash  sales  compared  with  the  day  previous,  the  volume 
offered  and  the  demand.  All  are  judged  as  to  their  effect  on  values  and  closing  prices 
based  thereon.  Sales  to-arrive  are  made  on  individual  samples  so  no  “to-arrive” 
close  can  be  given. 

Corn:  In  times  of  surplus  cash  corn  prices  follow  closely  the  movement  of  Chicago 
corn  futures.  When  offerings  are  insufficient  for  local  consumption,  prices  become 
temporarily  independent  of  such  basis.  Cash  sales,  volume  offered,  demand  existing 
and  movement  of  futures  are  therefore  all  considered  in  closing  prices  which  usually 
can  be  based  approximately  at  a  discount  or  premium  on  closing  futures. 

Oats:  This  commodity  follows  closely  the  movement  of  Minneapolis  oat  futures. 
There  being  a  considerable  range  in  quality  at  present  on  the  various  grades,  quota¬ 
tions  show  a  spread  in  values  cereal  mills  paying  premiums  for  best  quality.  For 
example,  present  range  on  oats  shows  December  price  to  lj<t;  under,  and  closing 
quotations  are  so  given,  based  on  the  closing  price  of  that  future.  “To-arrive  ”  prices 
are  based  on  bids  given  by  buyers  for  “round  lots”  of  5,000  bushels  or  more  at  the  close, 
subject  to  “hedge  ”  in  the  future  market. 

Rye:^  Prices  on  rye  also  follow  the  Minneapolis  futures  very  closely  and  closing 
quotations  are  based  thereon,  from  information  gained  in  the  same  manner  as  described 
above. 

Flax:  Minneapolis  being  a  large  consuming  market  with  crushers  using  the  futures 
continuously  for  hedging  protection,  cash  prices  follow  these  futures  closely  and  are 
closed  daily  on  such  basis.  Range  in  quality  is  shown  in  a  spread  of  values.  Prices 
“to-arrive”  are  based  in  the  same  manner. 

It  is  clear  from  the  foregoing  that  the  close  is  not  the  last  actual 
sale,  as  in  the  case  of  certain  other  exchanges,  but  is  based  on  the 
future,  and  that  the  premiums  or  discounts  to  be  applied  to  the  future 
in  determining  the  closing  price  are  left  to  the  judgment  of  the  closing- 
price  committee.  This  would  appear  to  raise  the  question  as  to  how 
far  such  closing  prices  are  to  be  regarded  as  representative  of  the 
actual  cash  marhet  at  the  close  and  as  a  correct  basing  price  for 
country  buying  (Chap.  VIII,  sec.  3).  It  was  therefore  felt  that  it 


9  The  foregoing  method  applies  to  both  spot  and  ^qp-arrive”  transactions,  the  only  difference  being  that 
the  pot  premiums  or  discounts  are  used  in  the  former  case  and  the  “to-arrive”  premiums  or  discounts  in 


240 


TERMINAL  GRAIN  MARKETING. 


would  be  of  interest  to  compare  the  Minneapolis  closing  prices  with 
actual  prices  paid  for  grains  on  the  exchange  during  the  day  in  an 
effort  to  test  the  situation  in  these  respects.  Because  ^Ho-arrive’’ 
actual  prices  were  too  infrequent  to  be  employed  for  actual  com¬ 
parisons  with  the  “to-arrive’’  close  it  was  necessary  to  use  the  spot 
prices.^® 

The  Minneapolis  closing  spot  prices  for  certain  grades  of  grain  on 
specified  days  were  therefore  compared  with  certain  of  the  prices 
actuafiy  paid  for  the  same  grades  on  the  same  days.  Because  the 
close  is  usually  given  as  a  range  the  mean  of  the  close  was  taken  and 
for  cash  prices  during  the  day  the  mean  of  the  high  and  low  and  also 
tjie  modal  price;  i.  e.,  the  price  at  which  the  greatest  number  of  cars 
was  sold.  Where  two  modal  prices  appeared  the  average  of  the  two 
was  employed.  The  grades  selected  were  Nos.  1  and  2  northern 
wheat  and  No.  3  white  oats,  and  comparisons  were  made  for  the  first 
five  days  of  each  month  for  five  years.  On  account  of  Sundays  and 
holidays  and  because  on  some  days  there  were  no  sales  of  the  grades 
in  question,  the  price  comparisons  are  less  than  60  in  the  case  of  each 
grade  in  all  years.  The  following  summary  presents  the  frequency 
of  deviation  of  the  means  of  closing  prices  of  No.  1  northern  and  No. 
3  white  oats  over  and  under  the  modal  price  and  means  of  actual 
high  and  low  prices. 


Frequency  of  deviation  of  mean  closing  prices  over  and  under  the  mean  of  the  actual  high 
and  low  and  the  modal  figures  for  specified  grades  of  wheat  and  oats  at  Minneapolis, 
1912-13  to  1916-17. 


Commodity  and  year. 

Relation  of  mean  of  close  to 
mean  of  high  and  low. 

Relation  of  mean  of  close  to 
the  modal  price. 

Times 

over. 

Times 

under. 

Times 

equal. 

Times 

over. 

Times 

under. 

Times 

equal. 

No.  1  northern  wheat: 

1912-13 . 

15 

28 

3 

9 

34 

2 

1913-14 . 

20 

25 

3 

22 

25 

1 

1914-15 . 

15 

32 

2 

7 

42 

0 

1915-16 . 

19 

28 

1 

19 

28 

1 

1916-17 . 

11 

34 

0 

16 

29 

0 

1912-13  to  1916-17 . : . 

80 

147 

9 

73 

158 

4 

No.  3  white  oats: 

1912-13 . 

14 

14 

16 

11 

16 

17 

1913-14 . 

17 

21 

6 

16 

20 

6 

1914-15 . 

14 

28 

6 

17 

23 

7 

1915-16 . 

15 

29 

3 

25 

18 

4 

1916-17 . . 

13 

29 

3 

18 

22 

5 

1912-13  to  1916-17 . 

73 

121 

34 

87 

99 

39 

It  will  be  observed  from  this  tabulation  that  the  '‘close'’  averaged 
lower  than  the  mean  of  the  high  and  low  and  modal  “  prices  for  wheat 
far  more  frequently  than  it  averaged  higher;  and  that  while  the 
"close”  for  No.  3  white  oats  was  predominantly  under  the  mean  of 
the  high  and  low  prices,  it  was  not  much  more  frequently  below  than 
above  the  modal  price. 


is  an  important  point  to  be  considered  in  connection  with  the  subsequent  discussion,  since  it  is 
the  to-arrive  close  and  not  the  spot  close  that  is  used  chietly  as  the  basis  in  country  buying  (Chap.  VIII, 

SBC.  o}* 

“  Price  at  which  the  greatest  number  of  cars  was  sold. 


CASH  GRAIN  PRICE  QUOTATIONS. 


241 


The  extent  of  the  deviations  of  the  means  of  the  closing  prices 
issued  for  No.  1  northern  wheat  over  and  under  the  mean  of  the 
actual  high  and  low  prices  for  the  five  years  specified  (derived  from 
transactions  on  the  first  five  days  of  each  month  and  excluding  those 
where  the  means  of  the  close  and  high  and  low  coincided)  are  indi¬ 
cated  by  the  following  figures ; 


+DEVIATIONS. 


1912-13 . 

21 

5 

2 

1913-14 . . 

20 

4 

1 

1914-15 . 

15 

7 

4 

2 

2 

2 

1915-16 . 

5 

10 

6 

4 

3 

1916-17 . 

5 

5 

5 

5 

6 

3 

5 

Total . 

66 

31 

17 

11 

8 

5 

9 

The  statement  following  shows  likewise  the  number  and  extent  of 
deviations  of  the  means  of  the  closing  prices  over  and  under  the  modal 
price  of  the  actual  transactions  for  the  day,  on  No.  1  northern  wheat, 
using  the  same  periods  as  in  the  preceding  analysis  and  excluding 
those  transactions  where  the  means  in  question  coincided  with  the 
modes : 

+DEVIATIONS. 


Number  of  deviations. 

Less 
than  1 
cent. 

1  to 
1.99 
cents. 

2  to 
2.99 
cents. 

3  to 
3.99 
cents. 

4  to 
4.99 
cents. 

5  to 
5.99 
cents. 

6  to 
6.99 
cents. 

7  to 
7.99 
cents. 

8  cents 
and 
over. 

1019!  13 

8 

1 

1013  14 

18 

3 

1 

1 

101 4-1  ii 

6 

1 

1 

lOl.'v-lfi 

7 

7 

2 

3 

1 

1016-17 

5 

5 

3 

1 

1 

1 

44 

16 

7 

4 

1 

1 

1 

1 

-DEVIATIONS. 


10191  13 

18 

12 

4 

1013-14 

19 

6 

1014-15  . 

13 

9 

6 

6 

2 

3 

2 

1 

101.6-16 

9 

9 

3 

3 

1 

2 

1 

1916-17 . 

3 

5 

5 

6 

1 

2 

3 

1 

3 

Total . 

62 

41 

18 

15 

3 

6 

7 

2 

4 

I 


242 


TERMINAL  GRAIN  MARKETING. 


This  tabulation  shows  that  the  closing  price  was  not  only  lower  ‘ 
than  the  modal  price  for  the  day  more  frequently  than  it  was  over  this  i 
price,  but  also  that  the  minus  deviations  were  generally  much  wider  j 
than  those  on  the  plus  side.  ' 

A  similar  comparison  as  between  the  means  of  the  closing  prices  i 
and  the  modal  prices  for  No.  2  northern  wheat  showed  the  following 
results,  days  where  the  two  prices  coincided  being  excluded,  as  above :  I 


+DEVIATIONS. 


Number  of  deviations. 

Less  than 
1  cent. 

1  to  1.99 
cents. 

2  to  2.99 
cents. 

3  to  3.99 
cents. 

4  to  4.99 
cents. 

5  to  5.99 
cents. 

6  cents 
and  over. 

1912-13 . 

11 

23 

6 

6 

3 

1 

4 

3 

3 

5 

1913-14 . 

1914-15 . 

1 

4 

3 

2 

2 

5 

1915-16 . 

1916-17 . 

2 

2 

Total . 

49 

16 

8 

9 

2 

2 

-DEVIATIONS. 


1912- 13 . 

1913- 14 . 

19 

15 

10 

5 

1 

1914- 15 . 

1915- 16 . 

10 

6 

9 

14 

6 

C 

7 

3 

2 

1916-17 . 

8 

4 

1 

3 

7 

c 

1 

1 

1 

Total . 

58 

45 

1 7 

6 

1  i 

io 

2 

4 

Here,  again,  we  find  that  the  closing  price  was  more  frequently 
lower  than  the  modal  price  for  the  day,  and  that  the  minus  deviations 
were  somewhat  wider  than  those  on  the  plus  side. 

^  comparison  was  made  as  between  the  closing  prices  issued 
for  No.  3  white  oats  and  the  means  of  the  high  and  low  actual  prices* 
and  also  as  between  the  closing  prices  and  the  modal  prices  for  this 
grade: 

+DEVIATIONS. 


Number  of  deviations  from  the  mean  of  high 
and  low. 

Number  of  deviations 
from  the  modal  price. 

Less 
than  1 
cent. 

1  to 
1.99 
cents. 

2  to 
2.99 
cents. 

4  to 
4.99 
cents. 

7  to 
7.99 
cents. 

12  to 
12.99 
cents. 

Less 
than  1 
cent. 

1  to 
1.99 
cents. 

2  to 
2.99 
cents. 

1912-13 . 

11 

16 

14 

13 

12 

3 

11 

16 

16 

23 

13 

1913-14 . 

1 

1914-15 . 

1 

2 

4 

1915-16 . ■. 

2 

1 

1916-17 . 

1 

Total . 

66 

4 

3 

79 

7 

1 

' 

1912- 13 

1913- 14 

1914- 15 

1915- 16 

1916- 17 


-DEVIATIONS. 


13 

1 

15 

"1 

21 

20 

1 

21 

7 

16 

7 

21 

6 

2 

16 

0 

20 

6 

2 

1 

18 

3 

1 

96 

19 

4 

1 

1 

85 

12 

2 

(! 


*lts 


r 

A 


Total 


CASH  GRAIN  PRICE  QUOTATIONS. 


243 


Finally,  a  test  was  made  to  show  how  frequently  the  closing  prices 
were  under  both  the  mean  of  the  high  and  low  and  the  modal  prices 
for  the  first  five  days  of  each  month.  In  every  year  the  deviations 
under  were  more  frequent  than  the  deviations  over  both  the  mean  and 
modal  prices  for  No.  1  northern  wheat  and  No.  3  white  oats,  as  the 
following  figures  show : 


No.  1  northern 
wheat. 

No.  3  white  oats. 

Times 

over. 

Times 

under. 

Times 

over. 

Times 

under. 

1912-13 . 

8 

27 

8 

10 

1913-14 . 

13 

17 

12 

16 

1914-15.  . 

6 

31 

8 

20 

1915-16 . 

10 

20 

13 

15 

1916-17 . 

10 

28 

10 

18 

Total . 

47 

123 

51 

79 

Section  3.  Conclusion. 

From  the  foregoing  study  it  appears  that  the  method  of  taking 
premiums  and  discounts  over  and  under  the  future  and  applying 
these  to  the  closing  future  prices,  in  order  to  determine  a  cash  close, 
results  in  such  closing  prices  running  much  more  frequently  under 
than  over  the  prices  prevailing  during  the  day,  and  also  in  the  varia¬ 
tions  under  being  much  wider  than  those  over  the  latter  prices. 
There  are  at  least  three  conceivable  explanations  of  this  situation. 

It  is  possible,  in  the  first  place,  that  the  future  prices  at  the  close 
tend  to  be  lower  than  those  prevailing  during  the  day  (on  which  pre¬ 
vailing  prices  the  premiums  or  discounts  to  be  used  in  determining 
the  close  are  figured) .  The  possibility  of  such  a  situation  is  suggested 
by  the  inclination  of  scalpers  of  futures  to  even  up  at  the  close  each 
day,  taking  losses  rather  than  carrying  over  open  trades,  coupled 
with  the  possibility  that  scalpers  at  Minneapolis  might  more  often 
find  occasion  to  take  the  buying  end  on  heavy  hedging  sales  than  the 
selling  end  of  the  buying  orders  that  are  presumably  more  evenly  dis¬ 
tributed.  But  the  function  of  the  future  scalper  may  at  Minneapolis 
be  so  largely  performed  by  spreaders,  who  would  have  no  such  need 
to  close  tiieir  open  trades,  that  this  possible  explanation  is  decidedly 
hypothetical.  In  fact,  a  compilation  of  continuous  quotations  at 
Minneapolis  designed  to  test  this  hypothesis,  shows  no  tendency  to 
a  sag  in  future  prices  at  the  close. The  first  possible  explanation, 
therefore,  evidently  does  not  explain.  Some  other  explanation  must 
be  sought  for  the  predominance  of  minus  deviations  in  the  cash  clos¬ 
ing  prices  as  compared  with  cash  prices  of  the  day  and  for  the  greater 
average  width  of  such  minus  deviations  as  compared  with  the  plus 
deviations. 

A  second  possible  explantion  is  that  cash  prices  may  tend  to 
sag  toward  the  close  of  the  market  as  compared  with  cash  prices 
paid  earlier  in  the  day.  It  is  well  known  that  cash  commission  men 
are  reluctant  to  carry  consigned  grain  over  until  the  following  day, 
since  by  so  doing  they  are  in  effect  speculating  with  the  consignor’s 

12  This  compilation  shows  average  prices  at  or  nearest  each  15  minute  interval  from  11.45  to  the  close  for 
the  first  5  days  of  each  month  for  3  years. 


244 


TERMINAL  GRAIN  MARKETING. 


vf  possible  therefore,  that  cash  commission  men,  as  a  rule 
are  less  likely  toward  the  close  to  hold  out  for  as  high  prices  as  earlier 
thn  *  ®.ossion,  because  of  the  fear  that  they  may  be  obliged  to  carry 

succeeding  day.  It  is  also  possible  that  there 
competition  among  the  buyers  toward  the  close  of  the  market 
because  more  of  them  have  succeeded  in  buying  their  requirements 
than  IS  the  case  earlier  m  the  session.  Moreover,  on  many  Says  of  the 

&  to  feTf  *1'''  sanfple  tables  is 

rf-  quality,  or  held  at  unreasonable  prices.  Under 

such  conditions  buyers  may  prefer  to  hold  off  until  the*^ following  day 
when  their  opportunity  for  selection  will  be  greater  ^  ^ 

It  is  not  intended  by  the  foregoing  to  assert  that  there  is  such  a 

tol«  toH  “  market  as  that  pos- 

™°re  .especiaUv  since  there  are  no  data  available  to  test  the 

iWr^n  ^‘^‘J^'^^'cally.  If,  however,  there  is  a  preponderance  of  such 
declines,  it  may  be  an  explanation  of  the  situation  under  discussion 
Certainly  such  sags  m  the  daily  cash  market  in  any  representative 
period  would  account,  at  least  partially,  for  the  fact  that  the  closing 
™  n®  frequently  below  than  above  thi 

fr  spread  between  the 

cash  and  future  which  is  applied  to  the  future  close,  a  tendency  for 

cash  gram  prices  to  decline  toward  the  close  of  the  market  should 
result  in  closing  cash  prices  tending  to  be  below  the  averages  or 

The  fact  that  the  determinations  of  the  premiums  and  discounts 
are  so  largely  a  matter  of  personal  judgment,  however,  suggests  that 
e  greater  Irequency  and  greater  size  of  the  minus  deviations  may 
be  due  to  defects  m  the  human  judgments  involved,  rather  than  to 
any  sag  m  cash  prices  at  the  close.  Objections  to  the  method  of  de¬ 
termining  closing  prices  as  made  up  at  Duluth  and  Minneapolis  mav 
be  based  primarily  on  this  situation.  No  matter  how  honest  the 
exchange  members  on  the  closing  price  committee  may  be  their 
judgments  are  necessarily  fallible.  Some  evidence  of  this  fact  is  con¬ 
tained  m  the  hies  of  correspondence  examined,  which  show  that 
various  exchange  members  have  at  times  felt  that  the  closing  price 
of  this  or  that  grade  of  gram  on  this  or  that  particular  day  was^not 
a  correct  price  m  view  of  the  conditions  prevailing. 

it  IS  also  to  be  noted  that  the  future  close  at  Minneapolis  is  itself 
more  commonly  a  bid  or  asked  price  than  the  price  on  an  actual 

to  the  evidence  of  published  continuous  quo- 
.tons,  ibis  situation  introduces  a  further  element  of  personal 
judgment  into  the  decisions  of  the  closing-price  committee. 

nf  psychological  effect  of  the  character  of  the  market 

and  ot  the  businesses  m  which  the  members  of  the  exchange  and  of  the 

From^T^n  vVlW?'  ^^gugh,  Sec.  Chamber  of  Commerce,  Minneapolis. 

urom.  The  Van  Dusen  Harrington  Co.,  Minneapolis.  ^ 

th?w“  ***  would’Sc'cVcTup 

*  *  *  *  *  .V  ■ 


Y ours  very  truly, 
CRD*6  - 


(Signed) 


C.  Ray  Davis. 


CASH  GRAIN  PRICE  QUOTATIONS. 


245 


closing-price  committees  are  engaged  should  not  be  disregarded.  A 
large  proportion  of  the  exchange  membership,  the  large  lines,  the 
terminal  elevators,  and  the  mills  are  buyers  of  country  grain,  and 
representatives  of  these  groups  sit  on  the  closing-price  committees. 
At  times  also  a  majority  or  all  of  the  members  of  one  or  more  of  the 
closing-price  committees  have  been  either  representatives  of  such 
buyers  or  of  concerns  affiliated  with  such  interests.  The  pg^^chology 
of  the  buyer  favors  lower  rather  than  higher  prices.  Even  the 
country  elevator  is  a  buyer  of  country  grain,  so  that  the  commission 
man  who  sells  its  grain  is  in  a  way  the  agent  of  a  buyer,  and  possi¬ 
bly  can  not  be  expected  to  be  especially  interested  in  whether  or  no 
the  producer  obtains  as  high  a  price  for  his  grain  as  the  market 
situation  justifies.  If  the  closing  prices  allow  his  country  elevator 
customers  to  buy  in  the  country  at  something  less  than  they  would  if 
the  close  were  higher,  that  means  on  the  average  a  higher  profit  for 
the  elevators.  Besides,  many  Northwestern  commission  houses  are 
directly  or  indirectly  interested  in  buying  country  grain,  through  the 
fact  that  a  large  proportion  of  such  houses  are  connected  through 
branches,  affiliated  companies,  or  otherwise  with  buying  concerns. 
Thus  the  psychology  of  the  exchange  members  in  this  area  would  seem 
to  tend  to  press  a  committee-made  close  downward  rather  than  upward. 

The  closing  prices  employed  in  the  above  comparisons  are  the  spot 
and  not  the  to-arrive^’  close.  The  country  prices  distributed  by 
the  Grain  Bulletin  are  usually  based  on  this  latter  close  (Chap. 
VIII,  sec.  3).  But  to-arrive’’  transactions  are  too  few  and  infre¬ 
quent  to  permit  satisfactory  comparisons  with  the  ^Ho-arrive”  close, 
which  is  also  not  an  estimate  of  the  value  of  grain  at  Minneapolis 
on  the  day  the  transaction  is  effected,  but  for  some  days  later.  Both 
because  of  the  infrequency  of  such  quotations  and  because  of  this 
element  of  futurity,  it  may  be  assumed  that  the  element  of  personal 
judgment  involved  in  the  make-up  of  these  ^To-arrive’’  closing  prices 
is  even  greater  than  in  the  case  oi  the  spot  close. 

From  the  foregoing  discussion  certain  conclusions  may  be  drawn: 
Terminal  market  prices  generally  serve  as  the  basis  of  prices  paid  in 
the  country.  It  is,  therefore,  oi  vital  importance  to  the  grower  that 
the  records  of  prices  actually  paid  should  be  as  complete  and  accurate 
as  possible,  and  that  any  price  compiled  or  selected  from  them  for 
general  circulation  should  be  determined  as  objectively  and  imper¬ 
sonally  as  possible.  To  this  end  two  things  are  deemed  fundamental. 

In  the  first  place  every  cash  sale  made  should  be  required  to  be 
reported  promptly  together  with  the  time  of  the  transaction,  regard¬ 
less  of  whether  other  sales  have  been  made  at  the  same  time  and 
price  or  not.  As  grain  from  country  points  may  be  resold  several 
times  in  the  same  market  before  reaching  the  ultimate  consumer  (as 
at  Minneapolis) ,  it  should  also  be  required  that  all  resales  of  cars 
should  be  reported  in  exactly  the  same  fashion  in  order  particularly 
that  the  higher  prices  paid  to  scalpers  will  have  their  due  influence  on 
the  general  level.  Under  present  methods  the  lower  original  sales 
prices  figure  in  the  records  of  the  day’s  transactions,  but  the  higher 
prices  paid  on  the  same  or  subsequent  days  to  scalpers  for  the  same 
cars  do  not  appear  in  the  record.^^  Perhaps  such  resale  prices  should 

n  This  is  trae  also  of  prices  paid  by  scalpers  which  are  lower  than  the  original  prices,  but,  as  shown  in 
Ch.  XI,  sec.  5,  the  bulk  of  the  scalpingis  done  at  a  profit.  The  rule  requiring  the  reporting  of  cash  sales 
at  Minneapolis  applies  only  to  sales  “from  country  points.”  The  secretary  of  the  exchange  has  stated 
that  resales  are  not  reported. 


246 


TERMINAL  GRAIN  MARKETING. 


be  specially  designated  as  such,  but  in  any  case  the  complete  record 
cash  grain  transactions,  together  with  the  time  thereof 
should  be  available  to  country  elevators  and  to  the  public.  ’ 

Secondly,  it  is  regarded  as  fundamental  that  in  the  issuance  of 
prices,  such  as  opening,  high,  low,  and  closing,  the  element  of  human 
judgment  should  so  far  as  practicable  be  eliminated.  Such  prices 
should,  so  far  as  possible,  represent  actual  purchases  and  sales  and 
m  the  case  of  opening  and  closing  quotations,  prices  on  transactions 
within  a  dehnite  period  after  the  opening  or  before  the  close.  Highs 
and  lows  should  likewise  represent  in  all  cases  actual  transactions  If 
1  necessary  to  use  bid  or  asked  prices  or  nominal  prices,  they 
should  be  so  labeled  and  any  necessary  explanations  made.  Where 
ac^al  transactions  are  not  available  at  the  close  the  prices  may  have 
to  be  based  upon  actual  transactions  earlier  in  the  day.  Possibly  there 
is  no  obj  ection  to  the  method  used  at  Minneapolis  and  Duluth  of  applying 
premiums  &nd  discounts  over  and  under  the  future  to  the  future  close 
but  if  this  is  done  the  method  should  be  sharply  defined  and  should 
be  more  objective  and  impersonal  than  that  at  present  employed.  It 
IS  important  for  the  proper  application  of  any  satisfactory  method 
that,  as  already  stated,  there  be  a  complete  record  of  all  cash  sales 
inclu(hng  lesales,  together  with  the  time  at  which  each  transaction 
was  efiected.  With  this  record  before  them  and  the  complete  record 
of  contmuous  quotations  of  futures,  it  would  be  possible  for  the  com¬ 
mittee  m  making  the  close  to  determine  with  a  good  deal  of  accuracy 
the  exact  premiums  and  discounts  prevailing  at  all  times  during  the 

employing  more  or  less  of  a  ‘‘snap’’  judgment 

Whether  this  particular  method  is  employed  or  not,  it  is  highly 
important  that  the  procedure  of  closing  price  committees  should  be 
more  definitely  prescribed. 

Finally,  it  is  recommended  that  all  the  exchanges  should  publish 
quotations  on  a  uniform  basis,  each  kind  of  quotation  to  be  made  up  by 
as  nearly  uniform  methods  and  principles  as  practicable.  I  twill  doubt¬ 
less  be  necessary  to  recognize  the  fact  that  on  the  smaller  exchanges  only 
a  small  number  of  actual  transactions  may  be  available.  If  practica- 
ble’  It  might  be  desirable  that  a  representative  of  the  Federal  Depart¬ 
ment  of  Agriculture  or  other  governmental  agency  should  sit  wifii  all 
committees  having  supervision  over  price  quotations. 

Cash  prices  as  at  present  reported  for  the  various  exchanges,  and 
the  methods  of  recording  and  computing  such  prices,  taking  the  ex¬ 
changes  as  a  whole,  leave  a  good  deal  to  be  desired.  The  exchanges 
have  apparently  devoted  less  attention  to  such  matters  than  their 
importance  warrants.  It  is  believed  that  they  would  perform  a 
considerable  public  service  if  they  would  undertake  a  careful  study 
of  the  situation,  with  a  view  to  attempting  the  establishment  of  a 
system  of  cash  price  quotations  along  the  lines  already  indicated  or 
along  such  other  lines  as  might  seem  to  be  desirable  in  the  attempt  to 
improve  the  situation.  ^ 


- j  ...  *aiuca  ui  cuaiats  grams. 

*  *  * 

Yours  truly, 


3,  wiiiLii  AUhiin  IS 

The  three  members  of  this 
nd  an  average  ten  minutes 


on  coarse  grain  are  made, 
”  of  which  C.  C.  Austin  is 


OcT.  12, 1914. 


(Signed) 


E.  S.  Hughes,  Assf.  Secy. 


•  Chapter  X. 

INSURANCE  CHARGES  BY  DULUTH  COMMISSION  MEN. 

Section  1.  Reasons  for  insuring  consigned  grain. 

With  reference  to  the  terminal  charges  billed  back  by  commission 
men,  the  inquiry  disclosed  a  practice  of  Duluth  receivers  which  was 
not  found  at  any  other  market.  It  appears  that  a  majority  of  the 
receivers  at  that  market  have  billed  their  shippers  for  insurance 
on  their  grain  while  on- track”  at  the  terminal  elevator  at  the  rate 
of  5  cents  per  $100  (selling  price),  and  that  in  many  instances  the 
charges  billed,  as  recorded  on  the  books,  were  far  in  excess  of  the 
insurance  expenses  actually  incurred. 

Section  7  of  Rule  XIII  of  the  Duluth  Board  of  Trade  provides  with 
reference  to  charges  by  receivers  against  country  shippers  that  there 
shall  be  charged  such  legitimate  expenses  as  are  necessarily  incurred 
in  caring  for  the  property  and  guarding  the  interest  of  both  consignor 
and  consignee.^’  The  directorate  of  the  board  of  trade,  it  appeared, 
had  not  specifically  approved  an  insurance  charge  of  5  cents  per  $100, 
but  they  nad  ruled  that  if  insurance  was  incurred  in  protecting  the 
interests  of  a  customer  it  must  be  charged  back  to  him  in  conformity 
with  the  uniform  commission  rule.  Insurance  was  thus  regarded  as 
a  legitimate  terminal  charge  and  the  uniform  rate  of  5  cents  per  $100 
of  selling  price  had  been  agreed  upon  by  the  Commission  Merchants^ 
Association.  This  rate  was  never  apparently  questioned  by  the 
exchange  authorities. 

Commission  men  explained  the  necessity  of  this  insurance  charge 
on  the  ground  that  the  railroad’s  responsibility  on  a  car  of  grain 
ceased  the  moment  it  was  set  within  100  feet  of  the  elevator  to  which 
it  was  directed,  while  the  elevator’s  responsibility  therefor  did 
not  begin  until  the  car  was  unloaded,  weighed,  and  warehouse 
receipts  or  the  equivalent  unloading  reports  were  tendered.  If  in 
the  interval  between  placing  the  car  ^ ‘on- track”  and  unloading,  or  even 
between  unloading  and  the  tender  of  the  unload  report  or  warehouse 
receipt,  the  grain  should  be  destroyed  by  fire  or  otherwise,  then  the 
commission  men,  in  their  opinion,  would  be  liable  therefor  to  their 
customers.  It  was  stated  that  delivery  was  not  customarily  made 
“on-track”  in  the  Duluth  market  and  that  title  was  retained  until  ware¬ 
house  receipts  (or  unloading  reports)  were  delivered  to  the  purchaser 
of  the  grain.  They  declared  that  in  Minneapolis,  on  the  other  hand, 
delivery  was  made  to  the  purchaser  “on-track”  and  that  no  necessity 
of  insurance,  therefore,  devolved  upon  the  commission  man. 

Section  2.  The  insurable  risk. 

That  such  a  period  of  risk  (or  “gap”)  between  the  ending  of 
railroad  responsibility  and  the  beginning  of  elevator  responsibility 
for  the  grain  existed  in  the  Duluth  market  was  denied  by  the  attor¬ 
ney  for  the  Duluth  Board  of  Trade  in  1917.  He  asserted,  on  the 
contrary,  that  there  was  rather  an  overlapping  of  responsibility  as 
between  railroad  and  private  elevator:  and  that  the  matter  of  passing 

247 


248 


terminal  grain  Marketing. 


of  title  did  not  enter  into  the  question  since  the  elevator  insurance 
policies  were  drawn  without  reference  to  whether  the  grain  was 
owned  by  the  elevator  or  merdy  intrusted  to  it. 

Further  investigation  developed  the  fact*  that  insurance  on  grain 
had  been  largely  placed  through  the  Manley-McLennan  Agency. 
Eesponsible  officers  of  this  firm,  including  a  firm  member,  stated  that 
in  their  opinion  the  Minnesota  standard  policy  for  fire  insurance,  with 
the  clauses  customarily  attached  thereto,  gave  the  grain  insurance 
protection  as  soon  as  it  was  set  within  100  feet  of  an  insuring  elevator, 
and  that,  so  far  as  they  could  see,  no  period  ordinarily  intervened 
between  the  cessation  of  railroad  liability  for  loss  and  the  assumption 
of  such  risk  by  an  elevator. 

The  following  are  extracts  from  clauses  attached  to  the  insurance 
policies  covering  grain  in  two  of  the  terminal  elevators  (known  as  the 
100-feet  clause) : 

$ — — —  On  grain  and  seeds  of  all  kinds,  their  own  or  held  by  them  in  trust  or  on 
commission,  or  sold  but  not  delivered,  if,  in  case  of  loss,  the  assured  is  legally 
liable  therefor,  while  contained  in  the  frame,  iron-clad  elevator  and/or  warehouse 
building  and  in  cars  therein  and  in  cars  on  tracks,  within  one  hundred  feet 
thereof;  situate  at  Duluth,  Minnesota,  and  known  as  Consolidated  Elevator 
Company’s  Elevator  G. 

$ -  On  grains  and  seeds  of  all  kinds,  their  own,  or  held  by  them  in  trust,  or  on 

commission,  or  sold  but  not  delivered  or  removed,  or  bought  but  not  paid  for,  or 
for  which  they  may  be  legally  liable,  while  contained  in  the  frame,  iron-clad, 
steam-power  elevator  and  warehouse  building  known  as  the  Itasca  Elevator, 
situated  on  Allouez  Bay,  Superior,  Wisconsin,  and  in  cars  therein  and  in  cars 
on  track  within  100  feet  of  same.  Loss,  if  any,  payable  to  the  assured  or  order 
indorsed  hereon  for  collateral  purposes,  but  this  insurance  is  void  as  to  any  sub-  i 
sequent  purchaser  or  owner  of  the  property  hereby  insured.  No  storage  or  other  j 
charges  to  be  added  to  the  market  value  of  grain  or  seeds  covered.  a 

It  appears,  then,  that  if  delivery  was  accomplished  by  the  carrier 
through  placing  the  cars  on  the  industrial  tracks — which  might  leave  9 
a  car  at  a  spot  more  than  100  feet  awaj^  from  an  elevator — mere  was  9 
a  period  of  risk  covered  by  neither  carrier  nor  elevator.  If  delivery,  I 
however,  required  actual  unloading  there  could  be  no  such  risk  for  M 
which  the  commission  man  was  liable.  fl 

The  assistant  secretary  of  the  Capitol  Elevator  Co.  stated  freely  M 
that  he  could  see  no  necessity  whatever  for  any  insm-ance  by  com-  | 
mission  men  on  cars  consigned  to  them  for  sale.  When  a  car  is  J 
delivered  on  track  to  us,’’  he  said,  ‘Tt  is  our  car,  and  the  completion  9 
of  the  delivery  by  unloading  and  issuing  notice  of  unloading  is  merely  T 
a  question  of  time.  We  feel  that  the  question  of  passage  of  title  J 
would  not  even  be  raised  by  an  insurance  company.  We  would  t 
gladly  give  and  do  give  advances  on  cars  when  disposition  to  our  a 
elevator  is  ordered.” 

Various  persons  familiar  with  the  market  asserted  that  there  was  ^ 
no  necessity  for  the  commission  men  to  assume  such  a  risk.  E.  N. 
Bradley,  manager  of  the  Globe  Elevator  Co.,  stated  that  in  his  d 
knowledge  there  has  been  only  one  case  at  law  at  Duluth  raising  the 
question  of  the  extent  of  the  carrier’s  responsibility.  This  case,  he 
thought,  had  arisen  in  1907.  According  to  Mr.  Bradley  two  cars 
of  -wheat  had  been  ordered  to  the  Peavey  Elevator  by  commission  T 
firms  and  placed  by  the  Northern  Pacific  Railroad  Co.  on  the  switch  I 
tracks  of  the  elevator,  but  not  within  100  feet  of  the  structure.  A 
trestle  caught  fire  and  the  cars  of  wheat  were  burned  before  they  ■ 
could  be  reached.  The  Cargill  Co.,  who  alleged  ownership  of  one 


INSURANCE  charges  BY  DULUTH  COMMISSION  MEN.  249 


car  of  wheat,  sued  the  railroad  company,  he  said,  and  won  the  suit; 
whereupon  the  railroad  company  had  abandoned  its  claim  that  the 
cars  of  wheat  had  been  delivered,  and  settled  with  another  commis¬ 
sion  house  for  the  second  car  of  wheat  without  protest. 

Mr.  Bradley  pointed  out  that  the  railroads  customarily  claim 
responsibility  for  grain  until  the  issuance  of  a  weight  certificate  for 
it,  and  that  they  will,  on  order  from  a  consignor,  withdraw  cars  of 
grain  from  an  elevator  even  when  they  are  in  position  to  unload. 
He  stated  that  if  the  commission  men  would  give  his  company 
turnover  notices  on  cars  of  grain  ordered  to  the  industrial  tracks  or 
if  they  would  specify  the  car  numbers  on  disposition  orders,  then  it 
would  become  a  question  solely  between  the  elevator  and  the  rail¬ 
road  company. 

As  to  the  liability  of  the  carrier  after  a  car  of  grain  has  been  placed 
on  the  private  tracks  of  an  elevator  company,  reference  should  be 
had  to  the  statement  of  the  Interstate  Commerce  Commission  in  the 
Industrial  Railways  case,^  restated  in  the  Car  Spotting  Charges 
Case  ^  as  follows : 

Under  the  common  law  as  construed  in  the  practically  unanimous  decisions  of  the 
courts,  a  delivery  of  carload  freight  to  a  shipper  having  a  private  siding  is  made  by 
shunting  the  car  upon  the  switch,  clear  of  the  main  tracks. 

Assuming  this  to  be  the  rule,  it  would  appear  that  an  elevator 
company  holds  grain  on  its  own  tracks  either  at  its  own  risk  or  at 
the  risk  of  the  seller  (represented  by  a  commission  man) . 

Without  passing  upon  the  legal  question  finally,  it  may  be  pointed 
out  that  the  custom  of  the  market  is  frequently  a  controlling  factor 
in  such  cases;  and  at  Duluth  in  practically  every  transaction  where 
the  commission  man  assesses  a  charge  for  insurance  the  liability 
rests  either  upon  the  railroad  or  the  elevator  company.  That  is, 
the  car  placed  and  delivered  on  the  switch  tracks  of  the  elevator 
plant  has  been  ordered  to  that  position  pursuant  to  a  contract  of 
sale  entered  into  between  the  elevator  company  and  the  commis¬ 
sion  man.  There  are,  indeed,  certain  conditions  subsequent  to  be 
complied  with — such  as  inspection  and  weighing  at  the  elevator. 
But  it  seems  clear  that  the  commission  man  has  fulfilled  his  part 
of  the  contract  when  the  car  has  been  placed  ou  the  industrial 
tracks;^  and  that  if  there  is  a  possibility  that  he  may  still  be  tech¬ 
nically  liable  for  the  fire  risk  on  the  grain  prior  to  unloading,  such 
liability  might  be  removed  or  waived  in  the  disposition  order  issued 
by  the  commission  man  to  the  railroad  company. 

Section  3.  Income  realized  on  insurance  accounts. 

Whatever  the  necessity  may  have  been,  examination  of  the  books  of 
28  commission  companies  showed  that  a  majority  of  these  concerns 
had  each,  in  certain  years,  secured  substantial  income  from  the  opera¬ 
tion  of  their  insurance  accounts.  This  appears  in  Appendix  Table  37. 

As  an  indication  of  the  long  duration  of  this  practice  the  following 
figures  were  taken  from  the  books  of  one  of  the  largest  receivers  in 
th^e  Duluth  market: 

1291.  C.C.,  212. 

2  34  I.  C.  C.,  618  (decided  in  1915). 

3  It  should  be  noted  that  a  prominent  commission  man  admitted,  when  interviewed,  that  “we  sell  a 
good  deal  of  barley  on  track,  for  shipment  to  outside  points,  and  I  guess  we’ve  probably  been  grafting  a 
littlein  charging  insurance  in  such  cases,  alsoin  charging  insurance  on  wheatsince  the  beginning  of  Food 
Administration  control,  when  title  is  passed  on  track.  ” 


250 


TERMINAL  GRAIN  MARKETING. 


Year. 

Collected 

from 

1  customers 
for  grain 
insurance. 

Expended 
for  grain 
insurance. 

Credit 

balance 

insurance 

account. 

190.S-6 . 

«Q1 1  7A 

4HOQ  '70 

1906-7 .  . 

1,307. 16 

1  p.cn  AO 

$  1  OA*  y  f 

1907-8 .  . 

oou.  Do 

OK 

yi7.  5o 

1908-9 .  . 

1  dne;  on 

^0^.  oO 

09  OC 

'  ’  1,  ol5.  84 

1909-10 . : .  . 

9  oni  A7 

AC\  HA 

1, 0^1.  Oo 
1,963.  93 

1910-11 .  . 

1  1191ft 

1  /4  77 

1911-12 . . .  . 

1,754.  53 

Q  /IQft  OQ 

I'i.  /  / 
Af:  AO 

1,097.41 

1912-13 .  . 

^0.  ^0 

1  KO  AO 

1,  /lAh  10 

3, 347.  .55 

1913-14 .  . 

9  ^A.1 

XOU. 

1  70 

1914-15 .  . 

3, 145.  73 
3. 483.  95 

9  Oi^C  1 

1.  #U 

R  CiO 

Zf  o4o.  Do 
3, 140.  04 

1915-16 .  . 

0.  Dy 

1916-17 .  . 

o,  4o<j.  u’j 

2,058.15 

Total . 

9A  AOO  90 

1,066.  as- 

23, 543. 17 

Section  4.  The  rate  charged. 

Income  has  been  secured  from  these  so-called  insurance  charges 
both  because  the  rate  charged  was  higher  than  the  actual  premiums 
paid  and  because  the  commission  man  frequently  charged  the  shipper 
for  the  insurance  at  a  rate  in  excess  of  loss  rates  and  assumed  the  risk, 
or  most  of  it,  on  his  own  account.  If  a  commission  firm  were  selling 
grain  to  the  Qapitol  elevator  the  rate  for  one  day  (according  to  the 
card  ^  followed  in  1917)  would  have  been  2.9  cents,  as  against  5 
cents  charged  to  the  shippers.  Assuming  a  car  to  have  been  worth 
$2,400  (1,200  bushels  at  $2)  the  5-cent  rate  billed  to  the  consignor 
would  amount  to  $1.20  as  compared  with  71  cents  actual  cost  of  the 
premium  for  one  day.  The  actual  insurance  rates  at  the  time  appear 
Irom  the  following  extract  from  the  Manley-McLennan  Agencv  grain 
rate  card  for  October,  1917:  ^ 


DULUTH. 

Capitol  Elevator  Co.: 

4  . 

5  . 

Consolidated  Elevator  Go, 

B . 

c . 

D  and  annex . 

E . 

F . 

G . 

H . 

Peavey  Duluth  Term. : 
PV  and  annex . 

SUPEBTOR. 

Superior  Elevator  Co.: 

M . 

N .  ■■ 


Gross  rate 
per  $100. 

Gross  ratk 
per  $100. 

SUPERIOR — continued. 

$1.47 

1.47 

C.,  St.  P.,  M.  &  0.  Ry.  Co.: 

Itasca . 

$2.12 

9  Hp; 

1.98 

Globe  Elevator  Co. : 

1 . 

1.54 

2 . 

1 

.17 

3 . 

1  ftl 

1.70 

1.32 

Great  Northern  Elevator  Co.: 

S . 

AQ 

1.73 

S  annex . 

9A 

1.59 

X .  . 

2. 07 

2.35 

1  4Q 

.16 

Superior  Terminal  Elevator  Co. : 

K.... . 

L .  . 

American  MilUng  Co. : 

General  form . 

.99 

ft  An 

1.72 

1.15 

Hall  Elevator: 

T . 

Standard  short-rate  table. 


T 


Days. 

Per  cent 
of  annual 
premium. 

Days. 

Per  cent 
of  annual 
premium. 

1 . 

2 

4 

5 

6 

5 

7 

8 
9 
9 

2 . 

6 

3 . 

7  . 

4 . 

8  ■■■■ 

*  Manley-McLennan. 


INSURANCE  CHARGES  BY  DULUTH  COMMISSION  MEN.  251 


Section  5.  Summary. 

In  summary  it  may  be  stated  that  for  several  years  Duluth  re¬ 
ceivers  have  levied  so-called  insurance  charges  upon  consignors  to 
cover  an  alleged  liability  for  loss  on  grain  after  delivery  but  before 
unloading  at  the  elevators.  While  the  existence  of  any  such  lia¬ 
bility  as  that  alleged  is  a  matter  of  dispute,  the  best  evidence  avail¬ 
able  would  indicate  that  it  does  not  exist.  During  the  five  years 
ending  vdth  1917  Duluth  receivers  collectedTfor  such  insurance 
charges  more  than  $69,000  in  excess  of  any  expenditures  made  by 
them  for  such  insurance  (x4ppendix  Table  37).  There  existed  at 
that  time  no  rule  of  the  board  of  trade  that  would  sanction  excessive 
terminal  charges,  but  these  insurance  tolls  were  never  impeached  by 
the  exchange  authorities.  The  rates  at  which  the  insurance  was 
billed  to  shippers  were  (on  the  basis  of  1917  rate  card)  frequently 
in  excess  of  the  rates  charged  by  regular  insurance  agencies.  This 
income,  therefore,  was  secured  partly  through  this  overcharge  where 
the  commission  houses  insured  through  insurance  companies.  Where 
the  commission  men  carried  their  own  risks  (i.  e.,  did  not  purchase 
insurance  from  insurance  companies)  this  income  theoretically  repre¬ 
sented  excess  of  charges  billed  over  losses. paid.  As  no  losses  appar¬ 
ently  occurred,  the  income  was  presumably  the  total  amount  of 
charges  billed.  Even  granting  that  the  alleged,  liability  for  loss  is 
actually  existent,  there  is  no  justification  for  billing  shippers  a  charge  • 
in  excess  of  regular  premium  rates  for  insurance  in  the  case  of  com¬ 
panies  purchasing  insurance  from  insurance  companies,  or  in  excess 
of  loss  ratios  in  the  case  of  those  companies  which  do  not  purchase 
regular  insurance  but  prefer  to  carry  their  own  risk. 


Chapter  XI. 

SCALPING  IN  THE  CASH  MARKETS. 


Section  1.  Nature  and  character  of  scalping. 

Definitions  of  scalping. — ^The  practice  of  scalping  is  difficult  to 
define  in  precise  terms.  It  is  not  a  new  one  in  the  market  and  has 
long  been  regarded  as  disserviceable.  For  the  purpose  of  the  present 
discussion  a  car  of  grain  is  considered  to  have  been  scalped  when  it 
has  passed  through  the  hands  of  one  or  more  middlemen  other  than 
the  consignee  in  the  same  market  prior  to  delivery  on  either  a 

to-arrive’’  or  a  future  contract,  or  prior  to  delivery  to  a  concern  or 
its  agent  engaged  in  storing,  conditioning,  converting,  or  shipping 
grain. 

In  its  essentials  the  definition  followed  agrees  in  most  respects 
with  those  given  by  certain  grain  men  in  the  Duluth  and  Minneapolis 
.markets.  Thus,  a  Minneapolis  operator  defined  scalping  as  ‘ffiuying 
to  resell  on  the  same  market  in  a  short  time  without  treatment.^ 
Another  trader  offered  the  definition:  ^^The  term  ^scalping’  means 
the  purchase  of  grain  for  reselling  in  the  market  without  moving  it 
to  an  elevator.”  A  third  man  discussed  the  practice  as  follows: 

A  scalper  is  a  man  that  picks  up  a  car  of  grain  for  the  purpose  of 
reselling  it  in  the  same  market;  that  is,  a  scalper  is  a  man  that  buys  in 
the  market  to  resell  in  the  market.  If  he  buys  it  there  to  ship  to 
some  other  market,  knowing  the  difference,  he  is  not  a  scalper  but  a 
merchant.  But  a  man  that  just  picks  up  a  car  here,  where  two 
salesmen  would  get  together  and  swap  cars  to  profit  out  of  it,  that 
IS  scalping  *  *  *  ^  man  that  buys  a  car  of  grain  in  the 

market  and  resells  it  in  the  same  market. 

Markets  studied. — Early  in  the  investigation  of  the  grain  business 
there  appeared  considerable  evidence  of  scalping  on  consigned  grain 
in  the  Minneapolis  market,  and  a  statistical  test  was  made  to  deter¬ 
mine  the  extent.  Statistical  tests  were  then  made  in  Kansas  City  and  - 
Chicago,  to  determine  whether  similar  practices  prevailed  at  those 
centers.  The  results  of  these  latter  tests,  however,  indicated  that  the 
scalping  of  consigned  grain  was  so  insignificant  in  both  Chicago  and 
Kansas  City  as  to  be  negligible.  The  discussion  of  scalping,  there¬ 
fore,  IS  restricted  in  scope  to  the  Minneapolis  market. 

Joint  account  scalping.— Apparptly  the  larger  part  of  the 
scalping  in  Minneapolis  is  done  on  a  joint  venture,  or,  as  it  is  com-  . 
mcmly  called,  a  joint  account  arrangement  between  the  employer  j 
and  the  employee.  Under  this  arrangement  the  employee  (who  ire-  v 
fiuently  combines  a  special  knowledge  of  the  market  with  a  thorough 

r.  ^  Q.iiestion  as  t  o  whether  an  individual  would  be  engaged  in  scalping  who  bought  un  damn  ■ 

and  treated  it  in  order  to  put  i  t  into  merchantabll  condition,  and  then  resold  it  a  proSE  | 
nent  Minneapolis  commission  man  repUed;  “  He  is  not  a  scalper.  That  is  a  hospital  proposition  .^He is  * 

for  cfnsumpS  oMo^^^  ^rain  and  puttingit  into  condition 


252 


I 


A 


SCALPING  IN  THE  CASH. MARKETS. 


253 


understanding  of  the  purchasing  requirements  of  various  organiza¬ 
tions)  determines  what  scalping  ventures  are  to  be  undertaken,  and 
conducts  the  actual  buying  and  selling  operations.  The  employer 
acts  as  a  silent  partner  in  these  undertakings  in  that  he  merely 
finances  the  transactions  and  permits  them  to  be  put  through  for 
his  account.  The  profits  and  losses  of  the  various  ventures  are 
divided  between  the  two  in  var5ring  proportions. 

The  most  detailed  description  of  the  transaction  of  joint  account 
scalping  operations  was  given  in  an  interview^  with  W.  S.  McLaughlin 
of  the  McLaughlin  Grain  Co.  of  Minneapolis,  viz: 

I  am  working  for  you  and  you  are  a  grain  firm.  You  have  perhaps  a  line  of  elevators. 
You  have  salesmen  on  the  floor.  I  get  a  salary  of  $300,  $400,  or  $500  a  month.  When 
I  make  my  arrangements  with  you  I  would  say:  “I  get  through  about  11  or  12  o’clock 
on  some  days.  I  would  like  an  opportunity  to  make  some  money  for  myself  and  make 
some  for  you.”  You  would  say,  “Well,  that  sounds  reasonable;  what  do  you  want?” 
“I  am  a  good  man  and  you  want  to  keep  me,  and  I  can  make  good  money  for  you,  I 
think,  if  I  can  pick  up  a  car  of  oats  or  corn  when  I  get  through  at  a  bargain.” 

A  salesman  on  the  floor  will  have  a  certain  amount  of  business  to  do  for  the  firm 
that  he  is  with.  After  he  gets  through  going  around  the  market  attending  to  his 
firm’s  business,  he  may  have  some  time  left  and,  of  course,  is  throughly  posted  on  the 
market.  If  toward  the  end  of  the  session  he  will  look  around  and  hear  of  some  bar¬ 
gains,  the  general  custom  of  the  firms  is  to  go  to  work  and  let  that  man  do  his  scalping. 
He  handles  this  on  joint  account.  He  puts  in  the  trade  in  what  they  call  a  ‘  ‘scalp 
account.”  The  firm  finances  it,  he  sells  it  out  next  day  or  the  same  day,  if  he  is  a 
scalper  pure  and  simple.  The  profit  is  put  into  a  “scalp  account”  and  they  divide  it 
up.  He  may  get  30  to  50  per  cent. 

Question.  And  he  accepts  the  losses  on  parity? 

Answer.  That  is  the  way  scalping  is  done,  I  think,  by  the  representatives  of  all  the 
different  firms. 

Analysis  shows  that  two  out  of  six  of  the  houses  most  prominent 
in  scalping  operations  used  the  joint-account  method  entirely  and 
that  two  others  operated  partly  on  that  basis.  There  was  wide 
variation  in  the  contracts  between  employer  and  the  scalping  opera¬ 
tor;  but  the  indications  are  that  profits  and  losses  were  divided 
equally  more  often  than  in  any  other  ratio. 

Lack  of  specialization  in  scai.ping. — There  does  not  seem  to  be 
any  clearly  defined  class  of  specialists  in  cash  grain  scalping  in  the 
Minneapolis  market  in  the  sense  of  individuals  or  concerns  who  devote 
their  entire  attention  to  scalping  in  the  same  way  in  which  the  pit 
trader  employs  his  energies  exclusively  in  the  scalping  of  futures. 
It  was  generally  denied  by  Minneapolis  traders  that  there  were  either 
concerns  or  individuals  specializing  in  this  work,  although  it  also 
appeared  that  nearly  all  the  buyers  in  the  market  scalped  to  some 
extent.  It  appeared,  however,  that  certain  concerns  engaged  in 
scalping  far  more  than  others  and  for  that  reason  might  perhaps  be  con¬ 
sidered  as  specialists  in  scalping,  although  that  was  not  their  chief  func¬ 
tion  in  the  trade. 

Section  2.  Estimated  extent  of  scalping. 

Estimates  by  the  trade  as  to  the  extent  of  scalping  in  Minneapolis 
were  too  variable  to  be  of  statistical  value,  but  indicated  in  general 
that  whereas  the  number  of  cars  scalped  as  compared  with  the  total 
receipts  was  small,  yet  the  number  of  concerns  who  practiced  scalping 

2  As  the  statements  of  Mr.  McLaughlin  were  made  at  different  places  throughout  the  interview  some 
transposition  of  his  remarks  has  been  made  for  the  sake  of  clearness . 


56976°— 22 - 18 


254 


TERMIIiTAL  GRAIN  MARKETING. 


to  some  extent  was  relatively  large,  probably  including  a  majority 
of  the  cash  grain  dealers  in  the  market. 

The  Commission  undertook  statistical  tests  in  the  three  principal 
grain  markets  of  Minneapolis,  Chicago,  and  Kansas  City.  The  main 
purpose  of  these  tests  was  to  ascertain  (1)  the  proportion  of  incoming 
cars  in  these  markets  which  are  scalped;  (2)  the  proportion  of  con¬ 
cerns  engaged  in  scalping;  (3)  the  extent  to  which  scalped  cars  are 
rescalped,  i.  e.,  sold  a  second,  third,  and  fourth  time;  and  (4)  to  as¬ 
certain  the  gross  profits  and  losses  in  connection  with  such  operations. 

The  enormous  number  of  cars  received  in  these  three  markets  ren¬ 
dered  it  out  of  the  question  to  attempt  a  study  of  all  cars  received, 
and  in  consequence  it  was  necessary  to  limit  such  a  study  to  a  rep¬ 
resentative  sample.  It  was  determined  not  to  include  for  this  test 
any  cars  of  grain  sold  to -arrive,  ”  and  to  confine  it  solely  to  con¬ 
signed  cars.  This  selection  was  warranted  (1)  because  the  great  bulk 
of  scalping  operations  appeared  to  be  conducted  in  consigned  rather 
than  ‘Ho-arrive”  grain,  and  (2)  because  the  objections  to  scalping 
cash  grain  applied  more  forcibly  to  cars  handled  on  consignment 
than  to  cars  bought  outright  by  the  receivers.  ‘^To-arrive’’  grain  is 
frequently  bought  on  bids  sent  out  by  the  terminal  market  dealers. 
On  the  acceptance  of  the  bids,  the  grain  becomes  the  property  of  the 
middleman  when  shipped,  and  if  he  chooses  to  resell  it,  that  is  his 
affair,  since  the  profit  or  loss  on  his  transaction  affects  no  one  but 
himself.  Consigned  grain,  on  the  other  hand,  is  shipped  by  the 
farmer,  country  elevator,  or  other  grain  dealer  to  a  consignee  in  the 
primary  market  for  the  purpose  of  sale.  The  consignor  must  neces¬ 
sarily  intrust  the  grain  to  the  consignee  and  rely  upon  the  honesty, 
good  faith,  and  selling  ability  of  the  latter  to  obtain  the  best  possible 
price  for  it.  This  is  the  function  as  well  as  the  duty  of  the  consignee. 

After  determining  that  the  study  should  be  limited  to  consigned 
grain,  it  was  decided  that  a  preliminary  test  of  1,200  represen^tive 
cars  would  be  made  in  each  market.  The  method  employed  in 
order  to  obtain  a  representative  distribution  was  as  follows :  In  each 
of  the  three  markets  of  Minneapolis,  Chicago,  and  Kansas  City  five 
concerns  were  selected  entirely  at  random  from  among  the  grain 
receivers  and  commission  men.  The  period  to  be  covered  by  the 
test  in  each  market  was  the  crop  year,  July  1,  1916,  to  June  30,  1917. 
From  each  of  the  five  houses  so  selected  records  were  taken  of  10  con¬ 
signed  cars  on  or  about  the  5th  of  each  month  and  10  cars  on  or  about 
the  25th  of  each  month,  a  total  of  240  cars  a  year  from  each  house 
and  of  1,200  cars  from  each  market.  In  all  cases  the  cars  selected 
were  the  first  10  found  to  be  handled  on  or  about  the  selected  days.^ 

These  cars  were  then  traced  through  the  market  for  the  purpose  of 
determining  whether  or  not  they  were  scalped,  and  if  so,  the  number 
of  times  and  the  profits  and  losses  involved.  Data  were  obtained 
in  respect  to  the  first  purchaser  of  each  car  from  each  of  the  five 
consignees  in  each  market,  together  with  details  of  the  transaction, 
and  also  as  to  the  disposition  of  the  cars  by  the  first  and  all  subse- 

3  Owing  to  the  fact  that  only  a  fraction  of  the  10  cars  might  be  received  on  either  of  the  selected  days  of 
each  month,  except  at  the  height  of  the  grain-moving  season,  it  was  impossible  to  select  as  large  a  number  as 
10  cars  on  particular  days  in  each  month  throughout  the  year.  This  made  it  necessary  to  take  off  such 
cars  on  or  about  the  .5th  and  25th  instead  of  on  the  5th  and  ‘25th.  On  account  of  the  great  divergency  with 
which  the  books  of  the  selected  concerns  were  kept  and  the  state  of  the  car  records  generally,  it  was  impos¬ 
sible  to  choose  the  cars  in  any  chronological  or  other  definite  order,  and  for  the  purpose  of  avoiding  any 
statistical  criticism  of  selection  with  reference  to  the  study  of  scalping  the  Commission’s  representatives 
were  instructed  and  did  take  off  the  first  10  cars  that  came  to  their  attention  in  each  case. 


SCALPING  IN  THE  CASH  MARKETS.  255 

quent  purchasers  and  the  details  in  connection  with  these  trans¬ 
actions.^ 

A  second  1,200-car  test  was  subsequently  made  at  Minneapolis 
according  to  the  same  method,  the  five  consignees  for  this  test 
embracing  two  of  the  three  concerns  reputed  to  be  the  largest  scalpers 
in  that  market. 

As  the  results  showed,  the  cars  selected  for  these  tests  comprised 
fairly  broad  samples  of  the  buying  in  each  market.  This  appears 
from  the  comparatively  large  number  of  different  buyers  purchasing 
each  group  of  cars  from  the  consignee  houses  of  selected  cars,  viz : 


Markets, 


Chicago . 

Kansas  City.... 
Minneapolis: 
First  test... 
Second  test 
Both  tests.. 


Number 
of  cars 
sold.i 

Number  of  first  purchasers. 

Total. 

Buying 
more 
than  10 
cars. 

Buying 

less 

than  10 
cars. 

1,184 

79 

22 

57 

1,184 

64 

34 

30 

1,199 

96 

25 

71 

1,196 

88 

29 

59 

2, 395 

105 

51 

54 

1  It  will  be  noted  that  the  total  number  of  cars  reported  in  each  of  the  four  tests  shown  in  the  fable  above 
is  something  less  than  the  1,200  originally  selected.  In  several  instances  it  was  impossible  to  follow  through 
every  car,  owing  to  the  fact  that  some  of  these  cars  went  to  concerns  no  longer  in  business  and  in  other  in¬ 
stances  the  records  had  been  destroyed  or  for  some  other  reason  were  not  available. 


The  total  number  of  first  purchasers  shown  by  this  table  consti¬ 
tutes  a  very  considerable  proportion  of  the  total  number  of  concerns 
engaged  in  the  cash  grain  business  in  each  of  the  three  markets. 
This  is  especially  true  of  the  city  of  Minneapolis,  where  there  were 
at  that  time  approximately  175  concerns  who  were  members  of  the 
Minneapolis  Chamber  of  Commerce,  105  of  them  being  represented 
in  the  Commission’s  tests.  It  was  true  also  of  Kansas  City,  where 
the  membership,  like  the  membership  of  Minneapolis,  was  below  200 
concerns,  64  of  which  were  among  the  first  purchasers  according  to 
the  tests.  In  Chicago  the  total  number  of  first  purchasers — 79 — ap¬ 
pears  to  be  small,  particularly  with  reference  to  large  membership  of 
that  exchange,  but  it  is  probably  not  unfairly  representative  of  the 
concerns  who  were  engaged  strictly  in  the  cash  grain  business  in  that 
market.® 

Section  3.  Probable  percentage  of  consigned  cars  scalped. 

As  already  stated,  the  first  question  to  be  determined  was  the  pro¬ 
portion  of  consigned  cars  coming  into  the  market  which  were  scalped. 
This  required  an  analysis  of  the  disposition  which  was  made  of  the 
cars  in  the  hands  of  the  first  purchasers.  This  analysis  appears  in 
the  following  tabulation  (including  1,184  cars  in  each  of  the  markets 

■•The  data  covering  the  first  step  were  taken  from  the  books  of  the  selected  consignees  on  shps  giAung  the 
car  number  and  initials,  kind  and  grade  of  grain  and  name  of  consignee,  date  of  first  sale,  price  at  which 
sold,  name  of  the  purchaser,  and  where  ordered.  After  these  data  in  regard  to  the  first  purchaser  had  been 
obtained,  the  results  were  then  combined  so  as  to  bring  together  all  the  cars  bought  by  any  one  purchaser 
from  all  five  houses  in  each  market. 

All  firms  which  originally  bought  10  or  more  cars  were  visited  by  the  Commission’s  agents,  and  the 
records  of  the  various  cars  individually  examined.  Original  purchasers  of  less  than  10  cars  and  all  sub¬ 
sequent  purchasers  were  communicated  witKby  mail  and  requested  to  supply  the  necessary  information. 

f>Vol.  II,Table30. 


256 


TERMINAL  GRAIN  MARKETING. 


of  Kansas  City  and  Chicago  and  2,395  cars  in  the  Minneapolis  market 
in  the  crop  year  1916-17) : 

Disposition  of  specified  numbers  of  consigned  cars  by  first  purchasers  in  the  markets  of 
Chicago,  Kansas  City,  and  Minneapolis,  crop  year  1916-17. 


Markets. 


Disposition  by  first  purchaser. 

Chicago. 

Kansas  City. 

Minneapolis. 

First  test. 

Second  test. 

Both  tests. 

Num¬ 
ber  of 
cars. 

Per 

cent 

of 

total 

cars. 

Num¬ 
ber  of 
cars. 

Per 

cent 

of 

total 

cars. 

Num¬ 
ber  of 
cars. 

Per 

cent 

of 

total 

cars. 

Num¬ 
ber  of 
cars. 

Per 

cent 

of 

total 

cars. 

Num¬ 
ber  of 
cars. 

Per 

cent 

Of 

total 

cars. 

Unloaded  by  first  purchaser: 

In  local  market . 

1,018 

85. 95 

997 

84.  21 

830 

69.23 

851 

71.15 

1,681 

70.19 

Elsewhere . 

3 

.25 

85 

7. 18 

48 

4.00 

32 

2. 68 

80 

3.34 

Bought  on  brokerage: 

For  local  elevators  and 

unloaded . 

19 

1.61 

1 

.08 

8 

.67 

5 

.42 

13 

.54 

For  local  seed  companies 

• 

and  unloaded . 

4 

.34 

For  local  consumers  and 

unloaded . 

20 

1.69 

5 

.42 

22 

1.84 

16 

1.34 

38 

1.59 

Total  unloaded  by  first 

purchaser . 

1,060 

89.53 

1,092 

92.23 

908 

75.74 

904 

75.  59 

1,812 

75.66 

Shipped  outside  by  first  pur- 

chaser . 

92 

7.77 

58 

4.90 

197 

16.43 

167 

13.96 

364 

15.20 

Delivered  on  “to-arrive”  con- 

tract . 

16 

1.35 

30 

2.53 

13 

1.08 

5 

.42 

20 

.83 

Sold  to  local  feeders  i . 

14 

1. 18 

13 

1.  08 

7 

.  58 

18 

75 

Resold  in  local  market(scalped) 

2 

.17 

4 

.34 

68 

5. 67 

113 

9.  45 

181 

7.56 

Total . 

1,184 

100.00 

1,184 

100.00 

1,199 

100.00 

1, 196 

100.00 

2, 395 

100.00 

1  These  feeders  were  not  members  of  the  exchange  and  it  was  therefore  necessary  for  them  to  purchase 
through  members.  It  is  not  known  whether  these  transactions  were  on  a  brokerage  basis  or  not. 


The  tabulation  shows  nine  different  ways  of  disposing  of  the  con¬ 
signed  cps,  i.  e.,  nine  classes  of  transactions.  Only  the  last  class  of 
transactions,  however,  includes  cars  scalped,  under  the  definition 
adopted,  i.  e.,  those  consigned  cars  which  were  resold  by  the  first 
purchaser  in  the  same  market,  and  not  delivered  on  contracts,  or  sold 
to  organizations  or  their  agents  which  either  store,  condition,  convert, 
or  ship  grain. 

The  first  fact  to  be  noted  from  this  tabulation  is  that  a  much  larger 
proportion  of  consigned  cars  were  unloaded  by  Kansas  City  and 
Chicago  first  purchasers  than  W  those  in  Minneapolis.  In  Kansas 
City  about  92  per  cent,  and  in  Chicago  about  90  per  cent  of  the  cars 
bought  by  first  purchasers  were  unloaded  as  compared  with  approxi¬ 
mately  75  per  cent  shown  in  Minneapolis  by  each  test  and  by  the 
combined  tests.  This  fact  indicates  that  a  considerably  larger  pro¬ 
portion  of  the  consigned  grain  coming  into  Chicago  was  in  the  first 
instance  bought  for  shipment,  storage,  conditioning,  or  conversion, 
than  was  the  case  in  Minneapolis. 

It  is  also  apparent  that  the  proportions  of  consigned  cars  scalped- 
in  both  Chicago  and  Kansas  City  were  almost  negligible;  2  cars,  or 
only  0.17  per  cent,  in  the  case  of  Chicago,  and  4  cars,  or  0.34  per 
cent  in  Kansas  City.  In  Minneapolis,  on  the  other  hand,  68  cars,  or 


SCALPING  IN  THE  CASH  MARKETS.  257 


approximately  per  cent,  were  scalped  on  the  first  test  and  113 
cars,  or  about  9^  per  cent  of  the  total,  on  the  second  test. 

The  Minneapolis  results  showing  the  number  and  percentage  of  cars 
consigned  to  each  of  the  selected  consignees  which  were  scalped  were 
as  follows : 


Consignee. 


A 

B 

C. 

D 

E 


Total  first  Minneapolis  test 


F . 

G . 

H . 

Total  F,  G,  and  H 
I . 

J . 


Total  second  Minneapolis  test. 
Total  of  both  Minneapolis  tests 


Number 
of  cars 
received 
on  con¬ 
signment. 

Number 
of  cars 
scalped. 

Percent¬ 
age  of 
scalping 
to  re¬ 
ceipts. 

240 

6 

2. 50 

240 

7 

2.92 

240 

14 

5.85 

240 

20 

8.33 

239 

21 

8.  79 

1, 199 

68 

5.  67 

237 

•  8 

3. 38 

239 

10 

4. 18 

237 

18 

7.59 

713 

36 

5.  04 

240 

31 

12.  92 

243 

46 

18.93 

1, 196 

113 

9.45 

2,395 

181 

7.56 

This  analysis  shows  that  in  the  case  of  no  one  of  these  10  receivers 
was  the  percentage  of  their  consigned  cars  scalped  less  than  2^  per 
cent,  and  secondly,  that  in  the  case  of  6  out  of  the  10  receivers  the 
percentage  of  their  cars  scalped  was  above  5  per  cent.  It  is  also 
immediately  apparent  from  this  table  that  the  relatively  greater 
percentage  of  scalping  shown  by  the  second  test  as  compared  to  the 
first,  is  due  to  the  large  volume  of  scalping  on  the  cars  con¬ 
signed  to  concerns  ''I''  and  ''J.”  If  ‘"I”  and  be  eliminated, 
and  and  only  considered  on  the  second  test,  it 

appears  that  only  36  of  the  713  cars  consigned  to  these  last  three 
concerns  were  scalped,  or  5.04  per  cent  of  their  total  receipts.  This 
percentage  is  somewhat  less  than  the  proportion  of  cars  scalped  on 
the  first  test.  Concerns  ''I'^  and  ‘'J’’  were  by  common  repute  the 
largest  scalpers  in  Minneapofis,  with  one  exception.  A  very  much 
larger  proportion  of  the  grain  consigned  to  these  concerns  was  scalped 
than  in  the  case  of  grain  consigned  to  the  other  eight  consignees. 

Since  the  group  of  concerns  selected  at  random  for  the  first  test 
did  not  include  the  largest  scalpers,  it  is  probable  that  the  proportion 
of  cars  scalped,  considering  the  market  as  a  whole,  was  higher  than 
5.67  per  cent  shown  on  the  first  test.  On  the  other  hand,  it  would 
appear  to  follow  that  the  figure  of  9.45  per  cent  is  perhaps  too  high, 
considering  the  entire  market. 

On  the  basis  of  this  test,  therefore,  it  may  be  concluded  that  in 
1916-17  between  5^  and  9^  per  cent  of  incoming  consigned  cars  were 
scalped  in  Minneapolis.  In  this  connection  it  is  worth  noting  that  a 
later  test  made  in  the  same  year  by  tracing  3,496  cars  taken  from 
railroad  records  showed  about  9J  per  cent  of  the  cars  scalped  and 
that  by  this  test  the  proportion  of  the  cars  from  line  elevators  which 
were  scalped  was  much  lower  than  the  proportion  of  those  from 
farmers  and  independent  elevators. 


258 


TEKMINAL  GRAIN  MARKETING; 


Of  the  total  2,395  cars  traced  in  Minneapolis,  as  already  stated, 
181,  or  7.56  per  cent,  were  scalped.  An  analysis  of  these  scalping 
transactions,  however,  shows  that  there  were  only  six  concerns  which 
scalped  10  cars  or  more,  and  further,  that  these  six  concerns  scalped 
121,  or  66.8  per  cent,  of  the  total  number  of  181  cars  scalped.  These 
six  concerns  included  among  their  number  only  two  of  the  consignees 
from  which  cars  for  tracing  purposes  were  selected ;  i.  e.,  “1”  and  ‘  ‘  J.” 
The  other  four  concerns  in  this  group  of  leading  scalpers  are  hereafter 
designated  as  ‘‘K,”  ‘‘L,”  and  ‘‘N.'’  A  detailed  analysis  of 

scalping  by  these  six  concerns  follows : 


Ratios  of  scalping  to  purchases  for  six  Minneapolis  concerns  scalping  10  or  more  cars  on 

Commission’s  tests. 


Company. 

Both  tests. 

First  test. 

Second  test. 

Number 
of  cars 
purchas¬ 
ed. 

Number 
of  cars 
scalped. 

Per  cent 
of  pur¬ 
chases 
scalped. 

Number 
of  cars 
purchas¬ 
ed. 

Number 
of  cars 
scalped. 

Per  cent 
of  pur¬ 
chases 
scalped. 

Number 
of  cars 
purchas¬ 
ed. 

Number 
of  cars 
scalped. 

Per  cent 
of  pur¬ 
chases 
scalped. 

K . 

127 

42 

33.1 

52 

11 

21.2 

75 

31 

41.3 

1 . 

27 

18 

66.7 

5 

2 

40.0 

22 

16 

72.7 

J . 

58 

19 

32.8 

34 

6 

17.6 

24 

13 

54.0 

L . 

19 

18 

94.7 

7 

6 

85.7 

12 

12 

100.0 

M . 

24 

13 

54.2 

16 

7 

43.8 

8 

6 

75.0 

N . 

13 

11 

84.6 

1 

0.0 

12 

11 

91.7 

Total . 

268 

121 

45. 1 

115 

32 

27.8 

9 

153 

89 

58.2 

Company. 


K . 

I . 

J . 

L . 

M . 

N . 

Total 


Per  cent 
of  total 
purchases 
bought 
on  first 
test. 


40.9 

18.5 

58.6 
36.8 

66.7 
7.7 


42.9 


Per  cent 
of  total 
scalps 
scalped 
on  first 
test. 


26.2 

11.1 

36.8 
33.3 

53.8 


26.4 


Per  cent 
of  total 
purchases 
bought 
on 

second 

test. 


59.1 
81.  5. 
41.4 

63.2 

33.3 

92.3 


57.1 


Per  cent 
of  total 
scalps 
scalped 
on 

second 

test. 


73.8 

88.9 

63.2 
66.7 

46.2 
100.0 


73.6 


It  appears  from  this  table  that  while  only  28  per  cent  of  the  cars 
bought  by  these  six  large  scalpers  were  scalped  on  the  first  test,  58 
per  cent  of  their  purchases,  or  more  than  twice  that  proportion,  were 
scalped  on  the  second  test.  That  this  is  not  due  to  the  larger  number 
of  cars  purchased  on  the  second  test  as  compared  with  the  first 
appears  from  the  comparison  of  scalps  and  purchases  on  each  test  in 
the  last  four  columns  of  the  table. 

Although  not  shown  in  the  table,  the  larger  proportions  of  their 
purchases  scalped  by  the  large  scalpers  on  the  second  test  was  due 
chiefly  to  operations  on  the  cars  of  '‘I’'  and  '‘J.”  Of  the  cars  pur¬ 
chased  by  pie  five  largest  scalpers  from  being  necessarily 

excluded,  since  a  concern  is  forbidden  by  rule  to  buy  cars  consigned 
to  it),  79  per  cent  were  scalped,  and  of  those  purchases  made  from  “J” 
(  J  being  excluded) ,  67  per  cent.  The  next  highest  proportion  of 
purchased  cars  scalped  by  these  large  scalpers  was  50  per  cent  on  the 
cars  bought  from  receiver  '‘D”  on  the  first  test.  In  the  case  of  the 


SCALPING  IN  THE  CASH  MARKETS. 


259 


cars  consigned  to  all  the  other  seven  receivers  employed  in  the  two 
tests  the  proportion  of  purchased  cars  scalped  was  less  than  42  per 
cent.  It’ is  perhaps  worth  noting  that  of  the  16  cars  ‘‘I”  bought  of 
‘‘ J”  13,  or  81  per  cent,  were  scalped  and  of  the  7  cars  bought  by  J’’ 
from  5,  or  71  per  cent,  were  scalped. 

Apparently  either  certain  consignees  who  are  largely  engaged  in 
scalping  do  not  pay  sufficient  attention  to  the  grain  consigned  to 
them  to  obtain  the  best  possible  prices  for  their  consignors,  or  else 
certain  of  these  consignees  or  their  representatives  work  in  collusion 
with  one  another.  Only  on  one  of  these  two  bases  or  the  other  does 
it  seem  possible  to  account  for  the  fact  that  the  grain  of  some  con¬ 
signees  is  so  much  more  frequently  scalped  than  the  grain  of  certain 
other  consignees.  From  this,  however,  it  does  not  necessarily  follow 
that  the  houses  themselves  have  knowledge  of  the  situation.  As 
already  indicated,  most  of  the  scalping  is  done  on  joint  account. 
It  would  seem  that  the  desire  of  the  various  representatives  working 
on  joint  account  to  make  money  by  engaging  in  scalping  might 
easily  lead  to  a  certain  degree  of  neglect  in  selling  the  consignors’ 
grain,  owing  to  the  greater  interest  which  these  particular  represen¬ 
tatives  might  have  in  scalping  operations.® 

Similarly,  if  collusion  exists  or  has  existed,  it  is  entirely  within 
the  bounds  of  possibility  that  such  collusion  is  between  individual 
joint  account  salesmen  working  for  different  houses,  and  that  such 
operations  are  carried  out  not  only  without  any  instructions  upon 
the  part  of  the  houses  themselves  but  even  without  their  cognizance. 

Section  4.  Probable  percentage  of  Minneapolis  grain  concerns  engaged 

in  scalping. 

The  second  purpose  of  the  statistical  tests  was  to  ascertain  the 
probable  proportion  of  grain  dealers  engaged  in  scalping  operations 
in  Minneapolis,  Chicago,  and  Kansas  City  being  eliminated  because  of 
the  insignificant  volume  of  scalping  at  those  centers.  The  proportion 
of  Minneapolis  concerns  engaged  in  scalping  as  shown  by  the  first 
and  second  tests,  and  on  both  tests  combined,  appears  as  follows: 


First  test. 

Second  test. 

Both  tests. 

Class  of  first  purchasers. 

Num¬ 
ber  of 
first 
pur¬ 
chasers. 

First  purchasers 
that  scalped. 

Num¬ 
ber  of 
first 
pur¬ 
chasers. 

First  purchasers 
that  scalped. 

Num¬ 
ber  of 
first 
pur¬ 
chasers. 

First  purchasers 
that  scalped. 

Dealers  operating  terminal 
elevators . 

38 

Num¬ 

ber. 

9 

Per 

cent. 

23.7 

35 

Num¬ 

ber. 

11 

Per 

cent. 

31.4 

39 

Num¬ 

ber. 

13 

Per 

cent. 

33.3 

Dealers  not  operating  termi¬ 
nal  elevators  o . 

32 

14 

43.8 

30 

13 

43.3 

37 

20 

54.1 

All  dealers . 

70 

23 

32.9 

65 

24 

36.9 

76 

33 

43.3 

Consumers . 

26 

23 

29 

Total . 

96 

23 

24.0 

88 

24 

27.3 

105 

33 

31.4 

o  Includes  H.  Poehler  &  Co.  and  E.  S.  Woodworth  &  Co.  The  Pacific  Elevator  Co.,  operating  a  terminal 
elevator,  was  owned  by  Poehler;  and  the  Concrete  Elevator  Co.,  also  operating  a  terminal  elevator,  was 
owned  by  Woodworth.  Both  these  terminal  elevator  companies  were  operated  separately,  however,  and 
their  purchases  recorded  separately. 

«  This  would  also  seem  to  apply  in  those  cases  where  the  head  of  a  commission  house  or  a  partner  both 
sells  consigned  grain  and  scalps. 


260 


TERMINAL  GRAIN  MARKETING. 


According  to  these  tests,  33  out  of  the  105  first  purchasers  in 
Minneapolis,  or  31  per  cent,  did  some  scalping  during.  1916-17. 
These  peicentages  include  millers  and  converters  who  obviously  were 
not  buying  with  a  view  to  resale.  Excluding,  therefore,  the  figures 
of  the  latter  class  of  purchasers,  the  tests  showed  that  33  out  of  a 
total  of  76  dealer  ^^first  purchasers,’’  or  43  per  cent,  did  some  scalping, 
and  that  whereas  only  33  per  cent  of  the  terminal  elevator  first  pur¬ 
chasers  scalped,  slightly  over  54  per  cent  of  the  first  purchasers  not 
operating  terminal  elevator  companies  did  some  scalping.  These 
should  be  regarded  as  minimum  percentages,  however,  since  the 
table  clearly  shows  the  tendency  for  the  number  and  proportion  of 
first  purchasers  scalping  to  increase  with  the  size  of  the  sample. 

The  reasons  why  the  proportion  of  scalpers  operating  terminal 
elevators  is  so  much  less  than  the  proportion  of  other  dealers 
engaging  in  scalping  is  perhaps  to  be  found  in  the  nature  of  the 
terminal  elevator  business.  The  terminal  elevator  company  usually 
purchases  grain  and  stores  it  until  it  is  rec^uired  by  converters  or 
shippers.  W^hen  a  car  of  grain  is  bought  on  the  floor  by  a  terminal 
elevator  company,  that  concern  has  the  option  either  of  reselling  the 
car  or  of  turning  it  into  the  elevator  either  for  mixing  purposes  or  to 
make  ''storage  charges.”  In  the  latter  event,  as  large  a  profit  will 
presumably  be  obtained  from  the  operations  involved  as  would  be  the 
case  were  the  car  in  question  resold  or  scalped.  In  many  instances  it 
is  probably  a  inatter  of  indifference  as  to  which  course  of  action  is 
pursued.  But  it  also  must  be  considered  that  the  terminal  elevator 
company  is  equipped  for  doing  that  kind  of  business  and  the  staff 
IS  employed  for  the  purpose  of  making  a  return  out  of  it.  For  these 
reasons,  therefore,  it  seems  probable  that  there  is  less  inclination  on 
the  part  of  elevator  company  buyers  to  scalp. 

Section  5.  Number  of  scalping  operations  to  which  scalped  cars  were 

subjected. 

The  third  purpose  of  the  statistics  was  to  determine  the  number 
of  scalping  operations  to  which  each  car  originally  scalped  is  sub¬ 
jected.  F or  this  purpose,  tracing  sheets  similar  to  those  sent  to  each 
first  purchaser  of  cars  in  Minneapolis  were  also  sent  to  second,  third, 
fourth,  and  fifth  purchasers.  Returns  to  these  schedules  were  then 
tabulated  and  gave  the  following  results: 


Scalped  cars  traced. 

Cars  scalped. 

Number 
of  scalp¬ 
ing  opera¬ 
tions. 

Average 
number 
of  times 
each  car 
is  scalped. 

Once. 

Twice. 

Three 

times. 

Four 

times. 

Cars  traced  to  final  disposition. . . 

168 

63 

11 

2 

244 

1  4.^ 

Cars  scalped  once,  no  further  record . . . 

10 

10 

1  nn 

Cars  scalped  twice,  no  further  record . 

3 

3 

6 

2.00 

Total  cars  scalned . 

181 

66 

11 

2 

260 

1.44 

At  least  36  per  cent  of  the  cars  originally  scalped,  therefore,  were 

scalped  a  second  time,  and  about  6  per  cent  of  them  were  scalped  a 
third  time. 


SCALPING  IN  THE  CASH  MAKKETS. 


261 


Section  6.  Scalping  profits  and  losses. 

From  the  prices  on  the  original  sale  and  the  subsequent  resales, 
the  Commission  computed  the  average  profits  and  losses  per  bushel 
on  each  scalping  operation  and  on  each  car  scalped,  and  from  the 
names  of  the  consignors  and  the  purchasers  on  the  various  resales 
the  number  of  cars  sold  back  to  original  consignees. 

In  computing  the  profits  and  losses  in  question,  the  180  cars  ^  were 
first  divided  according  to  kind  of  grain  (wheat,  corn,  oats,  rye,  and 
barley).  In  view  of  the  importance  of  wheat  as  an  article  of  human 
food,  it  was  deemed  desirable  to  make  a  somewhat  more  intensive 
study  of  the  profits  and  losses  in  scalping  wheat  and  for  this  purpose 
cars  of  wheat  scalped  were  divided  into  three  classes.  In  the  first 
class  were  included  all  cars  of  wheat  of  all  classes  (spring,  durum, 
winter,  mixed,  western,  etc.)  grading  No.  3  or  better;  in  the  second 
class,  all  cars  of  wheat  of  all  classes  grading  poorer  than  No.  3  and 
including  '^no  grade'’;  and  in  the  third  class  all  cars  of  wheat  upon 
which  the  data  as  to  the  grade  could  not  be  obtained.  The  results 
appear  in  Appendix  Table  42. 

This  table  shows  that  the  bulk  of  the  scalping  was  in  wheat.  On 
the  first  scalp,  117  cars  out  of  180  scalped,  or  65  per  cent,  were  wheat 
and  63  cars,  or  35  per  cent  of  the  total,  were  coarse  grains.  This 
higher  percentage  of  wheat  scalping  as  compared  with  coarse  grains 
is  very  probably  explained  by  the  relation  of  wheat  to  coarse-grain 
receipts  at  Minneapolis  in  1916—17.  Normally  wheat  constitutes 
more  than  50  per  cent  of  the  Minneapolis  receipts,  and  in  the  crop 
year  1916-17  there  were  received  101,353  cars  of  wheat,  or  64  per 
cent  of  a  total  of  156,877  cars  of  all  grains.  The  original  Minneapolis 
scalping  operations,  therefore,  as  between  y^heat  and  coarse  grains, 
correspond  almost  exactly  to  the  proportions  in  which  wheat  and 
coarse  grains  were  received  in  the  market. 

Sixty-six  of  the  original  180  cars  were  scalped  a  second  time,  and  of 
these  54,  or  approximately  83  per  cent,  were  wheat  and  only  12,  or 
approximately  17  per  cent,  were  coarse  grains.  All  of  the  11  cars 
scalped  the  third  time  and  both  of  the  two  cars  scalped  the  fourth 
time  were  wheat. 

The  data  on  scalping  also  show  that  by  far  the  greater  proportion  of 
scalping  in  wheat  was  on  the  lower  grade  offerings.  Whereas  nearly 
50  per  cent  of  the  wheat  inspected  at  Minneapolis  graded  No.  3  or 
better,  only  about  30  per  cent  of  the  scalping  was  done  in  these  grades. 
Nearly  70  per  cent  of  the  scalping  was  on  cars  grading  No.  4  or  lower. 

Moreover,  the  average  net  profit  on  scalping  wheat  was  greater  on 
grades  lower  than  No.  3  than  it  was  on  No.  3  and  better.  On  the 
first  scalping  operation  the  average  net  profit  per  bushel  on  wheat 
poorer  than  No.  3  was  5.30  cents  as  compared  with  4.97  cents  on 
wheat  grading  No.  3  or  better;  on  the  second  operation  (same  cars), 
4.80  cents  as  against  1.15  cents;  and  on  total  wheat  scalping  on  all 
cars,  8.20  cents  as  against  5.42  cents  (cf.  table  following). 

It  appears  that  a  greater  proportion  of  the  cars  of  wheat  were 
scalped  at  a  profit  than  was  the  case  with  coarse  grains,  and  that 

7  The  two  tests  made  by  the  Commission  in  Minneapolis  included  a  total  of  181  cars  scalped  out  of  a  total 
of  2,395.  In  the  case  of  one  of  these  cars,  it  was  impossible  to  obtain  the  price  at  which  it  was  resold  by 
the  purchaser  on  accoimt  of  the  fact  that  the  concern  to  which  the  car  was  resold  was  no  longer  in  business. 
In  consequence,  the  profits  and  losses  of  scalping  operations  are  figured  upon  the  basis  of  180  cars  instead 

of  181. 


262 


TEKMINAL  GRAIN  MARKETING. 


the  average  per  bushel  profit  on  wheat  scalping  was  greater  than  for 
the  coarse  grains. 

The  original  scalping  operations  show  that  117  cars  of  wheat 
were  scalped,  of  which  two  were  resold  at  the  same  prices,  leaving 
115  disposed  of  at  either  a  profit  or  a  loss.  Of  these  115  cars,  104, 
or  slightly  over  90  per  cent,  were  sold  at  a  profit  as  against  11,  or 
slightly  less  than  10  per  cent,  sold  at  a  loss.  In  the  case  of  coarse 
grains  (eliminating  5  cars,  which  5  were  resold  at  the  same  price), 

45  were  resold  at  a  profit  and  13  at  a  loss,  or  77  per  cent  at  a  profit 
and  23  per  cent  at  a  loss.  The  foregoing  conclusions  with  reference 
to  the  extent  and  profitableness  of  scalping  as  between  wheat  and 
coarse  grains  and  as  between  high  and  low  grade  wheat  are  further 
supported  by  the  following  table,  which  presents  the  net  profits  and 
losses  on  all  scalping  operations  on  various  kinds  and  grades  of 
grain:  * 


Kind  and  grade. 

Total 

cars 

scalped. 

Cars  which 
could  not  be 
traced  further. 

Total 

cars 

scalped 

and 

traced 

through. 

Aver¬ 

age 

net 

profit 

per 

Taushel. 

Sold  at  a  profit. 

Sold  at  a  loss. 

Scalped 

once. 

Scalped 

twice. 

Num¬ 
ber  of 
cars. 

Aver¬ 

age 

profit 

per 

bushel. 

Num¬ 
ber  of 
cars. 

Aver¬ 

age 

loss 

per 

bushel. 

Wheat  grading  No.  3  or 
better . 

37 

76 

4 

1  37 

2  71 

3 

Cents. 
5.42 
8. 20 
19.50 

31 

64 

3 

Cents. 

6.96 

9.63 

19.50 

4 

6 

Cents. 
3. 84 
5. 77 

Poorer  than  No.  3 . 

3 

1 

2 

Unclassifieds . 

Wheat,  all  grades . 

Barley . 

117 

4 

2 

4  111 

7.57 

98 

9.09 

10 

5.00 

22 

14 

25 

2 

3 

2  19 
13 
122 

2  2 

2. 63 
.66 
.15 
1.25 

18 

10 

10 

1 

2. 78 
1.30 
2.63 

2.  50 

Oats . 

1 

3 

10 

1.46 
2. 45 

Corn . 

3 

Rye . 

Allcoarse  grains. ^ _ 

All  grains . 

63 

6 

1 

5  56 

1.03 

39 

2.22 

13 

2.22 

180 

10 

3 

6  167 

5.38 

137 

7.U 

23 

3.43 

1  Two  cars  resold  at  same  price.  1 

2  One  car  resold  at  same  price.  •  ] 

3  Grade  not  obtained.  I 

<  Three  cars  resold  at  same  price.  | 

3  F  our  cars  resold  at  same  price.  I 

®  Seven  cars  resold  at  same  price.  J 

This  table  shows  that  of  the  167  scalped  cars  traced  through  to  1 
ultimate  destination,  111,  or  about  66  per  cent,  were  wheat  and  the  ! 
balance,  or  34  per  cent,  coarse  grains,  and  that  the  total  average  j 
scalping  profit  per  bushel  on  these  111  cars  of  wheat  amounted  to! 
7.57  cents,  as  compared  with  approximately  1.03  cents  on  coarse 
grains.  These  figures  give  some  indication  of  the  per  bushel  toll  ^ 
taken  on  the  cars  of  gram  coming  into  the  Minneapolis  market  which 
are  scalped  in  a  year  considered  favorable  to  scalping  operations.  _ 
The  cars  showing,  respectively,  the  greatest  profit  and  the  greatest  I 
loss  m  scalping  appear  m.  the  following  statement:  | 


SCALPING  IN  THE  CASH  MARKETS.  263 

[Car  G.  W.  210059  containing  SG-1  wheat  consigned  to  H,  Pophler  Co.] 

Sold  May  16,  1917: 

To  fianner  Grain  Co.,  at . . . . .  $1. 40 

To  F,  M.  Davies  Co.,  at . . . .  1.  49 

To  A.  J.  Atkins  Grain  Co.,  at . . .  1.  50 

Sold  May  17,  1917: 

To  Pacific  Elevator  Co.,  at .  1.  60 

To  Milwaukee  Elevator  Co.,  at .  1,  70 


Unloaded  by  Milwaukee  Elevator  Co.,  May  22;  total  profit . 30 

[Car  L.  4150  containing  SG-2  wheat  consigned  to  H.  Poehler  Co.) 

Sold  June  26,  1917,  to  Fraser- Smith  Co.,  at . . .  1.  50 

Sold  to  June  29,  1917: 

To  C.  C.  Wyman  &  Co.,  at .  1.  29^ 

To  Washburn-Crosby  Co.,  at . .  1.  30 


Unloaded  by  Washburn-Crosby  Co.,  July  5;  total  loss . 20 


A  computation  was  also  made  of  the  average  profit  per  scalping 
operation.  Since  a  considerable  number  of  cars  were  scalped  more 
than  once  the  average  profit  per  operation  was  necessarily  lower  than 
the  average  scalping  profit  per  car.  The  following  statement  shows 
these  profits  per  operation,  including  the  figures  for  the  entire  180 
cars,  13  of  which  it  was  impossible  to  trace  to  final  destination: 


Kind  and  grade. 

At  a  profit. 

At  a  loss. 

Total. 

Number 

of 

opera¬ 

tions. 

Average 

profit 

per 

bushel. 

Number 

of 

opera¬ 

tions. 

Average 

loss 

per 

bushel. 

Number 

of 

opera¬ 

tions. 

Average 

net 

profit  per 
bushel. 

Cents. 

Cents. 

Cents. 

Wheat,  grade  3  or  better . 

45 

4.83 

4 

4. 22 

151 

3. 93 

Poorer  than  3 . 

120 

5.53 

8 

7.  52 

128 

4.  72 

Unclassified . 

5 

11.90 

5 

11.90 

Wheat . 

170 

5.53 

12 

6.42 

1  184 

4. 69 

Barley . 

30 

2.  23 

*  32 

2  09 

Oats . 

12 

1. 23 

3 

1.46 

15 

.69 

Corn . 

13 

1. 93 

10 

2.  45 

2  26 

.02 

Rj'^e . 

1 

2.50 

5  2 

1.  25 

Coarse  grains . 

56 

1.95 

13 

2.  22 

3  75 

1.  07 

All  grains . 

226 

4. 65 

25 

4.  24 

<259 

3. 65 

i^Two  cars  resold  at  sarae  price. 

2  Three  cars  resold  at  same  price. 

®  Six  cars  resold  at  same  price. 

<  Eight  cars  resold  at  same  price. 

5  One  car  sold  at  the  same  price. 

This  table  covers  a  total  of  259  scalping  operations,  of  which  226 
(87  per  cent)  showed  a  profit  and  25  a  loss,  8  operations  being  at 
the  same  price.  The  average  profit  per  operation  was  4.69  cents  a 
bushel  in  the  case  of  wheat,  against  1.07  cents  on  coarse  grains,  and 
the  average  profit  for  all  operations  was  3.65  cents  per  bushel. 

Section  7.  Conclusion. 

The  operations  of  the  scalper  have  been  defended  by  one  writer  as 
follows: 

The  scalper  performs  his  principal  function  through  the  influence  that  he  exerts 
on  prices  in  the  market  in  which  he  operates.  If  the  price  sags  the  least  bit  below 
what  the  scalpers  believe  the  market  conditions  warrant,  they  begin  to  buy,  and  this 


264 


TEKMINAL  GRAIN  MARKETING. 


mamtaiiis  the  price.  In  the  Minneapolis  Chamber  of  Commerce,  for  example  the 
bulk  of  the  wheat  is  bought  by  a  small  number  of  large  flour  millers  and  by  the  ter¬ 
minal  elevators.  During  some  seasons  of  the  year  the  elevators  may  be  buying  very  ■ 
^  j  1^^^  milling  companies  are  the  principal  buyers.  It  would  appear  that 
the  buyers  of  these  companies  might  be  able  to  depress  the  price  by  merely  holding 
back  in  making  their  purchases,  but  if  they  did  so  the  scalpers  would  immediately 
jump  in  and  furnish  sufficient  demand  to  keep  the  price  up.  They  know  that  the 
millers  have  to  buy  large  quantities  of  wheat  every  day  and  that  they  will  have  to 
pay  the  price  to  get  it. 

Such  a  theoretical  justification  of  this  practice,  however,  seems  to 
lose  sight  of  a  number  of  factors  in  the  situation.® 

As  has  already  been  shown,  it  appears  that  certain  firms  whose  - 
consignments  were  most  extensively  scalped  were  at  the  same  time  ^ 
^emselves  among  the  largest  scalpers  in  the  Minneapolis  market.  \ 
There  are  apparently,  as  also  indicated  (sec  5),  only  two  possible 
^^plti'Dations  of  this  situation!  (1)  That  there  is  collusion  between  ^ 
consignees  and  buyers;  (2)  That  certain  scalping  consignees  do  not  ' 
pay  sufficient  attention  to  their  consignments  to  procure  the  best  • 
results  for  consignors.  ' 

T7^_  _j1  •!•••  .  _  _  * 


SCALPING  IN  THE  CASH  MARKETS. 


265 


Consignee. 


J. 

I. 

I. 

H 

H 

H 

H 

E 

E 

E 

E 

E 

E 

C. 

C. 

C. 

D 


Number 
of  cars. 

Original 
sale  price 
per 

bushel. 

Price  at 
which 
car  was 
bought 
back  per 
bushel. 

Differ¬ 
ence  per 
bushel. 

1 

$1.82i 

$1.82i 

Cents. 

None. 

1 

1.69i 

1.72i 

-b  3 

1 

1,56 

1.59 

+  3 

1 

1.46 

1.461 

+  h 

1 

.90 

.901 

+  h 

1 

1.77^ 

1.78 

+  i 

1 

1.55 

1.55i 

+  h 

1 

.87 

.87 

None. 

1 

.90i 

.92 

+  11 

1 

1.33 

1.33i 

+  i 

1 

1.46 

1.46i 

+  1 

1 

1.04 

1.041 

+  1 

1 

1.05 

1.04 

-  1 

1 

1.21i 

1.211 

None. 

1 

.541 

.56 

+  11 

1 

2.171 

2.  33 

+15i 

1 

.91i 

.92 

+  1 

From  this  table  it  will  be  observed  that  seven  cars  were  bought 
back  at  the  same  differential  (one-half  of  a  cent)  and  that  three  cars 
were  bought  back  at  the  same  price.  In  other  words,  10  out  of  17 
cars  were  bought  back  either  at  the  same  price  or  at  the  same 
differential.  These  figures  taken  in  conjunction  with  all  the  other 
statistics  would  seem  at  least  to  raise  the  question  of  whether  there 
may  not  have  been  some  understanding  between  the  consignees  and 
these  original  purchasers  with  reference  to  repurchasing.  If  it  be 
assumed  that  there  was  no  collusion  it  then  appears  that  the  original 
consignees  bought  back  16  out  of  these  17  cars  either  at  the  same 
price  or  at  prices  from  one-fourth  of  a  cent  to  15  J  cents  per  bushel 
more  than  the  price  at  which  they  were  originally  sold,  and  that  as 
to  14  out  of  these  17  cars,  the  consignee  or  his  agent  subsequently 
concluded  that  the  grain  was  worth  more  than  what  it  was  originally 
sold  for.  It  will  of  course  be  claimed  that  this  is  not  controlling  as  to 
whether  the  consignee  has  properly  attended  to  the  sale  of  the  grain 
since  changes  in  the  market  may  have  taken  place  between  the  time 
of  the  original  sale  and  repurchase.  Other  things  being  equal,  how¬ 
ever,  it  would  seem  safe  to  assume  that  the  shorter  the  period  elapsing 
between  purchase  and  sale  in  scalping  transactions  the  less  important 
would  be  the  element  of  time  differences  in  prices  and  the  greater  the 
probability  that  the  scalping  profit  may  be  due  to  the  failure  of  the 
consignee  to  realize  the  highest  possible  price  for  the  cars  in  the 
first  place. 

In  this  connection  it  may  be  pointed  out,  therefore,  that  both  of 
the  cars  bought  back  at  3  cents  advance  and  one  of  the  two  bought 
back  at  cents  over,  were  repurchased  on  the  same  day,  and 
that  8  out  of  the  13  cars  repurchased  by  the  original  consignees  at 
an  advance  were  bought  back  on  the  same  day.  Furthermore,  out 
of  180  cars  scalped,  82,  or  45  per  cent,  were  bought  and  scalped 
the  first  time  on  the  same  day — 68  at  a  profit,  9  at  a  loss,  and  5  at 
the  same  price.  Out  of  115  cars  scalped  once  only,  60  were  scalped 
on  the  day  of  purchase — 47  at  a  profit,  8  at  a  loss,  and  5  at  the  same 
price;  out  of  37  cars  scalped  twice  only,  18  were  scalped  twice  on  the 
same  day  as  purchased — 17  at  a  profit  and  1  at  a  loss;  and  out  of  9 


266 


TERMINAL  GRAIN  MARKETING. 


cars  scalped  three  times  only,  4  were  thus  scalped  on  the  same  day  '■ 
as  purchased,  all  at  a  profit. 

It  probably  can  not  be  disputed  that  a  scalper  may  under  certain 
conditions  serve  to  support  the  market  for  cash  grain,  but  the  figures 
heretofore  presented  together  with  other  information  and  data  i 
procured  would  indicate  that  in  scalping  operations  in  cash  grain  as  : 
conducted  at  Minneapolis  the  scalper  does  not  always  function 

according  to  the  theory  that  has  been  outlined  in  the  early  part  of  ^ 
this  section.  ^ 

In  the  first  place  the  obtainable  data,  both  statistical  and  other-  \ 
wise,  indicates  that  the  great  field  for  the  cash  scalper  is  a  rising  I 
market  and  that  scalping  operations  decline  pronouncedly  in  a  ! 
stationary  market  and  tend  to  disappear  altogether  in  a  declining  \ 


Secondly,  it  has  been  shown  (1)  that  the  bulk  of  Minneapolis 
scalping  IS  done  upon  a  joint  account  basis;  (2)  that  the  consign¬ 
ments  of  certain  large  scalpers  are  much  more  heavily  scalped  than 
the  consignments  of  other  receivers;  (3)  that  the  two  largest  scalpers 
in  Minneapolis  apparently  scalped  71  and  81  per  cent  respectively  of 
the  cars  consigned  to  the  other  which  they  purchased;  (4)  that  a  sub¬ 
stantial  proportion  of  the  scalped  cars  are  bought  back  by  the 
original  consignees;  (5)  and  that  a  large  proportion  of  the  cars  prof¬ 
itably  scalped  are  bought  and  scalped  one,  two,  or  three  times  on  the 
same  day. 


sc 


The  foregoing  points  would  seem  to  raise  the  question  whether 
alpmg  as  it  has  been  conducted  at  Minneapolis  does  not  result  less 

SPT’VTnO’  m  €»  in  f  Q  i-n  _ * l  •  .  . 


m  servmg  to  maintain  cash  prices  than  in  causing  scalping  commission 

lo  procure  the  best  obtainable  prices  for  consignors. 


While  positive  statements  can  not  be  made  on  this  point,  it  is  believed 
that  the  statistics  presented  point  to  an  affirmative  answer  to  this 

niiAsfinn  •  fhcif  iT-i  - _ i  i  n* 


question;  that  in  some  cases  there  is  collusion  and  logrolling  among 
the  scalping  operators,  who  tip  one  another  off  as  to  good  ‘'buys’' 
on  their  tables  or  those  of  the  firm  employing  them,  or  else  agree  to 

their  em 


buy  back  cam  consigned  to  them  or  their  employing  houses'^which 
be  purchased  by  the  scalpers  of  another  firm;  and  that  there  is 
a  failure  to  realize  the  highest  possible  prices  obtainable  on  the 
floor  at  the  time  of  the  sale,  owing  both  to  a  comparative  lack  of  skill 
in  selling  on  the  part  of  certain  consignees  which  allows  a  scalper 
to  pick  up  cars  at  prices  lower  than  those  being  offered  on  other 
parts  ol  the  floor  at  the  same  time  and  to  the  fact  that  heads  of 
consignee  houses  or  their  salesmen  who  are  scalping  are  more  inter- 

ested  in  possible  scalping  profits  than  in  realizing  the  best  results  for 
their  shippers. 

In  so  lar  as  scalping  may  be  due  to  lack  of  skill  on  the  part  of  the 
consignee  seller,  it  necessarily  implies  that  the  field  for  the  scalper’s 
operations  is  to  be  found  in  this  lack  of  ability  on  the  part  of  the 
consignee  rather  than  in  any  economic  considerations  relating  to  the 
maintenance  of  market  prices  for  the  seller.  Moreo'^er,  there  is 
presumably  no  excuse  for  lack  of  skill  on  the  part  of  the  larger 
scalpers  whose  consigned  grain  is,  as  indicated,  most  heavily  scalped. 


of  futures  St  in  their  general  nature  from  those  of  the  scalper 

The  S  scalar  it  soon  sell  as  purchase, 

stead^nl  m?ces  wS  i  economic  service  in  creating  a  continuous  market  and  in 

from  rSfcline  of  the  ma?kef  '^ho  can  only  profit  from  an  advance  and  not 


2\ 


SCALPING  IN  THE  CASH  MARKETS. 


267 


The  mere  fact  that  an  organization  is  a  large  scalper  would  indicate 
that  it  has  in  its  employ  men  who  are  either  highly  competent  judges 
of  grain  or  who  have  great  familiarity  with  the  requirements  of 
various  buyers  or  both.  The  proper  protection  of  the  interests  of 
the  consignor  ought  to  require  that  the  best  possible  talents  of  a 
commission  house  organization  should  be  employed  for  the  purpose 
of  selling  its  consignments.  Scalping,  however,  affords  an  outside 
profit  over  and  above  the  commission  obtained  by  a  receiver  for 
selling  grain  and  in  addition,  in  the  case  of  a  salaried  employee 
working  on  joint  account  for  such  a  house,  an  extra  source  of  income. 
So  long  as  this  is  the  case  it  certainly  would  not  be  peculiar  if  many 
scalpers  were  somewhat  more  interested  in  the  possibilities  of  extra 
profit  from  such  operations  than  in  procuring  the  best  possible 
prices  obtainable  for  consigned  grain  which  they  are  supposed  to 
sell. 

The  foregoing  propositions  lead  the  Commission  to  the  conclusion 
that  scalping  as  conducted  at  Minneapolis  has  been  to  a  large  degree 
at  the  expense  of  the  consignment  business  and  the  consignors  of 
the  gram  in  at  least  a  considerable  proportion  of  cases.  The  Com¬ 
mission  is  further  of  the  opinion  that  commission  houses  devoting 
their  entire  time  and  attention  solely  to  the  sale  of  grain  should  be 
able  to  absorb  a  very  considerable  proportion  of  the  profits  now 
obtained  by  the  scalpers  and  thus  to  procure  a  higher  price  for  con¬ 
signed  cars  which  are  scalped  than  has  been  obtained  for  such  cars. 
It  may  be  granted  that  the  scalping  of  grain  can  be  theoretically 
justified  on  the  ground  that  otherwise  the  price  realized  might  be 
lower  than  it  is.  On  the  other  hand,  it  is  believed  that  the  actual 
and  potential  results  of  the  practice— collusion,  logrolling,  lack  of 
attention  to  selling  on  the  part  of  consignees,  and  the  great  possi¬ 
bility  that  the  lack  of  skill  of  certain  of  the  latter  may  lead  to  sales 
to  scalpers  when  better  prices  could  be  realized  in  the  absence  of 
such  transactions — all  lead  to  the  conclusion  that  these  factors  more 
than  offset  the  possible  theoretical  considerations  mentioned.  What¬ 
ever  benefits  to  the  market  scalping  may  afford  can  be  obtained 
through  the  purchases  of  scalpers  who  are  not  permitted  to  act  as 
or  for  consignees  or  who  are  not  connected  with  other  grain  concerns 
affiliated  with  such  consignees.  * 

For  these  reasons,  therefore,  the  Commission  concludes  that  cash 
grain  scalping  by  concerns  or  individuals  in  any  way  connected  with 
the  cash  grain  commission  businesss  either  directly  or  indirectly 
should  be  forbidden. 


APPENDIX. 


EXHIBITS. 


Exhibit  A. 

ANALYSIS  OF  THE  FRDS  (FRANK  R.  DURANT  SPECIAL)  ACCOUNT 

1913-1917,  INCLUSIVE. 

[Note.— The  accounts  themselves  are  not  presented  on  account  of  lack  of  space.) 

Mr.  Twining:  All  of  these  items  are  from  the  Frank  R.  Durant  account? 

Mr.  Durant:  Yes. 

Mr.  Twining:  That  is  a  line  elevator  account  purely,  is  it? 

Mr.  Durant:  Why,  yes.  I  would  not  have  thought  of  it  in  that  way  but  I  think 
that  will  cover  it. 

Mr.  Flannery:  That  is  by  a  line  elevator  company  account,  the  money  that  is 
contnbuted  by  the  line  elevator  for  this  legislative  purpose  and  that  is  kept  in  a 
special  account.  ■  ^ 

Mr.  Durant:  Yes. 

Mr.  Flannery:  And  these  expenditures  are  for  that  account  and  for  the  purposes 
named,  as  well  as  you  know?  ^ 

Mr.  Durant:  Yes. 

1913. 

Me.  Twining:  On  March  8,  1913,  there  was  a  payment  of  $40  to  Mr.  D.  H.  Smith? 

Mr.  Durant:  That  was  paid  for  copies  of  the  legislative  journals  and  bills  that 
were  introduced. 

Mr.  Twining:  On  March  10,  there  was  a  payment  of  $1600  to  P.  L.  Howe? 

Mr.  Durant:  I  could  not  say  what  that  was  used  for,  whether  it  was  used  for  similar 
Dakota  or  not.  I  have  every  reason  to  believe  that  it  was. 

Mr.  Twining:  That  is  for  lobbying  in  North  Dakota? 

Mr.  Durant:  Not  lobbying,  no.  For  somebody  that  was  emploved  to  stav  out 
there  and  look  after  legislative  matters. 

Mr.  Flannery:  Was  that  the  president  of - 

Mr.  Durant:  Imperial  Elevator  Company. 

Mr.  Twining;  Mr.  Howe,  you  think,  wasAoing  work  of  that  sort  in  North  Dakota 
being  paid  by  the  line  elevator  companies?  ’ 

Mr.  Durant:  I  think  that  it  was  somebody  else  that  he  had  in  charge  of  it.  In 
days,  that  is,  further  back,  some  of  the  line  elevator  companies  used  to  look 
m  ^  themselves,  but  of  late  years  it  has  been  left  entirely  with  me. 

Mr.  Twining:  You  think  some  one  of  Mr.  Howe’s  emplovees? 

Mr.  Durant:  No. 

Mr.  Twining.  You  think  Mr .  Howe  looked  after  this  work  and  then  you  remunerated 
him  and  you  drew  on  the  other  line  elevator  companies  for  those  sums? 

Mr.  Durant:  Yes. 

March  10,  1913,  there  was  a  payment  of  $40.45  to  P.  L.  Howe 
Will  the  same  explanation  cover  that? 

Mr.  Durant:  In  general,  I  would  say  that  that  was  what  it  was  for,  but,  of  course 
I  can  not  be  positive  of  that. 

Mr.  Twining:  All  of  these  items  are  from  the  Frank  R.  Durant  account? 

Mr.  Durant:  Yes. 

That  is  a  line  elevator  account  purely,  is  it? 

A  ’  .Why,  yes.  I  would  not  have  thought  of  it  in  that  way,  but  I  think 

that  will  cover  it. 

Mr.  Flannery:  That  is  by  a  line  elevator  company  account,  the  money  that  is 
contributed  by  the  line  elevator  for  this  legislative  purpose  and  that  is  kept  in  a 
special  account? 

Mr.  Durant:  Yes. 

268 


EXHIBITS.  269 

Mr.  Flannery:  And  these  expenditures  are  for  that  account  and  for  the  purposes 
named,  as  well  as  you  know? 

Mr.  Durant:  Yes. 

Mr.  Twining:  On  March  13,  1913,  there  was  a  payment  of  $566  to  A.  W.  Campbell? 

Mr.  Durant:  I  don’t  remember  that  name,  at  all. 

Mr.  Twining:  Probably  it  was  for  some  similar  purpose  in  connection  with  legisla¬ 
tion  in  some  similar  state? 

Mr.  Durant:  He  was  sent  to  Pierre  on  some  special  legislation. 

Mr.  Twining:  On  the  same  date  there  was  a  payment  of  $150  to  Mr.  D.  H.  Smith. 
He  was  looking  after  legislation,  too? 

Mr.  Durant:  Yes. 

Mr.  Twining:  Then  these  payments  beginning  on  March  14,  1913,  to  E.  W.  Sarles, 
$366.50? 

Mr.  Durant:  I  can  give  you  the  full  explanation  of  that  if  you  want.  It  will  take 
in  all  of  these  items.  There  was  organized  in  N orth  Dakota  what  was  called  the  N orth 
Dakota  Better  Farming  Association.  Different  industries  were  asked  to  contribute 
so  much  a  year  Avith  a  view  of  employing  an  expert  agricultural  man  or  men  to  assist 
the  farmers  in  improving  their  crops.  The  elevator  companies  agreed  to  give  approx¬ 
imately  $5,000  a  year  for  three  years.  The  payments  were  made  monthly  by  me  to  the 
treasurer  and  collected  by  me  monthly  from  the  elevator  companies  in  proportion  to  the 
number  of  elevators  that  each  company  had  in  the  state  of  North  Dakota. 

Mr.  Flannery:  Did  the  association  pan  out  all  right? 

Mr.  Durant:  Yes,  it  did  very  good  work. 

Mr.  Flannery:  And  finally  was  abandoned? 

Mr.  Durant:  It  was  turned  over  to  the  Agricultural  College.  Mr.  Cooper  was  the 
head  man  and  the  Agricultural  College  wanted  him  and  so  the  Association  disbanded 
and  turned  the  matter  over  to  him. 

Mr.  Flannery:  Do  they  still  keep  up  their  contributions? 

Mr.  Durant:  No.  After  it  was  turned  over  to  the  College  the  State  Appropriation 
took  care  of  it. 

Mr.  Twining:  J ust  there  you  might  make  an  explanation  of  that  item  on  December 
1,  when  that  account  was  closed  and  the  $1,345  balance  was  put  into  the  special 
account. 

Mr.  Durant:  The  Association  made  10  assessments  a  year  on  me  and  for  my  own 
convenience  I  made  12  assessments  a  year  on  the  elevator  companies.  When  the 
Association  was  disbanded  I  was  left  with  $1,345  balance  and  this  amount  was  then 
transferred  to  the  special  account  on  December  1, 1914. 

Mr.  Twining:  On  March  25,  1913,  $500  was  paid  to  J.  J.  Wilson? 

Mr.  Durant:  That  was  South  Dakota  legislation. 

Mr.  Twining:  And  Mr.  Wilson  is  a  local  man? 

Mr.  Durant:  He  is  now  here  in  Minneapolis.  At  that  time  he  was  the  traveling 
representative  of  G.  W.  Van  Dusen  Company. 

Mr.  Twining:  Is  he  still  in  that  capacity? 

Mr.  Durant:  No,  he  is  in  the  office  here,  in  G.  W.  Van  Dusen  Company’s  office. 

Mr.  Twining:  On  April  1, 1913,  there  was  a  payment  of  $536.20  to  the  Atlas  Elevator 
Company. 

Mr.  Durant:  That  was  Mr.  Wilson’s  expenses.  We  assumed  his  expenses  while  he 
was  at  Pierre. 

Mr.  Twining:  And  the  payments  were  made  thru  the  Atlas  Elevator  Company? 

Mr.  Durant:  Yes,  they  paid  his  salary  and  expenses  each  month  and  we  reim¬ 
bursed  them  at  the  end  of  the  session. 

Mr.  Twining:  Then  he  got  about  $1,036.20? 

Mr.  Durant:  I  would  not  say  that. 

Mr.  Twining:  There  is  $1,036.20  that  went  to  him  in  a  week. 

Mr.  Durant:  He  would  have  had  half  of  that  had  he  not  been  out  at  Pierre. 

Mr.  Twining:  Items  run  along  monthly  throughout  all  the  term  covered.  Chamber 
of  Commerce,  $30. 

Mr.  Durant:  That  is  my  floor  privilege. 

Mr.  Twining:  Then,  on  April  14,  a  payment  of  $10  to  W.  F.  Cushing  is  shown. 

Mr.  Durant:  W.  F.  Cushing  was  secretary  of  the  Railroad  Commissioners  of  North 
Dakota  and  at  different  times  I  employed  him  to  furnish  me  with  lists  of  candidates 
for  the  legislature  and  also  lists  of  licensed  elevators  in  the  state  and  that  was  for  a  list 
of  some  Mnd,  I  don’t  remember  just  what. 

Mr.  Twining  On  April  29,  1913,  $37.12  was  paid  to  Winter-Truesdell-Ames  Com¬ 
pany. 

Mr.  Durant:  I  haven’t  any  idea  what  that  was  for. 

Mr.  Twining:  May  10,  1913,  $50  to  Oscar  Arneson. 


56976°— 22 - 19 


270 


TERMINAL  GRAIN  MARKETING. 


Mr.  Durant:  He  was  chief  clerk  of  the  Minnesota  House  of  Representatives  and 
his  work  was  to  send  me  copies  of  these  journals  and  bills. 

Mr.  Twining:  May  19,  1913,  St.  Anthony  &  Dakota  Elevator  Company,  $88.74; 
Imperial  Elevator  Company,  $82.24;  Cargill  Elev.  Company,  $19.  50;  Dodge  Elev. 
Co.,  $85.06;  Northland  Elevator  Co.,  $77.36;  Atlantic  Elev.  Co.,  $43.50;  National 
Elevator  Co.,  $20.06;  May  19,  Farmers  Elevator  Co.,  $16.56,  and  I  think  there  were 
some  others  that  I  did  not  take  down.  There  was  a  note  in  the  corner  of  one  “Credit 
interstation  expense.” 

Mr.  Durant:  I  have  always  been  accused  of  getting  money  from  these  elevator 
companies  and  never  giving  any  back  to  them. 

Mr.  Twining:  The  “interstation  expense”  doesn’t  suggest  anything? 

Mr.  Durant:  These  items  were  paid  to  the  various  companies  due  to  an  error  made 
by  one  of  the  telephone  companies  in  transmitting  a  market  change.  It  was  quite  a 
serious  error  and  the  telephone  company  agreed  to  re-imburse  my  subscribers  for  the 
loss0s  duo  to  tho  orror 

Mr.  Twining:  Then  on  July  16,  $400  to  W.  C.  Gilbreath,  Cornmissioner  of  Agri¬ 
culture  and  Labor,  Bismarck,  N.  D. 

Mr.  Durant:  For  several  years  the  elevator  companies  contributed  yearly  to  the 
exhibition  provided  by  the  Dept,  of  Agriculture  of  the  State  of  North  Dakota  and  this 
amount  was  for  that  purpose. 

Mr.  Twining:  On  September  5,  1913,  St.  Anthony  &  Dakota  Elevator  Co.,  $180. 

Mr.  Durant:  That  can  not  be  that  special  account. 

Mr.  Flannery:  There  was  a  similar  payment  to  the  Monarch  Elevator  Company 
on  September  5. 

Mr.  Durant:  For  several  years  at  stations  where  there  were  more  elevators  than  the 
needs  of  the  station  required  it  was  the  custom  of  the  companies  to  lease  each  other’s 
elevator.  At  one  station  after  arrangements  were  all  supposed  to  have  been  made 
one  of  the  companies  declined  to  enter  into  the  arrangement  and  rather  than  make  the 
statements  out  all  over  again  I  personally  paid  those  two  companies  $180  apiece. 
That  is  the  explanation  of  that  transaction  as  far  as  you  have  it  there.  I  think  you  will 
find  that  is  charged  to  my  personal  account.  I  intimated  to  one  of  those  that  I  had 
paid  the  money  to  that  I  paid  that  out  of  my  own  pocket  and  that  happened  just  as  I 
was  starting  away  on  a  vacation  and  when  I  came  b'ack  from  my  vacation,  I  found  the 
two  checks  for  $180  apiece  on  my  desk. 

Mr.  Flannery:  When  they  decided  there  were  too  many  elevators  at  a  point  they 
leased  them  for  the  purpose  of  closing  them,  didn’t  they? 

Mr.  Durant:  Yes,  keeping  that  particular  house  closed. 

Mr.  Flannery:  And  that  was  a  part  of  your  numerous  duties,  to  look  after  that? 

Mr.  Durant:  Yes. 

Mr.  Flannery:  To  tell  them  when  there  were  too  many  at  a  station? 

Mr.  Durant:  As  a  rule,  they  would  suggest  that  such  and  such  a  station  had  too 
many,  or  one  elevator  company  at  a  certain  station  would  say:  “  I  am  wilfing  to  close 
if  the  other  elevator  companies  want  me  to”.  Then  I  would  make  up  the  scheme 
all  the  way  thru.  The  first  few  years  it  amounted  to  considerable.  It  was  a  saving 
of  overhead  expense  to  the  elevator  companies  and  there  was  still  station  capacity 
and,  as  a  matter  of  fact,  those  elevators  would  be  used,  if  it  was  necessary,  by  the  one 
who  was  leasing  them.  (Of.  Vol.  I,  Chap.  XI,  sec.  18.) 

Mr.  Flannery:  But  as  long  as  one  elevator  or  two  elevators  could  handle  the 
business - 

Mr.  Durant:  It  was  economy  to  close  up.  * 

Mr.  Twining:  On  October  20,  1913,  Cashier’s  check  for  $3600  is  shown. 

Mr.  Durant:  That  was  not  in  that  special  account  either,  was  it? 

Mr.  Twining:  No. 

Mr.  Durant:  That  is  my  own  account.  That  is  charged  to  my  personal  account. 

Mr.  Flannery:  For  your  personal  benefit? 

Mr.  Durant:  Yes,  that  was  my  own  personal  matter. 

Mr.  Flannery:  Here  is  an  interesting  one.  November  3,  1913,  Benjamin  Drake, 
$17. 

Mr.  Durant:  Benjamin  Drake  is  my  attorney,  strange  as  it  may  seem.  I  think 
there  is  $3600  for  some  piece  of  property  that  I  bought  and  the  $17  to  Ben  was  for 
checking  up  the  abstract  and  title,  etc. 

Mr.  Twining:  R.  B.  Pelton,  November  4,  1913,  $135.84;  and  Hartzell  and  Hartzell, 
$242. 

Mr.  Durant:  That  is  my  personal  account. 

Mr.  Twining:  Powers  Elevator  Company  $150  on  December  12,  1913. 

Mr.  Durant:  That  was  for  transcript  of  testimony  taken  in  one  of  those  anti-die- 
crimination  cases. 


EXHIBITS. 


271 


1914. 

Mr.  Twining:  On  March  13,  1914,  $100  was  paid  to  the  Atlas  Elevator  Company. 

Mr.  Durant:  I  made  use  of  one  of  their  men  to  collect  information  on  the  prospec¬ 
tive  candidates  for  the  legislature  and  I  think  that  was  the  payment  for  his  expenses. 

Mr.  Twining:  March  19,  1914,  Security  National  Bank,  $600. 

Mr.  Durant:  That  is  where  I  get  into  the  Grain  Bulletin.  I  took  a  trip  and  went 
east  and  it  cost  me  $600  and  I  charged  the  Grain  Bulletin  with  $500  and  myself  with 
$100. 

Mr.  Twining:  May  20,  G.  C.  Dargis,  $237.88. 

Mr.  Durant:  That  was  personal  in  both  my  case  and  his — taxes. 

Mr.  Twining:  These  payments  on  June  5,  and  12,  1914,  to  G.  C.  Dargis — he  is  an 
employee  in  the  office  here? 

Mr.  Durant:  Yes. 

Mr.  Twining:  Then  on  June  6,  there  is  $500  charged  to  the  FRDS  account  paid  to 
yourself. 

Mr.  Durant:  I  haven’t  any  idea  what  that  was  for.  You  saw  the  check,  did  you? 

Mr.  Twining:  Yes,  on  June  6,  $500  on  the  Security  National  Bank,  check  No. 
7240  S. 

Mr.  Durant:  I  haven’t  any  idea  just  what  that  was  for.  Let  me  see.  That  was  to 
defeat  Mr.  James  Manahan  for  the  office  of  Attorney  General  of  the  State  of  Minnesota. 
That  was  part  of  the  cost.  There  will  be  some  other  fees  come  in  later.  He  went 
out  over  the  State  and  said  he  was  going  to  get  the  Minneapolis  Chamber  of  Commerce 
when  he  was  made  Attorney  General  so  there  is  no  reason  why  we  should  make  any 
bones  about  taking  the  other  side. 

Mr.  Flannery:  They  were  campaign  expense  contributions? 

Mr.  Durant:  Yes. 

Mr.  Twining:  June  10,  1914,  Daily  Market  Record,  $86  (Charged  expenses  $77.25, 
car  service  $4.25  FRDS,  $4.50). 

Mr.  Durant:  The  $4.50  was  for  printing  some  of  those  campaign  documents. 

Mr.  Twining:  June  10,  W.  F.  Cushing,  $20,  was  for  the  same  purpose  as  was 
explained  before? 

Mr.  Durant:  Yes,  in  this  case  I  should  say  it  was  for  lists  of  candidates  for  the 
legislature,  because  of  the  date. 

Mr.  Twining:  June  23,  1914,  $450,  F.  R.  Durant? 

Mr.  Durant:  That  was  personal. 

Mr.  Twining:  October  15,  1914,  G.  C.  Dargis,  $750,  charged  to  the  FRDS  account. 

Mr.  Durant:  That  is  the  second  one  I  haven’t  got  here.  That,  I  am  satisfied, 
was  a  Manahan  campaign  item. 

Mr.  Twining:  That  is,  payment  was  made  to  an  employee  here  in  the  office? 

Mr.  Durant:  He  just  simply  got  the  money  from  the  bank  for  me,  that  was  all. 
Having  such  a  large  amount  I  did  not  want  to  make  the  check  out  to  cash  so  I  made 
it  out  to  him. 

Mr.  Twining:  Then  on  November  2,  1914,  Van  Dusen  Harrington  Company,  FRDS 

$100. 

Mr.  Durant:  I  could  not  say  just  exactly  what  that  was;  apparently  campaign 
expenses. 

Mr.  Twining:  Dargis,  again,  November  5,  $300. 

Mr.  Durant:  That  would  be  the  same  as  November  2. 

Mr.  Twining:  December  1,  Grain  Bulletin  Guarantors’  Fund  account  closed,  and 
$2842.53  balance  put  into  profit  and  loss  account.  Will  you  explain  that. 

Mr.  Durant:  I  had  been  carrying  on  the  books  a  credit  to  the  original  organizers 
of  the  Grain  Bulletin.  Many  changes  had  been  made  in  the  companies,  some  of  them 
having  gone  out  of  business  and,  as  the  original  amoimt  contributed  was  small  and  it 
had  been  increased  by  profits  for  several  years  and  interest  on  the  money,  I  finally 
decided  to  close  that  account  and  put  the  balance  into  the  profit  and  losses. 

Mr.  Flannery:  Close  it  by  refundiiig  to  the  original  men? 

Mr.  Durant:  Closing  it  by  putting  it  into  profit  and  loss. 

Mr.  Twining:  On  that  same  date  you  transferred  $600  from  Profit  and  loss  to  your 
own  account. 

Mr.  Durant:  As  additional  compensation  for  the  year. 

Mr.  Twining:  December  30,  1914  G.  C.  Dargis,  $400,  again,  FRDS. 

Mr.  Durant:  That  probably  was  campaign  funds  but  it  was  after  the  campaign 
was  over,  but  it  may  have  been  the  tail  end  of  it.  , 

Mr.  Twining:  That  is,  you  just  drew  the  check  to  his  account  to  avoid  making  out 
a  cashier’s  check,  thhaking  it  would  make  a  better  record  that  way? 


272 


TERMINAL  GRAIN  MARKETING. 


Mr.  Durant:  No,  I  presume  that  I  was  told  that  $400  additional  was  needed  and  I 
simply  drew  the  check  and  gave  it  to  whoever  asked  for  it. 

Mr.  Twining:  Why  did  you  draw  it  to  Dargis’  account? 

Mr.  Durant:  He  is  an  employee  in  the  office  and  I  sent  him  up  to  the  bank  for  the 
money  and,  rather  than  make  it  out  to  cash  when  it  is  for  a  large  amount,  I  make  it  to 
his  order.  Then  I  have  an  endorsement  on  it. 

1915. 

Mr.  Twining:  February  9,  1915,  American  Typewriter  Sales  Company,  $60  FRDS. 

Mr.  Durant:  I  bought  that  typewriter  for  one  of  the  boys  here  in  the  office  to 
keep  at  home  to  do  any  extra  work  that  was  necessary  to  be  done  for  the  Grain  Bulle¬ 
tin  or  the  Elevator  companies. 

Mr.  Twining:  March,  4,  1915,  W.  H.  Bailey,  $62.40. 

Mr.  Durant:  He  was  D.  H.  Smith’s  successor  at  Pierre. 

Mr.  Twining:  March  12,  1915,  W.  D.  Austin,  $40. 

Mr.  Durant:  This  is  a  similar  case  to  the  North  Dakota  case  at, Bismarck;  fur¬ 
nishing  copies  of  the  journals  and  bills. 

Mr.  Twining:  March  16,  1915,  Atlas  Elevator  Company,  $150.  (A.  G.  Moritz, 
employee  of  V.  D.  H.  Co.,  kept  at  Pierre  during  legislative  session,  in  interests  of 
line  elevator  companies.  Salary  paid  by  V.  D.  H.,  and  Durant  paid  them  for  his 
time.) 

(The  question  explains  itself.) 

Mr.  Twining:  March  17,  Cashier’s  check  $700  order  of  Mr.  Durant  on  the  next 
item,  Wilson  and  Moritz,  is  the  same,  paid  to  Wilson  and  Moritz,  for  services  during 
legislative  session. 

Mr.  Twining:  March  17,  1915,  C.  J.  Mortieau,  Helena,  Mont.,  $47. 

Mr.  Durant:  That  was  a  similar  case  at  Helena,  Monta.,  that  was  for  legislation. 

Mr.  Twining:  Mr.  Frank  A.  Cousins,  $391.25,  FRDS.  (Employee  of  Occident 
Elevator  Co. ,  kept  at  Bismarck  during  legislative  session. ) 

Mr.  Durant:  That  was  for  special  expenses  at  Bismarck  during  the- session  of  the 
legislature. 

Mr.  Twining:  He  is  an  employee  of  the  Occident  Elevator  Company? 

Mr.  Durant:  He  was  at  that  time. 

Mr.  Twining:  On  March  22,  Occident  Elevator  Company,  $100. 

Mr.  Durant:  That  was  additional  for  F.  A.  Cousins. 

Mr.  Twining:  May  25,  1915,  F.  H.  ElHs,  $200. 

Mr.  Durant:  There  is  a  counter  entry  for  that.  I  never  knew  why  but  the  Impe¬ 
rial  Elevator  brought  me  a  check  for  $200  and  asked  me  to  give  a  check  to  F.  H.  Ellis, 
one  of  their  employees,  for  a  similar  amount. 

Mr.  Twining:  August  14,  G.  F.  Ewe,  $44.18. 

Mr.  Durant:  That  was  an  item  of  expense  incurred  by  Mr.  Ewe  going  to  Duluth 
on  some  matter  which  was  of  interest  to  all  the  elevator  companies.  I  don’t  remember 
just  what  the  matter  was. 

Mr.  Twining:  On  November  1,  1915,  there  was  a  payment  of  $50  to  J.  F. 
McKenney. 

Mr.  Durant:  J.  F.  McKenney  is  an  employee  of  mine  and  he  did  some  special 
work  for  the  elevator  companies  in  relation  to  bad  order  cars  which  I  thought  ought 
to  be  borne  by  all  the  elevator  companies  and  put  into  this  account. 

Mr.  Twining:  November  2,  S.  W.  Clark,  $50. 

Mr.  Durant:  That  was  attorney’s  advice  for  an  opinion  on  some  South  Dakota 
law. 

Mr.  Twining:  November  17,  Victoria  Elevator  Co.,  $265. 

Mr.  Durant:  That  was  for  a  transcript  of  evidence  taken  on  the  anti-discrimination 
case  here  in  North  Dakota. 

Mr.  Twining:  November  20,  1915,  Spaulding  Elevator  Co.,  $25.20. 

Mr.  Durant:  I  think  that  was  telephone  and  telegraph.  You  will  find  there  is  a 
check  every  month  to  them. 

Mr.  Twining:  On  December  2,  S.  W.  Clark,  $348.77. 

Mr.  Durant:  He  was  an  attorney  employed  by  the  elevator  companies  on  one  of 
these  anti-discrimination  cases  in  South  Dakota.  I  think  the  case  was  tried  at  Mil- 
bank,  S.  D. 

Mr.  Flannery:  Anti-discrimination  against  the  elevators? 

Mr.  Durant:  Yes,  you  remember,  all  of  these  states  have  a  law  requiring  them  to 
pay  the  same  price  at  each  station,  freight  rate  considered. 

Mr.  Flannery:  They  never  enforced  that? 

Mr.  Durant:  They  never  got  any  further  than  the  justice  courts  with  it. 


EXHIBITS. 


273 


Mr.  Twining:  December  7,  1915,  F.  C.  Riebe,  $16.80. 

Mr.  Durant:  That  was  for  transcript  of  testimony  taken  at  another  of  those  dis¬ 
crimination  cases. 

Mr.  Twining:  He  is  connected  with  the  Atlantic  Elevator  Company? 

Mr.  Durant:  Yes,  they  were  cited  to  appear  up  at  Bisbee. 

1916. 

Mr.  Twining:  May  2,  1916,  Wm.  Wallace,  $45.25. 

Mr.  Durant:  That  was  for  transcript  of  the  evidence  taken  in  a  bankruptcy  case 
at  Aberdeen,  S.  D. 

Mr.  Twining:  For  the  elevator  companies? 

Mr.  Durant:  I  think  that  was  obtained  for  the  President  of  the  Railroad  Commis¬ 
sioners  of  North  Dakota  on  his  request.  They  had  some  matter  up  before  them 
which  was  of  a  similar  nature  and  the  president  wrote  me  and  asked  me  if  we  could 
obtain  that  testimony  for  him  and  I  did,  and  to  be  good  fellows,  we  paid  for  it  and 
sent  it  to  him.  I  am  quite  sure  that  is  what  that  item  is. 

Mr.  Twining:  On  June  13, 1916,  a  payment  of  $500  was  made  to  G.  C.  Dargis,  FRDS. 

Mr.  Durant:  We  are  getting  into  campaign  time  again.  That  is  probably  what 
that  was. 

Mr.  Twining:  This  may  have  been  my  inability  to  see  correctly  but  from  February 
to  June,  for  instance,  for  a  long  time,  I  was  not  able  to  find  checks.  There  would  be 
$100  drawn  on  the  FRDS  account  for  which  I  could  not  find  any  check  and  they 
come  contemporaneous  with  checks  to  G.  C.  Dargis  for  $50. 

Mr.  Durant:  In  making  up  the  check  for  currency  for  the  pay  roll  I  would  add 
$100  for  use  on  the  campaign  fund  from  week  to  week  and  it  would  be — the  currency 
would  be  brought  down  to  me.  There  are  a  number  of  those  items  you  will  find  from 
the  12th  of  May  to  the  30th  of  June. 

Mr.  Twining:  October  25,  $250. 

Mr.  Durant:  That  was  to  get  money  at  hand  to  be  paid  on  small  amounts  on  cam¬ 
paign  expenses. 

Mr.  Twining:  August  22,  Cashier’s  check  to  George  J.  Smith  for  $1,000. 

Mr.  Durant:  That  was  a  campaign  fund  in  North  Dakota. 

Mr.  Twining:  Mr.  Smith  was  assisting  the  line  elevators  companies  in  a  campaign 
there? 

Mr.  Durant:  Yes,  assisting  the  grain  trade. 

Mr.  Twining:  He  was  editor  of  a  paper  up  there  at  that  time? 

Mr.  Flannery:  Was  that  amount  paid  for  articles  written  or  what? 

Mr.  Durant:  I  think  he  was  making  speeches  around  the  country,  more  par¬ 
ticularly,  as  far  as  I  know.  I  didn’t  have  any  communications  with  Smith  myself 
at  all,  I  don’t  know.  There  is  another  check  later  on  for  him,  I  think,  too. 

Mr.  Twining:  Smith  had  been  an  Equity  supporter  until  just  about  that  time 
when  he  switched  over  to  attack  the  Equity.  Do  you  know  if  this  was  in  that  con¬ 
nection,  thatis ,  for  services? 

Mr.  Durant:  I  don’t  think  it  was  so  much  against  the  Equity  as  it  was  the  Non 
Partisan  League.  That  was  just  about  the  time  that  they  were  organizing. 

Mr.  Flannery  :  Is  that  the  paper  that  retained  the  legend  on  it  after  it  had  switched 
over.  You  know  there  was  one  of  those  papers  that  had  a  legend  on  it  “Official 
Organ  of  the  Equity”.  I  don’t  kno.v  whether  this  was  the  one  or  not,  but  after  a 
certain  sum  was  paid,  why,  they  turned  against  the  Equity,  that  is,  their  policy  was 
against  the  Equity,  but  they  still  retained  that  legend.  Isn’t  that  right? 

Mr.  Twining:  Yes,  I  don’t  remember  whether  that  was  Smith’s  papers,  or  not. 

Mr.  Flannery:  Was  this  at  Plaza? 

Mr.  Durant:  Plaza  was  where  he  lived.  I  presume  I  have  seen  some  of  his  papers 
but  I  don’t  remember  enough  about  them  to  know  about  it.  It  is  my  recollection 
that  he  was  more  against  the  Non  Partisan  League  at  this  time  than  he  was  against 
the  Equity. 

Mr.  Twining:  On  August  28,  Monarch  Elevator  Company  was  paid  $26.16. 

Mr.  Durant:  That  was  an  expense  on  an  elevator  which  is  held  in  my  name  by 
three  of  the  elevator  companies.  It  is  taxes  and  other  items  of  expense.  You  will 
find  a  number  of  those  items  as  we  go  along,  of  that  money.  Of  course,  I  am  reim¬ 
bursed  by  those  three  companies,  not  by  all  of  the  companies. 

Mr.  Flannery:  That  one  elevator  is  held  by  three  line  elevator  companies? 

Mr.  Durant:  Yes,  not  in  use.  It  is  one  of  those  stations  where  there  is  an  over 
plus  of  elevators  and  this  elevator  company  wanted  to  get  out  and,  of  course,  they  did 
not  want  a  fourth  company  to  come  in  there  and  do  business  and  the  three  companies 
combined  and  bought  the  elevator  and  put  it  in  my  name  to  hold  until  it  can  be 
wrecked.  Probably  that  is  what  will  be  done  with  it. 


274 


TERMINAL  GRAIN  MARKETING. 


Mr.  Flannery:  Where  is  that  located? 

Mr.  Durant:  At  Wolford,  N.  D. 

Mr.  Twining:  On  October  11,  Watson  and  Young  were  paid  $2193.47. 

Mr.  Durant:  That  was  attorneys’  fees  for  contesting  the  law  in  North  Dakota 
placing  a  tax  on  the  sites  upon  which  elevators  are  built  on  a  railroad  right  of  way 

Mr.  Flannery:  Kind  of  a  joint  action? 

Mr.  Durant:  Yes. 

Mr.  Flannery:  In  other  words,  the  tax  was  thought  to  be  excessive,  or  something: 
of  that  kind?  ^ 

Mr.  Durant:  Double  taxation. 

Mr.  Flannery:  And  against  the  interests  of  the  line  elevator  companies 

Mr.  Durant:  Yes,  all  the  companies. 

Mr.  Twining:  On  October  25,  cash  $215. 

Mr.  Durant:  I  could  not  say  what  that  was  used  for,  or  the  next  item  on  the  31st 
of  $200. 

Mr.  Twining:  There  is  a  notation  in  the  comer  of  that  check  ‘‘Great  Falls.” 

Mr.  Durant:  Then  I  know.  That  was  a  trip  which  I  made  to  Great  Falls  to 
inaugurate  the  Grain  Bulletin  in  the  State  of  Montana. 

Mr.  Twining:  And  the  line  eleva,tor  companies  here  paid  for  that  trip? 

Mr.  Durant:  Yes. 

Mr.  Twining:  On  December  4,  H.  N.  Stockett,  Sec’y.,  $159.32. 

Mr.  Durant:  He  is  the  man  that  has  charge  of  the  cars  (cards)  out  at  Great  Falls, 
Montana,  that  is  salary  and  expense. 

Mr.  Twining:  Then  on  December  9,  Cooperative  Manager  &  Farmer,  $12.70. 

Mr.  Durant.  That  must  have  been  an  expense  item.  That  was  just  for  printing: 
some  supplies  for  us. 

1917. 

Mr.  Twining:  February  14,  Van  Dusan  Harrington  Company,  $100. 

Mr,  Durant.  That  was  logislativ©  GxpGnsG.  You  undGrstand  whGn  a  chGck  is 
nmde  out  to  V an  Dusen  Harrington  i  t  is  simply  that  I  know  I  can  get  it  cashed  in  their 
office.  I  make  the  check  out  to  them  and  go  down  to  their  office  and  get  the  cssh 
They  have  nothing  to  do  with  the  check. 

Mr.  Flannery:  Just  the  same  as  if  I  asked  you  to  cash  my  salary  check 

Mr.  Durant:  Yes. 

Mr.  Twining.  Then  it  is  only  in  exceptional  cases  that  the  checks  are  issued  to 
them  for  the  services  of  their  employees. 

Mr.  Durant:  Yes,  and  wherever  it  has  been,  I  have  told  you. 

Mr.  Twining.  Then  these  other  checks  made  out  to  Van  Dusen  Harrington  are 
just  for  the  money?  They  are  charged  to  the  FEDS  account  but  they  are  for  some 
pumose  in  connection  with  the  line  elevator  companies? 

Mr.  Durant:  Yes,  but  I  don’t  remember  just  what  they  are  issued  for. 

Mr.  Twining:  All  those  items  for  Mortieau,  Bailey  &  Austin  are  for  furnishing 
documents  in  connection  with  legislation? 

Mr.  Durant:  Yes,  at  Helena,  Pierre  and  Bismarck. 

Mr.  Twining:  Then  on  March  9,  the  pay  roll  was  three  times  the  usual  size 

Mr.  Durant:  $200  was  charged  to  the  FEDS  account. 

Mr.  Twining:  That  was  for  the  services  of  your  employees  in  connection  with  the 
line  elevator  companies  interests? 

Mr.  Durant:  No,  thatis  just  as  I  explained  to  you  on  those  $100  checks.  I  got  the 
currency  to  have  in  the  office  to  use  in  small  amounts. 

Mr.  Twining:  For  line  elevator  companies’  interests? 

Mr.  Durant:  Yes. 

Mr.  Twining:  Then  on  March  19,  National  Elevator  Company,  $144.38. 

Mr.  Durant:  That  was  insurance  on  the  elevator  at  Wolford 

26,  [Judge]  N.  C.' Young,  is  explained. 
(Mr.  1  Wining  then  read  the  explanation  which  appears  on  sheet  7  of  the  amounts 
listed  about  which  Mr.  Durant  was  questioned.) 

Mr.  Durant:  If  you  want  any  further  explanation  I  think  you  can  safely  spy 
it  was  used  in  the  campaign  against  the  Non  partisan  League.  I  have  no  doubt  but 
that  IS  what  it  was  used  for. 

Mr.  Twining:  April  11,  Van  Dusen  Harrington  Company,  $100.  That  is  again 
for  cash?  ^ »  e, 

Mr.  Durant:  That  may  have  been  a  case  of  where  I  got  $100  from  them  for  mvself 

Mr.  Twining:  April  12,  Cashier’s  check  Geo.  J.  Smith,  $500. 

Mr.  Durant:  That  is  that  other  $500  that  I  told  you  would  appear  later. 


EXHIBITS. 


275 


Mr.  Twining:  Mr.  Smith  was  writing  too,  if  I  remember  correctly,  from  the  corre¬ 
spondence.  He  was  conducting  a  campaign  in  his  papers  in  behalf  of  elevator  inter¬ 
ests,  wasn’t  he? 

Mr.  Durant:  That  is  possible,  yes.  As  I  say,  I  didn’t  see  his  papers,  I  don’t  know. 

Mr.  Flannery:  Northwestern  Grain  Dealers  Association,  $528.03,  April  16th. 

^Ir.  Durant:  That  is  not  in  the  special  account.  That  is  this  H.  N.  Stockett’s 
salary  and  the  telegraph  bills.  He  paid  the  telegraph  bills  out  there  and  I  remitted 
to  him  in  total  and  then  prorated  it  among  the  subscribers. 

Mr.  Twining:  May  9,  FRDS  Cash  $300. 

Mr.  Durant:  I  don’t  know  what  that  was  for.  It  is  probably  some  campaign  fund 
because  we  are  coming  now  into  the  time  of  the  primaries  again. 

Mr.  Twining:  June  6,  1917,  Van  Dusen  Harrington  Co.,  $400  FRDS. 

Mr.  Durant:  That  was  cash  that  I  obtained  from  them  for  similar  purposes. 

Mr.  Twining:  June  20,  Cashier’s  check  to  W.  F.  Cushing,  $300. 

Mr.  Durant:  Well,  sir,  I  never  did  know  what  that  was  for.  Mr.  Cushing  is  now, 
he  is  the  same  Cushing  who  was  at  one  time  Secretary  of  the  Railroad  Commissioners 
of  North  Dakota.  At  present  he  is  a  publisher  of  a  newspaper  in  Fargo,  and  just 
why  that  money  was  given  to  him — I  beheve  I  do  know.  The  Non-partisan  League 
had  published  throughout  the  State  of  North  Dakota  erroneous  statements  in  regard 
to  the  cutoffs  of  certain  elevator  companies,  making  it  appear  that  these  elevators 
showed  an  over  run  of  thousands  of  bushels  each  year.  The  statements  were  alto¬ 
gether  false  and  were  arrived  at  by  omitting  from  the  reports  the  amount  of  grain 
held  in  the  elevators  for  the  accounts  of  various  farmers  for  which  storage  tickets 
were  outstanding.  Due  to  Mr.  Cushing’s  familiarity  with  the  grain  interests  in  that 
state,  he  was  asked  to  go  to  Bismarck  and  see  the  actual  reports  on  file  there  and  make 
correct  comments  in  his  pubhcation. 

Mr.  Twining:  G.  W.  Van  Dusen  Company,  $75  on  July  25th. 

Mr.  Durant:  That  is  a  similar  item.  I  don’t  know  just  what  it  was  for.  I  got  the 
cash  from  them. 

Mr.  Twining:  July  27,  Watson  &  Young,  $235. 

Mr.  Durant:  Messrs.  Watson  &  Young  were  asked  to  write  an  opinion  on  the  Grain 
Grading  Act  passed  by  the  North  Dakota  Legislature  at  the  1917  Session,  and  this 
$235  was  their  fee. 

Mr.  Twining:  These  items  run  along:  here  is  First  and  Security  National  Bank, 
$127.46,  and  are  for  rental  of  this  office,  are  they? 

Mr.  Durant:  Yes. 

Mr.  Twining:  August  22,  Cashier’s  check,  M.  C.  Gaulke,  $200. 

Mr.  Durant:  After  the  opinion  in  regard  to  the  North  Dakota  Grain  Grading  Act 
had  been  obtained  the  Farmers’  Grain  Dealers’  Association  of  North  Dakota  under¬ 
took  to  make  a  test  case  of  the  law  and  M.  C.  Gaulke  was  Secretary  of  this  Associa¬ 
tion  and  proceedings  were  taken  against  him  to  enforce  the  law.  The  line  elevator 
companies  contributed  part  of  the  cost  of  maintaining  this  action.  I  might  say  that 
the  above  applies  also  to  the  item  of  $325  to  M.  C.  Gaulke  on  September  14th. 

Mr.  Twining:  He  lives  at  Thompson,  N.  D.? 

Mr.  Durant:  Thompson,  N.  D.,  yes. 

Mr.  Twining:  August  30,  1917,  Van  Dusen  Harrington  Company,  $100.  Those 
items  run  along  about  every  month. 

Mr.  Durant:  You  will  find  they  stop  right  there.  That  was  a  wind  up  on  the 
legislative  expense  of  the  1917  legislature. 

Mr.  Twining:  November  23,  Pubhcity  Corporation,  $100. 

Mr.  Durant:  That  is  this  Federal  Trade  information  service  at  Washington.  It 
is  a  very  interesting  service.  They  give  all  the  Washington  news  every  day. 

Mr.  Flannery:  Do  you  get  the  bills  through  them? 

Mr.  Durant:  I  get  any  particular  bills  or  Interstate  Commerce  Commission  deci¬ 
sion,  or  Treasurer’s  decision,  or  Supreme  Court  decisions  I  want  instead  of  bothering 
the  Senators  for  them.  I  thought  it  was  worth  the  $100. 

1918. 

Mr.  Twining:  These  items  to  J.  R.  McMillan  and  C.  N.  Magnuson,  are  personal 

items?  .  ,  ,  , 

Mr.  Durant:  No,  Mr.  Magnuson  and  Mr.  McMillan  made  a  trip  to  New  York  to 
visit  Jules  Barnes  on  a  matter  of  vital  interest  to  the  grain  trade  in  the  Northwest 
and  they  thought  that  all  the  companies  should  share  in  their  expenses.  , 


APPENDIX  TABLES 


Table  1, — Representation  of  cash  commission  merchants  on  specified  exchanges,  1918. 


Exchanges. 

Total 
resident 
member¬ 
ship.  1 

Exclusively  cash 
commission. 

Primarily  cash 
commission. 

Secondarily  cash 
commission. 

Number. 

Per  cent. 

Number. 

Per  cent. 

Number. 

Per  cent. 

Chicago . 

1,000 

15 

1.5 

no 

11.0 

320 

32.0 

Milwa'ukee . 

182 

8 

4.0 

48 

26.0 

32 

17.0 

Miimeapolis . 

464 

0 

.0 

157 

34.0 

112 

24.0 

Duluth . 

126 

1 

1.0 

69 

55.0 

12 

9.0 

Kansas  City . 

169 

4 

2.4 

74 

44.0 

56 

33.0 

St.  Louis . 

389 

40 

10.3 

109 

28.0 

24 

6.0 

Omaha . 

141 

22 

16.0 

34 

24.0 

60 

43.0 

Peoria . 

79 

14 

17.0 

30 

38.0 

10 

13.0 

Indianapolis . 

84 

6 

7.0 

17 

20.0 

18 

21.0 

Louisville . 

68 

0 

0 

2 

3.  0 

3 

4  0 

Cincinnati . 

102 

37 

36.0 

11 

11.0 

20 

20.0 

Toledo . 

24 

0 

0 

6 

25.0 

4 

17.0 

2, 828 

147 

5.0 

667 

24.0 

671 

24.0 

I  Excluding  those  not  in  the  grain  business. 


Table  2. — Methods  of  obtaining  grain^  at  specified  markets,  1913-1917. 


Primary  markets. 


Chicago . . 

Milwaukee.. 

Duluth . 

Minneapolis . 

Omaha . 

Kansas  City 

St.  Louis _ 

Peoria . 

Indianapolis. 
Cincinnati. . . 


Cars  re¬ 
ported 
(for  this 
test). 

Received 
on  con¬ 
sign¬ 
ment.  2 

Received 
on  direct 
pur¬ 
chases. 

Received 
by  the 
head  of¬ 
fice  ofline 
eleva,tor 
com¬ 
panies. 

Total. 

558, 797 
174, 932 
37,283 

Per  cent. 

57.4 

82.5 
68.0 

Per  cent. 
42.6 
17.5 
32.0 

Per  cent. 

Per  cent. 
100 
100 
100 

626, 327 

65.3 

7.0 

‘Pl.l 

100 

227, 579 

57.5 

42.5 

100 

164,  711 

67.7 

32.3 

100 

219,  671 

56.0 

44.0 

100 

91,  983 

50.4 

49.6 

100 

73,994 

47.8 

52.2 

100 

54,093 

66.1 

33.9 

100 

1  Combined  figur  es  for  wheat,  corn,  oats,  barley,  and  rye. 

2  Analysis  of  carsreceivedfrom  country  points  only  shows  higher  percentages  in  favor  of  the  consignment 
basmess  than  j^s  indicated  by  the  table  above,  viz,  Miimeapolis,  91.38;  Duluth,  90.60;  Milwaukee,  90.13; 
Kan^sCity,  80.65;  St.  Louis,  77.73;  Chicago,  77.33;  Omaha,  71.09;  Cincirmati,  69.24;  Indianapolis,  57.71;  and 
Peoria,  53.54.  (See  V olume  1,  Table  49. )  The  differences  in  the  figures  are  probably  due  to  the  fact  that 
the  foregoing  table  is  based  upon  reports  made  by  terminal  market  concerns  and  presumably  includes 
grain  other  than  that  obtained  from  the  country;  in  other  words,  bought  at  other  markets.  The  figures 
in  this  note  are  probably  more  correct  for  country  shipments  therefore. 


276 


APPENDIX  TABLES 


277 


Table  3. — HigTi,  low,  and  average  stocks  of  the  five  grains  combined,  in  terms  of  ratios 
to  the  rated  elevator  capacity  ^  of  each  market,  at  15  specified  terminal  points  for  the  2-year 
period  1919-20. 


Market. 

Elevator 

capacity. 

Ratio  of  high  stocks  to 
capacity.  2 

Ratio  of  low  stocks  to 
capacity. 

Ratio  of 
average 
stocks  to 
capacity. 

Percent. 

Date. 

Percent. 

Date. 

INTERIOR  POINTS. 

Minneapolis . 

42,775,000 

71.8 

Feb.  1,1919 

2.8 

Aug. 

21, 1920 

33.5 

Chicago . 

42,783,600 

72.8 

Feb.  22,1919 

9.2 

Jan. 

3, 1920 

39.7 

Duluth . 

35,850,000 

83.3 

Mar.  15,1919 

1.1 

Aug. 

28, 1920 

23.9 

Buffalo . 

24,933,000 

78.0 

Nov.  8,1919 

4.2 

Aug. 

2i;  1920 

39.8 

Kansas  City . 

21,902,000 

94.5 

Oct.  25,1919 

6.6 

July 

5, 1919 

39.6 

Omaha . 

9,085,000 

73.3 

Oct.  18,1919 

9.9 

July 

24;  1920 

38.8 

Milwaukee . 

7, 173, 000 

129.7 

Feb.  8, 1919 

8.4 

Aug. 

21;  1920 

49.3 

St.  Louis . 

5,355,000 

72.2 

Sept.  6,1919 

7.7 

May 

31, 1919 

32.9 

Peoria . 

2, 130,000 

30.5 

Sept.  25, 1920 

1.7 

May 

24, 1919 

16.2 

Indianapolis . 

945,000 

222.4 

Nov.  6,1920 

42.0 

July 

3, 1920 

99.0 

SEABOARD  POINTS. 

Baltimore . 

9,752,000 

53.8 

Sept.  11,1920 

10.7 

Jan. 

10, 1920 

38.5 

New  Orleans . 

7,572,000 

84.9 

Nov.  8,1919 

27.1 

May 

15',  1920 

53.9 

New  York . 

3  6, 732, 000 

151.1 

Mar.  29,1919 

9.7 

May 

8;  1920 

76.9 

Philadelphia . 

4,250,000 

83.6 

June  19, 1920 

18.1 

Jan. 

24',  1920 

52.9 

Galveston . 

3, 100,000 

156.2 

May  29,1920 

13.3 

July 

19;  1919 

76.2 

1  Excluding  the  elevator  capacity  of  millers,  converters,  etc.  For  detailed  figures  of  stocks  and 
capacities  see  Tables  5  and  11. 

2  The  stocks  at  Milwaukee,  St.  Louis,  Indianapolis,  New  York,  and  Galveston  were  overstated,  in  that 
str«ks  not  in  commercial  elevators  wore  included.  At  present  there  seems  to  be  no  data  available  for 
adjusting  the  figi.ires.  The  ratios  of  stocks  to  capacity  are  therefore  maximum  figures 

2  Warehouse  capacity  of  570  tons  not  considered. 


Table  4. — Average  combined  stocks  in  elevators'^  at  15  terminal  points  for  each  of  the 
5  grains  and  for  all  grains  combined,  and  ratio  of  combined  stocks  of  all  grains  to  aggre¬ 
gate  storage  capacity,  by  6-month  periods,  1919-20. 


Period. 

Average  stocks  (M  bushels). 

Ratio  of 
average 
combined 
stocks  to 
aggregate 
storage 
capacity. 

Wheat. 

Com. 

Oats. 

Rye. 

Barley. 

All 

grains. 

January-June,  1919 . 

July-December,  1919 . 

January-June,  1920 . 

July-December,  1920 . 

Two-year  average . 

Percentage  distribution. . . 

69, 152 
61, 422 
45, 726 
25, 808 

3,580 

2,064 

4,092 

5,754 

20,135 
17,558 
8,926 
19, 795 

14,215 
13,020 
14,263 
2, 829 

9,860 

5,264 

3,251 

3,089 

116,942 
99,328 
76, 258 
57, 275 

51.0 

43.3 

33.3 
25.0 

50,527 

3, 873 

16,604 

11,082 

5,366 

87,451 

38.1 

58 

4 

19 

13 

6 

100 

1  See  footnotes  1  to  3,  preceding  table. 


Table  b.— Grain  stocks  (M  husheh)  at  15  specified  terminal  points,^  by  six-month  periods,  January,  1919-December,  1920. 


278 


TERMINAL  GRAIN  MARKETING. 


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APPENDIX  TABLES 


279 


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Table  b.— Grain  stocks  {M  bushels)  at  15  specified  terminal  points,  by  six-month  periods,  January,  1919-December,  1920— Gontmued. 


280 


TERMINAL  GRAIN  MARKETING. 


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APPENDIX  TABLES 


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O  <N  05 
CO  (M  O 


CO  1 


05  tH 

t/  ® 


00  40 
05  1-1  O 


00 

i-H 

^-s 

d  ® 

1-5 


to  tc  00 

O  4jO 
CO  1-H 


00 
•  O) 


00  rH 

So 

CO  CO 


05 
tH  ^ 

A  c 
®  a 

ptH<j 


O  CO  ^ 
05  CO  ^ 
05  CO  40 


2S 

(N  <N 
^  3 


1— 1 1^ 

05  ^ 

40  1-H  CO 

'rjT  (N' 


o 

d 

d 


CO  CO  05 


CO  ^  CO 
t>-  1-H  40 


^H 
40  1-H 


Tt< 

CO 


1-H  40 


.  <1> 

^  >“-5 


CO  <M  05 
to  »0  05 
CO  O  00 

c^i-T-^ 


05 

I  05  CO 
05  1-H 


CO 


M  ?5 

Us? 
®  5 
02  <) 


.  (B 

;  cl 
:  1:3  . 

M  .(N 
’-'  00 

i 


05  tH 

o 


(X)(N 

05 


<N 

<N 


to 


CO 


d  ® 

HjOQ 


I  05 
<M  1-H 

-s « 

O 


1-H  to  40 
05  CO  CO 
(M  rH 


00 

CO  (N 
CO 


rH  to 


d 


05 


00  00 
00  CO 

oi  40 


CO  rji 
O  00 


00 

(N 


g  ^ 


.  fO 

ft!=! 


lO^OO 

05  Tt<  tH 
CO  1-H  C^ 


h*  CO  CO 
00  O  1-H 
1-H  CO 


00 


(N 


>  >> 
O'd 


CO 

co^ 

.  <D 

^  s 

c3  d 

}— 5  1-^ 


OI  CO  00 
(N  O  05 
CO  00 

trT  c^ 


o 

(N  TJ4 
CO 

CO 


05 

05 


■  o 


I  C2 

:S 

?S 

tf  05 

So 

>  '=> 


.  ® 
•  a 

;  S 
.  ft 


•J-2 


43  fe. 
be  f 
"  O 


®  . 

05  >5 
> 


05  05  40 


CO  05  rH 

CO  <M 


CO 


00  05 1-H 
05  to 
O  00  05 

CO'  i-h' 


1-H  1-H  t-- 
CO 


o  ^ 

CO 

o'd 


COi 


t  CO 
CO 


CO 


>>> 


05  O 
1-H  CO  t> 
Tt<  CO 


r>.  O 

t>>> 

IS 


1-H  CO  '';f< 
rH  rH 

CO  tH  CO 


>  >> 


40  <N 
05  05  00 
rH  00 


»d 
bjog 
:3  o 


H  /-tn  &-»rTi  3  05 

g’ 


.  ^ 

:Z 

j  i 

“I 

<-•  Q 
®  ^ 
>  o. 


te 
M  g 
‘  O 


1=1 

05 

ft 


>405 

3 


>^05 


Table  h.— Grain  stocks  {M  bushels)  at  15  specified  terminal  points,  by  six-month  periods,  January,  1919-December,  1920-ContmMed. 


282 


TERMINAL  GRAIN  MARKETING. 


<£> 

A 

VI 

a 


00 


t> 

M 

S 


■3 

•p^ 

ft 

ea 

o 

k. 

o 

■w 

e9 

> 

<D 

S 


^5  o  « ■  .  * 

o  ®  s  >> 

«  o  "a  >  o3 

03  fl  ><  ?3  ^ 


ft 

8  w  ®  6 


m 

a 

'& 

i~, 

bD 

> 


Lh 

C3 

w 


<D 

t>. 


C3 

O 


a 

(4 

o 

O 


c3 

ai 

-a 


a 

44) 

03 

ft 


o 

o 

44> 

M 


a 

■|4> 

c3 

Q 


CO 

52 

0  CO 

10 

CO 

CO 

CO  CO 

25 

00  tN. 

40 

CO 

8 

<N 

(N  ^ 

CO 

rH 

4^ 

co'i^ 

cf 

05 

a 

44> 

03 

Q 


a 

o 

44 

CQ 


a 

44 

a 


4-3 

02 


a 

■44 

C3 


02 


a 

-44 

OS 

a 


a 

o 

44 

02 


•a 

o 

'C 

a 

ft 


05  Tt< 
eo  05 


Tf  00  4j< 

r-4  (oi  e4 

O  i-H  4j5 


*  UO 

CO  o  c4 

1-4  00 


00  CO 

■8  « 
fts 


.‘'O 

Tt--' 

M 
o  D 
CO 


»  CO 

<3^  a 


CO  ^  CO 

o  00 

CO  CO 

oToTcir 


t>.  O  ' 
O  ^  ' 
Ci  < 


O  Tt< 
lO  CO 

cor^co 

CO'  <N 


•  « 

t  » 

t  t 

•  • 

<0 

0  05 

CD 

10  ^ 

OI  < 

44*  >5 

>>> 

§ 

^4  ® 

c3  b 

ftiz; 

Sft 

1 05  ; 

.'d  : 

Tji  N 

^  ^  • 

ic  ^  . 

y^ 

^  ^  » 

; 

>>  ei  I 

3  3  .' 

ft  • 

-p  d 
<»  d 

ftft 

1-^  (M  GO 

a>(N  o 

CO 

c4"  rn" 


Tt<  O 
CO  CO  ^ 
lO  1-H  CO 


>  » 

>  CO  < 


TjJ  ^ 

i  ^ 


o 

(N 


1  O) 

fs.  ^ 

q 
o)  R 


00  00  Oi 
b-  ^  Oi 
05  CO  Oi 


^ 


CO  CO 


^  05  CO 
CO  CO  CO 
CO  lO 


o  . 

s 

d  c« 

J-5 


(Noo 

Pho 


CO 

a  S 


05 


'^oor- 

lO  OI 


^0( 
iO(N< 
CQ  T 


C^l  IN.  , 

f 

CO  » 


S8: 


)  O 

-  J  CO 

^  ^ 


00  e5 

a 
a  S 


(N 


(N 


4J  bO 

a  a 

o«< 


00  — (  Tf 
05  iM  00 
CO  IN  -H 

co" 


»0 

^  ^ 

ko  ^ 

cf  i-T 


1-H  o  CO 

Cp  05  1-H 
O  05 

of 


o 

d 

d 


>>  ' 

Ui  •  •  • 

C3  05^ 

a=5 


05  05 
O  05  05 
05  lO  05 

C’f  1-f 


10  • 

(N 


cua 

c;  <D 

mm 


^  »-H  CO 
01  r>.  ^ 
01  f-H 


»— I 

a  a 

CC  1-5 


•Iti  O  CO 
C-  1-H  CD 


a'a 

oB> 


CO  Tf  -H 
1-H  10  N 
CO  rH  Hfl 

co"  i-T 


-^ft 

3  ® 

ft  05 


CO  y^  t>* 

05  In. 

CO 


•  1 

•  « 

00  N 

•  • 

.*05 

CO^ 

•  * 

.  * 

.  * 

1  • 

i  • 

>  bi) 

•  P 

►  >> 

2.  ^ 
^<5 

P  9 

C9  d 

II 

^  <M  Ofl 
O  ^  05 
CO 


f  (-4 
•  ^ 

•  X2 

ji 

fc-  Q 

>  O 
-i  **-3  05 


!  ® 
.  d 
•  d 

I 

r^ 


•  ^ 
• 

.X5 

:a 

0^  O) 

ca  ® 


PS  ■  :  M  ®  •  •  S) 

i“sw35pw3^“|g34 

g-  §4  ■g-H 

ft  ft 


05 

ft 

ft> 

o 

ft 

05 


a 

»3 

a 

a2 

8 

iO 

10 

CO 


05 

>> 

^■H 

d 


■3 

C5 

P- 

o 

tH 

o 

4-9 

C3 

-2 


OOt^QO 


COtN.  05 
CD 


05  00  CO 
05 


05  CO 
00  CO  S 
(N  CO 


05  CO  O 
<N  CQ 

o5 


05  00 
O  10 
CO  00 

csT 


^  ! 
p 
d 

'  o 

to 

b  ’m&  ® 

§- 


APPENDIX  TABLES. 


283 


CO 


o 

lO 


Ci  00 


CO 


t>*  1-H 


(J)  ^ 

CO 


>» 

3 


a> 


05 


00 

CO 


<D 


<P 

O 

<1P 

Q 


i3 

CJD 


>>05. 

3^' 


O 


CO 

GO 


CO  O 


(N 

CO 


CO 

05 


rH  CO  05 

CO  CO  00 

tH  <N 


.  a> 

•  c 
;  d 

, 

So 

p  >> 

>  ^ . 


CO  05 


« CO 


CO 

(M 


• 

• 

1 

• 

• 

CO  CO 

t  1 

-V 

o  <M 

dilN 

rP  >> 

^  >5 

d  C3 

« 

• 

• 

« 

:  > 

to 

QO 

* 

1 

00  CO 

<M  ^ 

July 

•M 

C 

o 

d  s 

3 

^,02 

)C^ 

J  lo 

(N 


05 

00 

o 

tN.  Q 

00  1-H 

CO 

lO 

o  o 

to  1-H 

CO 

C^ 

CO 

CO  1-H 

c<r 

00 

CO  1-H 

t>. 

CO 

(N 


.  ^ 

<3; 

.X5 


^  > 
b£  > 


o2 

.05 

>-> 


O!  <» 

“I 

fe  ^  > 

>>05 

d 

>~> 


(V 

bC 

05 

Ui 

a> 


« 

O 

H 

Pi^ 


w 

'3 

-d 

m 

d 

X2 

o 


(N 

s 

05 


3 


C5 

Ph 

o 

Ui 

o 

03 

> 

H 


CO 


wH 

C^  tH 


t^CO  05 
00  CO  TJH 


I  TJH 


s  ^ 


05  1 

o 


I  CO 


a> 

P 

P 


CO 


o 


cooo 


lO  Tfi 


o 

<N 

(N 

d 

Pk 

>> 

0) 

d 

c/2 

Hi 

c^ 

fN. 

to 

<N 

to 

rH 

2?3 


CO  05 
>0  05  lO 


1 

(N 

tN. 

<M 

•s 

to 

H-5 

P^ 

>> 

P 

P 

CO 

H> 

C<l 


In. 


c3 


P. 


CO 

c3 

q; 

0 


CO 

(M 

bib 

P 

<1 


S^p 

•  o 

p  g 

03  P 


O 


05 

CO 


o  o 

00  ^ 


bjo 

O  <! 


o 

CO 


CO 


bX)  .  >»  . 
EJTJI-;:;  05 


<nO* 

d  >1 

d  05 


05  C^ 


05  i-(  Tt^ 


b 

03  05 
3  ^ 
e 

M  r- 1 

03 


fe 

..£fS 


tuO 

CO 

j.,  & 

r^  L> 


t-i 

O) 

a 

<o 

o 

a> 

Q 


1  «> 
.  p 
;  P 

, 

So 


o 

CO 


OI 


ic 

(N 


P^ 

(X) 

CO 


CO 

>> 

r>H 

a 


O  00  (M 

lO  ic  lO 

^  tt* 


00  00 
(M  <N 

^  i 

<?  <j 


00  00 


(M 

bi 

■5 


to 
CO  c^ 
<N  . 

o 
.  a> 

■3Q 

o 


to 
<N 

00  oi  ^ 

^  .o 


O  D 

OQ  Hi 


OQ  CO 

to 

tN. 

(M 

Tf<  ^  00 

tN. 

to 

to  CO  CO 

05 

to 

tN,  :o  eo 

tN. 

to 

to 

CO 

(N  1-H 

to 

CO 

>> 

p 


p. 

<x 


CO 

CO 


00 

CO 


bJD 

p 

< 


lo 

(N 


00 


O 

O) 

Q 


CO 


O  tN. 

fH  (N 


!  H 

..o 

:a 

®  <35 


Table  b.—Grain  stocks  {M  bushels)  at  15  specified  terminal  points,  by  six-month  periods,  January,  1919-December,  1920— Continued. 

INDIANAPOLIS. 

[Elevator  capacity  July  1,  1920:  945,000  bushels.] 


284 


TERMINAL  GRAIN  MARKETING. 


^05  £  ®  p- 

S'S  ®  « 


o 


w 

s 

u 

bJD 

<3> 

> 

Ph 


O 

4-» 

Q 


A 

Zh 

c3 

pq 


c3 


M 


OQ 


® 

>> 


® 

ts 

ft 


4«1 


CQ 


8 

CO 


CQ 


05 

® 


® 

C3 

Q 


M 

8 

CO 


.1 

o 

Ah 


I  CO  Cl 


Oi  Oi  CSI 

o 


Oi  CO 


00  UO 
<N 


CO  0  OT 

0 

00 

CO  CO  00 

01  c4 

00 

1-H  10  00 

01 

OT 

01 

'S 


^  lO 
bi  >i 


S'O 

53S 


^co 

>  >> 

003 


g 

0  to  CD 

01  to  CD 

01  CD  OT 

00  CO 

1-H  d 

01  to 

i 

OT  ^  0 

05  0 

0  to  00 

d 

0  OT 
1-H  CO 

934 

0 

•M 

02 

iH 

tH 

rH 

fH 

01 

(M  (N 
(N  (N 


»C)  lO 


u  u 

c«  ce 


s « 


<M 


o 

003W 


CD 


C3 


00 


(N 


10 

(N 

. 

o 

o'g  w 


00  1-H  00 


Oi  tH 

O 


05 

<N 


05  01  Tt< 


CO  1— • 


6 

cQ 

•  • 

•  1 

•  * 

fH  1-H 

1-H  CO 

• 

• 

• 

1 

t 

0  • 

t  « 

•  » 

1  1 

lA 

^d 

lA 

w 

c  « 

® 

•!-> 

C3 

0 

O)  ^ 

02h-5 

S  ^ 

CO 

> 


CO  05  o 
CO^  <N 
CO  ^  (N 


CO  01 

S?*'  a 


00 

CO  00 


>  LO 

)  10 


CO 

05 

CO 


6 

•  • 

•  • 

•  1 

•  » 

1 

« 

1  * 

0  Tf 

1-H  d 

45 

03 

•  01 

CO  fH 

(N  00 

fH  tH 

, 

Q 

t>.c 

p 

^  ft 

^  c 

ftS 

Ui 

0 

^0 

0 

d  0? 


tf 

o 


CO 

CO 

d 

8 

(N* 

10 

oT 

o 

(N 

05 


o  CO^ 

OT  CO  Q 
CD  CO  to 


SS  p! 

Tt4 

0 1-1  -cf* 

OT  0 

05 

CD  CO  d 

00  CD 

to  fH 

01 

CD  01 

to  fH 

o 

00 

CO 


•  • 

•  1 

•  •  * 

t 

• 

• 

•  , 

■*  1 

'OS 

(N^ 

CO*  ; 

,  t 

CO 

.r  ^ 

bi  >» 

ftS 

c 

eS 

1-5 

CD 

fH  t-J 

o'd 


W  ^ 

o 

03 

P4 

c3 

O 

l-i 

O 

4^ 

> 

O) 

S 


^  t>-ci 

toci 


a>  w 


O  Tf  10 
o 


to  01 


01 


o  . 

2  ° 

d  05 


CO01»-H 
05  CD 
»-»  iO 


d  cot^ 
Tti  10  CO 
01 


05  o 

!>• 


COO  to 
t^t^Ol 
^  CO 


Tt^Ol  o 

00  o  CO 
01  1-H 


0; 


! 

.rO 


.  :a 

QJ  _  •  •  O)  ® 

gs  ts 

t-»  i-» 


® 

tuO 

c9 

b> 

® 

> 

<1 


2?5 

l:  ® 


O  i-H  Tt4 
01  CD  CD 
05 


C^Ol 

SS 


CO  01 

to  00  oi 
to  tc  00 


05  05  05 
t^t^Ol 
O  01 


to  OT  4t< 
01  d  CD 
00  d  t25 

d*'  i-T 


O) 


0) 
bo 

OT 


APPENDIX  TABLES 


40  05  O 

CD  cq 

00  cq  CO 

OCDI^ 

•  •  • 

oooo 

CO  f4  FjJ 

1-H  CO 

fH  CO 

40  oq 

05t>.  Dl 

05  CO  CO 

CD  fH  fH 

-^1^05 

o6i>i^ 

<0  fH 

05  05 

CD  oq 

00  CO  CD 

00  oq  ^ 

t>-Dq  40 

Oct.  25 . 

Dec.  27 . 

June  19 . 

Jan. 10 . 

Sept.  11 . 

July  17 . 

4,828 

1,657 

3,615 

4,745 
1, 048 
2, 941 

5, 248 
2,064 
4, 320 

July  5 . 

Oct.  18 . 

Apr.  17 . 

June  26 . 

Dec  .25 . 

July  10-31... 

.-H  0.-I50 

O  r»  IM  <D 

OO  M  CO 

July  12 . 

Nov.  29 . 

Feb.  21 . 

Jan.  3 . 

Dec.  25 . 

July  3 . 

rtTt(03  .-10050 

<*e5i50  ooooo  O5  00CO 

50  CO  (N  CO  C30 -.f  5D 

(n"  i-T 

July  5 . 

Aug.  30 . 

Mar.  27 . 

Apr.  17 . 

Dec.  25 . 

July  24 . 

1,600 

125 

512 

639 

91 

288 

OOOfH 
(N  Q 

40  CO 

July  5 . 

Nov.  29 . 

Feb.  21 . 

Jan.  10 . 

Nov.  13 . 

July  17 . 

. 1 

3<50i-l  rHOOCO  CO  .-1  05 

o  .-H cot'.r^  .— 1 50  (N 

Ttf  (N  .-(  -.CH 

Oct.  25 . 

July  5 . 

June  19 . 

Jan.  31 . 

Sept.  11 . 

July  17 . 

4,  276 
490 
2, 590 

2,871 

273 

964 

3, 960 
1,330 
2,889 

m 

iz; 

o 

:z; 


O 

c3 

Cm 

c3 

o 

o 

O) 


Feb.  8 . 

May  3 . 

Nov.  8 . 

July  12 . 

! 

Jan. 1 . 

May  15 . 

Dec.  11 . 

July  17 . 

05  40  40 
fH  05 

cq  o  40 

(N  05  ® 
40  O 

CO  fH  05 
O  40  O 

F-t  O  fH 

05  CD  (N 

O  CO 

CM  40 

c^  00  o  c^  <ocAc^ 


00 


CO 


bx)o' 

S  a> 

<!P 


t»!2 

(N  ’-' 

t:  ® 

aS 

<)►=; 


•  r^ 
o>  ^ 


C^  O  ir: 
cp  Cf> 
Cl  cs 


lO  O  lO 
'^  !>•  Tt< 
CO  UO 

CO  i-T 


iC  1-M  rt< 
O  40  t>- 


05  ?c 
05  (N 
O  OO 


iC  O 
(Mi-h 

o  ^ 


t>*t»  GO 
(N  fH 


CO  05 
OC 


00 ’-H 

^  C3 


CM  2  * 

F-f  • 

CO'’’ 

Cyo  ^  • 

: 

•<5-5  • 

S  P. 

W  ^ 

<N 


CO  C^ 
OC  O  CO 
40  CD 


(M  O 
CO  CD 
05  CO 


CD  O  l^ 

05  OC  00 
00  1-i 


O  CO  o 
40  (M  Tt< 
1-H  (M 


40 


(  1  1 

CD  CO  t 

^‘S  : 

OC 

CM  T-1  • 

fH  • 

fH 

^  d  • 
'g  a:>  ' 

5^0  : 

.  CD  • 

^  d  • 

®  3  : 

*  <40 

Qi 

®  ^ 
Pco 

CO  o 
05(N  00 


fH  CD  <N 
CO  00 


40  (M  O 
(N  l>  CD 
t-l 


Q  CD  (M 
O  40  CO 
Di  fH 


CO 


05 


d  W) 


COIM 

d  ^ 


rH  Oi 

O 

oo 


•*ti  <N 
05 40  CD 
-T}'  CO  40 

CO'FH'of 


CD  O 

fH  fH 

CO  CO  C^ 
40'  CO*' 


fH  o  CO 
(N  05  Q 
40  00  O 

V  cq' 


F-l  1-H  CO 
OJ  CD  DJ 
CD  O  CO 


CD 


x> 

a 

(V 

u 

<u 

Q 


■c 

tuO 

:ir3  o 


&  fe 


>.05 


>, 

tl 

<j3Q 


X!  fe. 

M)g 
-r  o 


.  ® 
..o 

«:  i 

u  Q 

(D*^ 

3 


X!  fe. 

W)£ 
o 


01 

be 

eS 

iH 

Oi 


cS 

CJ 


>, 

t-i 

C3  05 
3 
3 
o3 


:  o) 


56976°— 22- 


-20 


Excluding  Oct.  2,  9, 16,  and  Nov. 


Table  5. — Grain  stocks  {M  bushels)  at  15  specified  terminal  points,  by  six-month  periods,  January,  1919-December,  1920 — Continued. 


286 


TERMINAL  GRAIN  MARKETING. 


X) 


P3 

O 

K 


»-» 


o 

03 

a 

03 

o 


<a 

> 

w 


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APPENDIX  TABLES 


287 


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8  Warehouse  capacity  of  570  tons  not  considered.  i  Two  items. 


288 


TERMINAL  GRAIN  MARKETING, 


Table  6. — Capacity  of  public  and  private  terminal  grain  elevators  at  specified  interior 
and  seaboard  points  in  the  United  States,  July  1,  1920. 


Total  eleva- 


Public.i 


Private.^ 


Markets. 


INTERIOR  POINTS. 

Chicago . 

Minneapolis . 

Duluth-Superior . 

BulTalo . 

Kansas  City . 

Omaha . 

Milwaukee . 

St.  Louis . 

Toledo . 

Manitowoc . 

Cleveland . 

Peoria . 

St.  Joseph . 

Nashville . 

Erie . 

Cincinnati . 

Detroit . 

Fort  Worth . 

Indianapohs . 

Sioux  City . 

West  Fairport . 

Hutchinson . 

Louisville . 

Port  Huron . 

Ogden,  Utah . . 

Mansfield,  Ohio . . 

Fremont,  Nebr . . 

Memphis . . 

Atchison . . 

Pekin,  111 . 

Hillsdale,  Mich . 

Fostoria,  Ohio . 

Des  Moines . 

Green  Bay . 

Coffeyville,  Kans . 

Cedar  Rapids . 

San  Antonio . 

Evansville . 

Total  interior . 

SEABOARD  POINTS. 

Baltimore . 

New  Orleans . 

New  York . 

Philadelphia . 

Boston . 

Galveston . 

Portland,  Me . 

Seattle . 

Portland,  Oreg . 

Astoria,  Oreg . 

Newport  News . 

Tacoma . 

Port  Arthur,  Tex . 

Mobile . 

Total  seaboard.... 

Total  all  markets. 


tor  storage 
capacity  of 
the  market 
(excluding 
millers  and 
converters). 

Num¬ 
ber  of 
eleva¬ 
tors. 

Storage 
capacity 
in  elevators. 

Percent¬ 
age  to 
total 
storage 
capacity. 

Num¬ 
ber  of 
eleva¬ 
tors. 

Storage 
capacity 
in  elevators. 

Percent¬ 
age  to 
total 
storage 
capacity. 

Bushels. 

Bushels. 

Bushels. 

42, 783, 600 

9 

13, 400, 000 

31. 32 

27 

29, 383, 600 

68.68 

42, 775, 000 

29 

36, 481, 000 

85.29 

16 

6;  294;  000 

14.71 

35, 850, 000 

1 

300,000 

.84 

8 

35;  550;  000 

99. 16 

24, 933, 000 

8 

9,098,000 

36. 49 

11 

15;  835;  000 

63. 51 

21,902,000 

13 

21,142,000 

96.53 

9 

■  760;  000 

3.47 

9, 085,  000 

13 

Q  085  000 

inn  nn 

7, 173;  000 

10 

7  173  000 

.  inn  nn 

.  5, 355, 000 

11 

4, 845, 000 

90.48 

7 

510,000 

9.52 

2,619,000 

1 

1,640,000 

62. 62 

4 

979',  000 

37.38 

2, 220,  000 

2 

2  220  000 

inn  nn 

.  »  2, 166, 000 

1 

•  200,000 

9.23 

9 

1,966,000 

90. 77 

2, 130, 000 

3 

1, 850, 000 

86.85 

1 

'280;000 

13. 15 

1, 913, 000 

3 

1, 513, 000 

79.09 

1 

400;  000 

20.91 

. *  *  1, 606, 120 

6 

1  .506  120 

100.00 

i;  156;  400 

1 

1, 156, 400 

100.00 

1,070,000 

8 

1  070  000 

inn  nn 

i;  Olo;  000 

1 

600,000 

49.50 

3 

510,000 

50.50 

1, 000, 000 

1 

1  000  000 

inn  nn 

'  945, 000 

4 

945  000 

inn  nn 

920;  000 

2 

920,000 

100.00 

900,000 

1 

900,000 

100.00 

800,000 

2 

500,000 

62.50 

2 

300,000 

37.  51 

800,000 

1 

650,000 

81.  25 

1 

i.5o;ooo 

18.75 

750, 000 

1 

7.50  000 

ion  on 

700,000 

1 

700  000 

inn  nn 

649;  525 

1 

649  .525 

inn  nn 

600,000 

1 

600  000 

inn  nn 

485;  000 

3 

485  000 

inn  nn 

400;  000 

1 

400  000 

inn  nn 

370, 000 

2 

370  000 

inn  nn 

355, 000 

1 

355,000 

100.00 

325;  000 

1 

325,000 

100.00 

290,000 

2 

290  666 

inn  nn 

200; 000 

1 

200,000 

inn  nn 

175,000 

1 

175,000 

100.00 

100  00 

175,000 

1 

175  666 

inn  nn 

150;000 

1 

1,50  000 

inn  nn 

.  9o;ooo 

2 

90  000 

100.00 

216, 726, 645 

87 

94,675,400 

43. 68 

163 

122,051,245 

56.32 

9, 752, 000 

7 

9, 752, 000 

100.00 

7,572,000 

7 

7;  322;  000 

96.  70 

1 

250,000 

33.02 

‘  6, 732, 000 

10 

6, 732, 000 

100.00 

4, 250, 000 

5 

4, 250, 000 

100.00 

• 

3, 717, 191 

3 

3, 717, 191 

100.00 

3, 100, 000 

•  2 

2;  100;  000 

67.  74 

1 

1,000,000 

32.26 

2, 500, 000 

2 

2, 500,000 

100.00 

6  2, 226, 870 

1 

1,026,870 

46.11 

2 

1,200,000 

53.89 

T  1,350,  517 

1 

1,033,850 

76.55 

1 

'  316;  667 

23.45 

1, 250, 000 

1 

1,250,000 

100.00 

1,000,000 

1 

1, 000,000 

100.00 

8  630, 000 

1 

100,000 

15.87 

4 

530,000 

84.13 

500,000 

1 

500,000 

100.00 

200,000 

1 

200,000 

100.00 

44, 780,  578 

43 

41,483, 911 

92. 64 

9 

3, 296, 667 

7.36 

261,  507,  223 

130 

136, 159, 311 

52. 07 

172 

125,  347, 912 

47.93 

1  The  elevators  listed  as  “public”  in  this  table  include  houses  operated  under  State  license  as  public 
warehouses,  houses  operated  by  common  carriers  as  terminal  facilities,  and  houses  operated  wholly  as 
public  warehouses  by  elevating  and  storage  companies.  As  noted  in  the  text,  a  majority  of  the  elevators 
hcensed  by  State  authority  are  operated  by  grain  dealers  and  for  this  reason  in  ordinary  practice  handle 
more  grain  for  private  than  for  public  account. 

*  Elevators  handling  grain  for  account  of  the  operating  company  and  not  licensed  as  public  warehouses 
arellsted  as  private. 

3  Warehouse  capacity  of  350  tons  not  included  above. 

*  Warehouse  capacity  of  150,000  bushels  not  included  above. 

5  Warehouse  capacity  of  570  tons  not  included . 

®  Flat  warehouse  capacity  of  22,000  tons  not  included. 

7  Warehouse  capacity  for  sacked  grain  not  included. 

8  Warehouse  capacity  of  42,400  tons  not  included. 


APPENDIX  TABLES. 


289 


Table  7. —  Terminal  grain  elevators  owned  by  railroads  and  leased  to  dealers 

markets,  1920. 


at  specified 


Market. 

Capacity  of 
elevator. 

Owner.i 

Y  early 
rental. 

Rental 
reduced 
to  cents 
per 
bushel 
capacity. 

INTERIOR  POINTS. 

Bushels. 

Minneapolis . 

Chicago . 

600,000 
8, 300, 000 
3,000,000 
1,500,000 
1, 250, 000 

C.  St.  P.M.&O.R.  R . 

C.  &  N.  W.  Ry.  Co 

$4, 000.  00 
217, 091.  64 

2  18, 000.  00 

2  18,000.00 
2, 500.  00 
8, 495.  00 
21, 282.  00 
21,800.00 
7, 200.  00 

16. 500.  00 
2, 400.  00 

80, 251.  00 
3, 600.  00 

87. 500.  00 
27, 641.04 
30, 954.  77 
30, 000.  00 

20. 500.  00 
15, 140.  40 

7,  500.  00 
4, 920.  00 
3, 520.  00 
2,450.00 
300.00 
72,000.00 
18, 000.00 
3, 584.  06 

1  3, 000.  00 

5 100,000.00 
3, 000.  00 
5, 000.  00 
2,  400.00 
18, 150.  00 
6, 000.  00 
(8) 

4, 696.  56 

0.67 
2. 61 
.60 
1.20 
.20 
.77 
1. 93 
2. 18 
.90 

4.  27 
2.67 
8. 21 

10.29 
1.56 
.  95 
1.24 
1.  67 
1.  37 
1.26 
1.  25 
.89 
.88 
1.53 
.75 

5.  76 
1.09 

.29 
.30 
1.  33 
.23 
1.  25 
.96 
1.82 
1.00 

Do . 

C.  R.  I.  A  P.  Ry.  Co 

Do . 

. do . 

Do . 

. do . 

Do . 

1, 100,  000 
1, 100, 000 
1,000,000 

C.  B.  it  Q.  R.  R 

Do . 

A.  T.  A:  S.  F.  Ry.  Co 

Do . 

Penn.  R.  R.  Co 

Do . 

'800' 000 
386, 600 
90,000 
2,500,000 

I.  C.  R.  R . 

Do . 

Erie  R.  R.  Co. 

Do . 

Buffalo . 

N.  Y.C.&  St.  L.  R.  R . 

N.  Y.  C.  R.  R.  Co 

Do . 

35,000 
5,600,000 
2,900,000 
2,500,000 
1,  800,  000 
1, 500,  000 
1, 200, 000 

Erie  R.  R _ _ 

Kansas  City . 

A.  T.  &  S.  F.  Ry.... 

Do . 

C.M.&  St.P.  ily.  Co 

Do . 

C.R.I.  &  P.  Ry.  Co 

Do . 

K.C.S.  Ry.  Co... 

Do . 

C.B.  &  Q.* *^R.  R.  Co 

Do . 

C.  G.  W.  R.  R.  Co. 

Do . 

'600' 000 

K.C.  S.  Ry.  Co. 

Do . 

550' 000 

St.  L.-San  Fran.  Rv-® 

Do . 

400;000 

160,000 

. do . 

St.  Louis . 

T.  St.  L.  &  W.  R.  R 

Do . 

40'000 

Southern  Ry.  Co 

Omaha . 

1, 250, 000 
1, 650, 000 

C.  &  N.  W.  Ry.  Co... 

Milwaukee . 

C.  M.  &  St.  P/Rv.  Co 

Do . 

l'  248;  000 

C.  &  N.  W.  Ry.  Co. 

Do . 

1,000,000 

C.  M.  &  St.  P.  Ry.  Co. 

Duluth-Superior . 

5oo;ooo 

1, 300,  000 
400,000 
250,000 
1, 000,  000 

G.  N.  R.  R . 

Do . 

C.  St.  P.  M.  A  O.  Ry.  Co 

Toledo . ; . . 

B.  &  0.  R.  R.  Co _ 

Do . 

N.  Y.  C.  R.  R.  Co.. 

Cleveland . 

C.  C.  C.  &  St.  L.  Ry.  Co 

Do . 

'600,' 000 
750, 000 
413, 000 

Bie  Four  R.  R.  Co.. 

Port  Huron . 

Grand  Trunk  R.  R.  Co . 

St.  Joseph . 

C.B.&Q.  R.  R.7 . 

1.14 

Do . 

100,000 

C.  G.  W.  Ry.  Co . 

600.00 

.60 

Cincinnati . 

600,000 

Big  Four  R.  R.  Co  . . 

6, 000.  00 

1,  800.  00 

1.00 

.90 

Green  Bay,  Wis . 

200;000 

Green  Bay  Sz  Western  Ry,  Co 

SEABOARD  POINTS. 

New  York  City . 

8  50,000 

N.  Y.  C.  R.  R.  Co . 

6, 660. 00 

6,  550.  00 
(») 

30, 000.  00 

2, 000.  00 
(“) 

19, 449.  24 
29, 901.  27 

13.  32 
2.  18 

Philadelphia  .1 . 

300,000 

225,000 

1,000,000 

18  316, 687 
100,000 

Penn.  R.  R.  Co . 

Do.. . 

P.  &  R.  Ry.  Co . 

Galveston . 

So.  Pac.  r;  R.  Co...  . 

3.00 

.63 

Portland,  Oreg . 

. do . 

Tacoma.. . . . 

C.  M.  &  St.  P.  Ry.  Co... 

Do . 

12  50,  000 
20, 000 

Nor.  Pac.  Rv.  Co _ 

38.  90 
149.  51 

Do . 

. do . 

Total  capacity . 

59,  234, 267 

990,  336.  98 

1 


I  For  lessees  see  Appendix  Table  11. 

*  Plus  maintenance. 

3  Leased  to  the  Frisco  Elevator  Co.,  not  a  dealer. 

<  Cost  of  improvements  made  by  operating  company. 

5  Plus  certain  repairs. 

®  Unknown  or  not  reporting. 

7  Leased  to  the  Burlington  Public  Elevator  Co.,  not  a  dealer 

8  Warehouse  capacity  of  500  tons  not  included. 

9  Net  earnings. 

18  Warehouse  capacity  of  12,000  tons  not  included. 

II  Rental  undecided. 

12  Warehouse  capacity  of  18,000  tons  not  i;icl  uiel. 


290 


TERMINAL  GRAIN  MARKETING 


Table  8.  Total  terminal  elevator  capacity  at  specified  interior  and  seaboard  points  as 
related  to  the  total  capacity  owned  by  railroads  and  leased  to  dealers  and  the  capacity 
owned  and  operated  by  railroads  or  subsidiary  companies. 


Market. 


INTERIOR  POINTS. 

Minneapolis . 

Chicago . 

Duluth-Superior _ 

Buffalo . 

Kansas  City . !!”!!! 

Omaha. . . ! . 

Milwaukee . 

St.  Louis . 

Other .  . . 


Total  interior . 

SEABOARD  POINTS. 

Baltimore . 

New  Orleans . 

New  York . ** 

Philadelphia . !.'.!!!' 

Boston . 

Galveston . 

Other . 


Total  seaboard - 
Total,  all  points 


Total  elevator  storage 
capacity  (excluding 
millers  and  convert¬ 
ers). 

Total  capacity  owned 
by  railroads  and 
leased  to  grain  deal¬ 
ers. 

Total  capacity  owmed 
and  operated  by  rail¬ 
roads. 

✓ 

Bushels. 

Per  cent. 

Bushels. 

Per  cent. 

Bushels. 

Per  cent. 

42, 775, 000 
42,  783, 600 
35, 850,  000 
24, 933,  000 
21,  902,  000 
9, 085,  000 
7, 173, 000 
5, 355, 000 
26, 870, 045 

100.00 

100.00 

100.00 

100.00 

100.00 

100.00 

100.00 

100.00 

100.00 

600,000 
18, 526, 600 
8,800,000 
2,  535, 000 
17, 050, 000 
1,  250,  000 
3, 898, 000 
200,000 
4, 313,  000 

1.40 
43.30 
24.  55 
10.11 
77. 14 
13.76 
54.  34 
5.19 
15. 99 

1, 048, 000 
442,000 

4. 18 
2.00 

1, 656,  400 

6. 14 

216,726,645 

100.00 

57, 172, 600 

26.  50 

3, 146, 400 

1.46 

9, 752, 000 
7, 572, 000 
6, 732,  000 
4, 250,  000 
3, 717, 191 
3, 100,  000 
9, 657, 387 

100.00 

100.00 

100.00 

100.00 

100.00 

100.00 

100.00 

9,  752. 000 
4, 700,  000 
4, 750,  000 
2,  350,  000 
3, 717, 191 

100.00 
82.07 
70.  .56 
55.  29 
100.00 

50,000 
525,  000 

.74 
12.  35 

1,000,000 
486, 667 

32.26 

4.94 

3, 700,  000 

37.  .54 

44, 780,  578 

100.00 

2, 061,  667 

4.  .58 

28, 969, 191 

64.40 

261,  507,  223 

100.00 

59,  234,  267 

.  22.  72 

32, 11.5,  591 

12.  32 

Table  9.  Storage  capacity  in  elevators  operated  by  millers  and  converters  at  20  specified 

markets,  July  1,  1920. 


Market. 


Minneapohs... 

Chicago. .. _ 

Milwaukee.... 
Cedar  Rapids. 

St.  Louis . 

Kansas  City. . . 

Toledo . 

Omaha . 

Tacoma . 

TndianapoUs . . 

St.  Joseph . 

Duluth . 

Portland,  Orep 

Galveston . . 

Cincinnati . 

Detroit . 

Buffalo . 

Nashville . 

Seattle . 

Cleveland . 

Total . . . . 


Total  avail¬ 
able  storage 
capacity! 


Bushels. 


Storage  capacity  in  elevators  op¬ 
erated  by  millers  and  convert¬ 
ers. 


Number 
of  com¬ 
panies. 


Bushels. 


Per  cent 
of  total. 


Total  storage  capacity, 
not  including  millers 
and  converters. 


Bushels. 


Per  cent 
of  total. 


53,  935,  380 
51, 928, 600 
15, 566,  000 
4, 675,  000 
9, 665. 000 
24, 594,  000 
4, 314, 000 
10, 125,  000 

1  1, 630,  000 
1,920,000 
2, 763,  000 

36, 475,  000 
1, 901,  717 
3, 650,  000 
1,  59.5,  000 
1, 520,  000 
25, 473,  000 
1,  800,  120 
2, 496,  870 

2  2, 366,  000 


258,  393, 687 


18 

17 

17 

1 

14 

11 

5 

5 

3 

5 

3 

2 

3 

1 

2 

3 

2 

2 

2 

1 


117 


11, 160,  380 
9, 145,  000 
8, 393,  000 
4,  500,  000 
4, 310,  000 
2, 692,  000 
1, 695,  000 
1, 040,  000 
1,000,000 
975,000 
850,000 
625,000 
551,200 
550,000 
525,  000 
510,000 
390,000 
294,  000 
270,000 
200,  000 


49,  675,  580 


20.  68 
17.  61 
53.  92 

96.26 
52.  79 
10.86 
39.29 

10.27 
61.  35 
50.78 
26.69 

1.  71 
28.98 
15.07 

32.  92 

33.  55 
1.53 

16.  .33 
10.  01 
8.  45 


42,  775,  000 
42, 783,  600 
7, 173,  000 
175,000 
5, 355,  000 
21, 902,  000 
2, 619,  000 
9, 085,  000 
630,000 
945,000 
1, 913,  000 
35,  850,  000 
1, 3.50,  517 
3, 100,  000 
1, 070,  000 
1, 010,  000 
25, 083,  000 
1,  506,  120 
2, 226,  870 
2, 166,  000 


79.  31 
82.  39 
46.08 
3.74 
55.  41 
89. 05 
60.  71 
89.73 
38.65 
49.22 
69.24 
98.29 
71.02 
84. 93 
67.08 
66. 45 
98.47 
83. 67 
89. 19 
91.  55 


19. 30 


208,  718, 107 


80.78 


1  Warehouse  capacity  of  4,000  tons  not  included. 


2  Workhouse  capacity  of  350  tons  not  included. 


APPENDIX  TABLES 


291 


Table  10. — Elevator  storage  capacity  at  Fort  William  and  Port  Arthur,  Canada,  1920} 


PUBLIC. 


Fort  William  elevators:  Bushels. 

Can.  Pac.  Ry.  Co.,  “D” .  7,500,000 

Grand  Trunk  Pac.  Elev.  Co.  (Ltd.).  5, 750,000 
United  Grain  Growers  (Ltd.),  “B 

andE” .  2,500,000 

East.  Term.  Elev.  Co.  (Ltd.),  “A 

and  C”  (not  licensed) .  2,500,000 

Ogilvie  Flour  Mills  Co.  (Ltd.) .  2, 000, 000 

Western  Terminal  Elev.  Co.  (Ltd.)..  2,000,000 

Consolidated  Elev.  Co.  (Ltd.) .  1, 750,000 

Fort  William  Elev.  Co.  (Ltd.),“F”.  1,750,000 
Northwestern  Elev.  Co.  (Ltd.) .  850,000 


Total . . .  26,350,000 


Port  Arthur  elevators: 

Port  Arthur  Elev.  Co.  (Ltd.) .  9,000,000 

Canadian  Government .  3, 250, 000 

Saskatchewan  Co-op.  Elev.  Co. 

(Ltd.) .  4,500,000 

Davidson  &  Smith .  1,750,000 

David  Horn  &  Co.  (not  licensed) . . .  750,000 


Total .  19,250,000 


Grand  total .  45,600,000 


Fort  William  and  Port  Arthur  combined 
Percentage  of  public  to  total . 


PRIVATE. 


Fort  William  elevators:  Bushels. 

N.  M.  Paterson  &  Co.  (Ltd.) .  800,000 

Mutual  Elev.  Co.  (Ltd.) .  500,000 

Gillespie  Term.  Grain  Co.  (Ltd.) . . .  250, 000 

Western  Grain  Co.  (Ltd.),  “  G  ” _  250, 000 

Empire  Elev.  Co.  (Ltd.) .  1,750,000 

Mount  McKay  Feed  Co.  (Ltd.) .  8,000 

Jas.  Davidson  &  Co.  (Ltd.) .  10,000 

Canadian  Feed  Mfg.  Co .  85,000 

Gooderham  Melady  &  Co.  (Ltd.), 

“Capitol” .  65,000 

Merchants  Grain  Co.  (Ltd.) .  35, 000 

Muirhead-Bole  Grain  Co .  30,000 

Bole  Grain  Co .  10, 000 


Total .  3,793,000 


Port  Arthur  elevators: 

United  Grain  Growers  (Ltd.),  “H”.  600,000 

Sask.  Co-op.  Export  Co.  (Ltd.) .  650,000 

Eastern  Term.  Elev.  Co.  (Ltd.), 

‘  ‘  Richardson  ” .  2, 000, 000 

Thunder  Bay  Term.  Elev.  Co. 

(Ltd.) .  1,500,000 

National  Elev.  Co.  (Ltd.) .  50, 000 


Total .  4,800,000 


Grand  total .  8, 593, 000 


54, 193, 000 
.84 


1  As  reported  by  the  board  of  grain  commissioners  for  Canada,  Mar.  1, 1921. 


292 


TERMINAL  GRAIN  MARKETING. 


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APPENDIX  TABLES. 


297 


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Table  11.— Description  of  elevator  facilities  for  handling  grain  in  carlot  {and  boatload)  shipments  at  52  terminal  points  in  the  United  States— 


298 


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Tariffs  filed  with  Interstate  Commerce  Commission.  38  Between  Turner  and  Argentine,  Kansas. 

33  About.  '  Apphes  to  workhouse.  Tanks  added  later. 


Table  11.  Description  of  elevator  facilities  for  handling  gram  in  carlot  (and  boatload)  shipments  at  52  terminal  points  in  the  United  States-Con. 


300 


TERMINAL  GRAIN  MARKETING. 


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301 


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305 


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Table  11 —Description  of  elevator  facilities  for  handling  grain  in  carlot  {and  boatload)  shipments  at  52  terminal  points  in  the  United  States— Con. 


306  TERMINAL  GRAIN  MARKETING. 


APPENDIX  TABLES. 


307 


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Table  11.  Description  of  elevator  facilities  for  handling  grain  in  carlot  (and  boatload)  shipments  at  52  terminal  points  in  the  United  States 


TERMINAL  GRAIN  MARKETING. 


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APPENDIX  TABLES 


311 


Table  12. — Analysis  of  purchases  of  wheat,  corn,  oats,  and  of  barley  ana  rye  at  specified 
primary  markets,  shomng  proportion  purchased  by  elevator  companies,  and  distribution 
of  elevator  purchases  by  sources,  for  the  five-year  period  1913-1917. 


Percent- 

Analysis  of  purchases  by  terminal 
elevator  companies. 

Total 

cars 

reported 
for  this 
test. 

age 

bought 
by  termi¬ 
nal  eleva¬ 
tor  com¬ 
panies. 

Bought 
from 
commis¬ 
sion  mer¬ 
chants. 

Bought 

on 

direct 

purchase 

from 

country. 

points. 

Bought 

from 

local 

dealers. 

Total. 

Chicago: 

Wheat . 

103,804 

86.6 

32 

47 

21 

100 

Corn . 

209,853* 

79.0 

52 

14 

34 

100 

Oats . 

202, 170 

77.0 

54 

23 

23 

100 

Barley  and  rye . 

42;  970 

35.0 

38 

39 

23 

100 

Milwaukee: 

Wheat . 

15,721 

35.5 

69 

7 

24 

100 

Corn . 

33^977 

67.7 

7 

16 

100 

Oats . 

51,689 

82.0 

78 

9 

13 

100 

Barley  and  rye . 

73,545 

34.6 

66 

14 

20 

100 

Duluth: 

Wheat . 

28,630 

90.2 

100 

100 

Corn . 

23 

95.6 

100 

100 

Oats . 

2,382 

69.1 

100 

100 

Barley  and  rye . 

6,248 

87.4 

100 

100 

Minneapolis: 

Wheat . 

414,367 

21.8 

77 

2 

21 

100 

Corn . 

26,269 
264, 480 

28.4 

133 

20 

47 

100 

Oats . . . 

47.4 

84 

7 

9 

100 

Barley  and  rye . 

122,929 

79,255 

100,698 

40,632 

6,994 

112,373 

33,422 

11,764 

7,162 

120,413 

47,920 

39,849 

11,489 

22,894 

37,006 

13,771 

323 

45.9 

75 

14 

11 

100 

Omaha: 

Wheat . 

68.8 

44 

60 

6 

100 

Corn . 

79.1 

61 

28 

11 

100 

Oats . 

90.6 

62 

31 

7 

100 

Barley  and  rye . 

88.7 

73 

24 

3 

100 

Kansas  City: 

Wheat . . 

52.9 

79 

16 

6 

100 

Corn . 

67.7 

62 

22 

16 

100 

Oats . 

60.3 

39 

44 

17 

100 

Barley  and  rye . 

42.0 

63 

28 

9 

100 

St.  Loulsf 

Wheat . . . 

28.6 

81 

9 

10 

100 

Corn . 

33.6 

64 

31 

16 

100 

Oats . 

31.7 

68 

16 

16 

100 

Barley  and  rye . 

16.9 

61 

49 

100 

Indianapolis: 

Wheat . 

14.0 

96 

1 

3 

100 

Corn . 

40.9 

64 

40 

6 

100 

Oats . ■ . 

64,8 

80 

9 

11 

100 

Barley  and  rye . 

36.0 

84 

U 

6 

100 

1  Includes  purchases  from  line  elevators- 


Table  13. — Results  of  mixing  operations  in  wheat  at  six  private  elevators,  Chicago,  for  the 

crop  year  1914-15. 


Quantities  (bushels)  .1 

Percentages. 

In. 

Out. 

In.' 

Out. 

Winter  wheat: 

No.  1 . 

14, 875 

15,727 

No.  2 . 

16,631,403 

33,243,167 

244,926 

48.5 

95.8 

No.  3 . 

15,799,881 

46.1 

.7 

No.  4 . 

1, 122, 131 

210,916 

3.3 

.6 

Lower . 

734,984 

1,002,243 

2.1 

2.9 

Total . . 

34,303,274 

34,716,979 

100.0 

100.0 

Spring  wheat: 

No.  1 . 

22, 751 

27,016 

1.9 

5.9 

No.  2 . 

76,020 

81,003 

48,658 

6.5 

17.7 

No.  3 . 

373, 508 

31.6 

10.7 

No.  4 . 

478,785 

8,476 

40.5 

1.9 

Lower . 

230,667 

291,644 

19.5 

63.8 

Total . 

1,181,731 

456,797 

100.0 

100.0 

Grand  total .  . 

35, 485,005 

35,173,776 

/ 

1  No  figures  for  opening  and  closing  inventories. 


312 


TEKMINAL  GRAIN  MARKETING 


Table  14. — Results  of  mixing  operations  in  wheat  at  six  private  elevators,  Chicago,  for  the 

crop  year  1915-16. 


Quantities  (bushels).i 

Percentages. 

In. 

Out. 

In. 

Out. 

Winter  wheat: 

No.  1 . 

62, 417 
3, 105, 886 
7,094, 108 
3,018,240 
823, 050 

0.5 

22.0 

50.3 

21.4 
5.8 

No.  2 . 

12, 802, 330 
810, 948 
165, 827 
369, 888 

90.5 

5.7 

1.2 

2.6 

No.  3... . 

No.  4 . 

Lower . 

Total . 

14, 103, 701 

14,148,993 

100.0 

100.0 

Spring  wheat: 

No.  1 . 

13,348,201 
1,697,389 
1,551,196 
532, 543 
87, 132 

*6,288, 512 
118,623 
135, 235 
26,668 
48,323 

46.4 

23.5 

21.5 
7.4 
1.2 

95.1 

1.7 

2.1 

.4 

.7 

No.  2 . 

No.  3 .  . 

No.  4 . 

Lower . 

Total . 

7,216,461 

6,617,361 

100.0 !  100.0 

Grand  total .  I 

21,320, 162 

20,766,354 

1 

. j 

1  Includes  7,414  bushels  of  No.  1  hard.  » Includes  69,501  bushels  of  No.  1  hard. 


Table  1^. —Results  of  mixing  operations  in  wheat  at  six  private  elevators,  Chicago,  feyr  the 

crop  year  1916-17. 


Quantities  (bushels). 

Percentages. 

In. 

Out. 

In. 

Out. 

Winter  wheat: 

No.  1 . 

82,477 
3, 188, 447 
2, 144, 412 
758, 172 
283, 816 

168,896 

6,297,833 

660,745 

61,586 

13,568 

1.3 
49.4 
33.2 
11.8 

4.3 

2.3 

87.4 

9.2 

.9 

.2 

No.  2 . 

No.  3 .  . 

No.  4 . 

Lower . 

Total . 

6,457,324 

7,202,628 

100.0 

100.0 

Spring  wheat: 

No.  1 . 

1  56,052 
43,994 
92, 210 
118,520 
146, 634 

2  266,095 

12.3 

9.6 

20.2 

25.9 

32.0 

95.9 

No.  2 . 

No.  3 . 

6,583 

2.4 

No.  4 . 

Lower . 

4,866 

1.7 

Total . 

457,410 

277,544 

100.0 

100.0 

Grand  lotal. .. 

6,914,734 

7,480,172 

- -  - - 

1  Includes  1,824  bushels  of  No.  1  hard.  a  includes  16,025  bushels  of  No.  1  hard. 


1 


APPENDIX  TABLES, 


313 


Table  16. — Results  of  mixing  operations  in  wheat  at  certain  Chicago  elevators,  1913-1^  to 

1916-11} 


Quantities  (bushels). 

Percentages. 

In. 

Out. 

In. 

Out. 

Winter  wheat: 

No.l . 

168,650 

184,623 

0.3 

0.3 

No.  2 . 

24,219, 803 

54, 34?;  939 

42.6 

93.6 

No.  3 . 

25,644, 851 

i;  716; 619 

45.1 

3.0 

No.  4 . 

4,927,711 

438,329 

8.7 

.7 

Lower . 

1,857,572 

1,385,838 

3.3 

2.4 

Total . 

56,818,587 

58,073,348 

100.0 

100.0 

Spring  wheat: 

No.  1 . 

3, 593, 534 

6,932, 510 

38.9 

90.0 

No.  2 . 

1,891,338 

200,540 

20.5 

2.6 

No.  3 . 

2,063,749 

190,476 

22.3 

2.5 

No.  4 . 

1,140, 511 

35',  144 

12.4 

.4 

Lower . 

544, 875 

345,804 

5.9 

4.5 

Total . 

9,234,007 

7,704,474 

100.0 

100.0 

.  Grand  total . 

66,052,594 

65,777,822 

1  Includes  operations  of  six  elevators  for  three  years,  1914-15  to  1916-17,  and  of  one  of  these  six  for  1913-14. 


Table  17. — Results  of  mixing  operations  in  wheat  by  the  public  elevators  at  Minneapolis 

for  the  crop  year  1912-13. 


Quantities  (bushels). 

Percentages. 

In.i 

Out.2 

In. 

Out. 

No.  1  hard . 

436,903 

17,917,562 
11,754,636 
3,289,463 
36,733 
4,964, 946 
465, 817 

165,285 

18,371,089 
8,489,480 
3,070,809 
3, 523 
2, 154, 578 
293,072 

1.1 

46.1 

30.2 
8.5 

.1 

12.8 

1.2 

0.5 

56.5 

26.1 

9.4 

Northern  spring  wheat: 

No.  1 . 

No.  2 . 

No.  3 . 

No.  4 . 

Lower . 

6.6 

.9 

Ungraded . 

Total . 

38,866,060 

32, 547, 836 

100.0 

100.0 

1  Includes  opening  inventories.  *  Includes  closing  inventories. 


Table  18. — Results  of  mixing  operations  in  wheat  by  the  public  elevators  at  Minneapolis 

for  the  crop  year  1913-14- 


t 

Quantities. 

Percentages. 

In.i 

Out.2 

In. 

Out. 

No.  1  hard . 

Bushels. 

4, 198, 798 

13, 044, 954 
6, 713, 262 
2, 339,  729 
28,  206 
1, 717,  527 
2, 168,  098 

Bushels. 

3, 935, 1Q6 

20, 769, 365 
5, 441, 119 
3, 557, 279 
10, 946 
946, 617 
1,604,  782 

13.9 

43.2 

22.2 

7.7 
.1 

5.7 
7.2 

10.9 

57.3 

15.0 

9.8 

Northern  spring  wheat: 

No.l . 

No.  2 . . . 

No. 3 . 

No.  4 . . 

Lowejj . . 

2.6 

4.4 

Ungraded . 

Total . 

30, 210, 574 

36, 265, 214 

100.0 

100.0 

1  Includes  opening  inventories.  *  Includes  closing  inventories. 


314 


TEKMINAL  GRAIN  MARKETING, 


Table  19. — Results  of  mixing  operations  in  wheat  by  the  public  elevators  at  Minneapolis 

for  the  crop  year  1914-15. 


Quantities. 

Percentages. 

In.i 

Out.2 

In. 

Out. 

No.  1  hard . 

Bushels. 
348, 166 

7, 514, 089 
8, 837,  461 
.  7,  852,  207 

5, 669, 133 
2,  749,  308 
3, 358, 106 

Bushels. 
231, 685 

7, 937, 842 
11, 782,  498 
8, 153,  680 
2, 423,  504 
805,  707 
5, 625,  714 

1.0 

20.7 

24.3 

21.6 

15.6 

7.6 

9.2 

0.6 

21.5 

31.9 

22.1 

6.5 

2.2 

15.2 

Northern  spring  wheat: 

No.  1 . 

No.  2 . 

No.  3 . 

No.  4 . 

Lower . 

Ungraded . 

Total . 

36, 328, 470 

36, 960, 630 

100.0 

100.0 

1  Includes  opening  inventories.  2  Includes  closing  inventories. 


Table  20. — Results  of  mixing  operations  in  wheat  by  the  public  elevators  at  Minneapolis 

for  the  crop  year  1915-16. 


Quantities. 

Percentages. 

In.i 

Out.2 

In, 

Out. 

No.  1  hard . 

Bushels. 

2, 879, 797 

12, 534, 566 
11, 054, 000 
5, 888, 091 
3,368,539 
4, 392,  543 
3, 738, 049 

Bushels. 

1,689,556 

11, 323, 457 
12, 530,  895 
5, 793, 381 
1,342,880 
1, 499, 363 
3, 091,  785 

6.6 

28.6 

25.2 

13.4 

7.7 

10.0 

8.5 

4.5 

30.4 

33.6 

15.6 

3.6 
4.0 
8.3 

Northern  spring  wheat: 

No.  1 . 

No.  2 . 

No.  3 . 

No.  4 . 

Lower . 

Ungraded . 

Total . 

43, 855, 585 

37,271, 317 

100.0 

100.0 

1  Includes  opening  inventories.  2  includes  closing  inventories. 


Table  21. — Results  of  mixing  operations  in  wheat  by  the  public  elevators  at  Minneapolis 

for  the  crop  year  1916-17. 


Quantities, 

Percentages. 

In.i 

Out.2 

In. 

Out. 

t 

Bushels. 

Bushels. 

No.  1  hard . 

897, 995 

512, 817 

3.4 

1.6 

Northern  spring  wheat: 

No.  1 . 

2, 036, 938 

3, 519, 023 

7.8 

10.9 

No.  2 . 

2, 536, 945 

6, 001, 610 

9.7 

18.5 

No.  3 . 

3, 127,  888 

5, 724, 699 

11.9 

17.7 

No.  4 . 

7, 608,  536 

6, 516, 799 

29.0 

20.1 

Lower . 

6, 073,  478 

3, 747, 248 

23.2 

11.6 

Ungraded . 

3, 930, 894 

6, 330, 230 

15.0 

19.6 

Total . 

26,212,674 

32,352, 426 

100.0 

100.0 

1  Includes  opening  inventories.  2  includes  closing  inventories. 

% 


APPENDIX  TABLES 


316 


Table  22. — Results  of  mixing  operations  in  wheat  by  the  public  elevators  at  Minneapolis, 

1912-13  to  1916-17. 


Quantities. 

Percentages. 

* 

In.i 

Out.2 

In. 

Out. 

No.  1  hard . 

Bushels. 

8,761,659 

53, 048, 109 
40,  896, 304 
22,  497, 378 
16, 711, 147 
19,  897,  802 
13, 660, 964 

Bushels. 

n 

Q  7 

Northern  spring  wheat : 

No.  1 . 

Xy  X  XtT 

fil  Q9n  77A 

o«  u 

Qn  0 

o*  1 

No.  2 . 

AA  OAe\ 

OQ  9 

9=;  9 

No.  3 . 

26, 299,  848 
in  907  fit;9 

0 

19  R 

1  p;  n 

No.  4 . 

Q  t; 

10.  u 

p;  Q 

Lower . 

Q  1 

y.  0 

11.4 

7.8 

0.  y 
p;  9 

Unvraded . 

16, 945,  583 

0*  A 

Q  7 

y*  / 

Total . 

175, 473, 363 

17=;  *^07  /19Q 

1/VI  n 

lUU.  U 

ivJlJ*  u 

1  Includes  opening  inventories.  *  includes  closing  inventories. 


Table  23. —Results  of  mixing  operations  in  wheat  by  two  Duluth  elevator  companies 

for  the  crop  year  1912-13. 


Quantities. 

Percentages. 

In.i 

Out.2 

In. 

Out. 

No.  1  hard . 

Bushels. 

712,595 

19, 461,512 
7, 922, 325 
698,  635 
29,  422 
7, 404, 108 
982, 136 

Bushels. 
755, 839 

30, 982, 183 
1, 837, 553 
551,  676 
1,385 
204, 459 
377, 344 

1.9 

52.3 

21.3 
1.9 

.1 

19.9 

2.6 

2.2 

89.2 

5.3 

1.6 

.6 

1.1 

Northern  spring  wheat: 

No.  1 . 

No.  2 . 

No.  3 . 

No.  4 . 

Lower . 

Ungraded . 

Total . 

37,210,733 

34,  710, 439 

100.0 

100.0 

1  Includes  opening  inventories.  2  Includes  closing  inventories. 


Table  24. — Results  of  mixing  operations  in  wheat  by  two  Duluth  elevator  companies 

for  the  crop  year  1913-14. 


# 

Quantities. 

Percentages. 

In.i 

Out.* 

In. 

Out. 

No.  1  hard . 

Bushels. 

3, 614, 632 

14,264, 924 
5,138,310 
862,  691 
5, 260 
644,  707 
2, 088, 835 

Bushels. 

4, 448, 844 

24, 212, 650 
332, 270 
144,  755 
1,403 
66, 156 
935, 134 

13.6 

53.6 
19.3 

3.2 

14.8 

80.3 

1.1 

.5 

Northern  spring  wheat: 

No.  1 . 

No.  2 . 

No.  3 . 

No.  4 . . 

Lower . 

2.4 

7.9 

.2 

3.1 

Ungraded . 

Total . 

26, 619,359 

30, 141, 212 

inn  n  1  inn  n 

1  Includes  opening  inventories.  2  Includes  closing  inventories. 


316 


TERMINAL  GRAIN  MARKETING 


Table  25. — Results  of  mixing  operations  in  wheat  by  two  Duluth  elevator  companies 

for  the  crop  year  1914-15. 


Quantities. 

Percentages. 

In.i 

Out.2 

In. 

Out. 

No.  1  hard . . 

Bushels. 
151, 156 

Bushels. 

3, 984 

0.6 

Northern  spring  wheat: 

No.  1 . 

7,  767,  493 

18,006,757 

31.7 

72.7 

No.  2 . . . 

6, 119, 137 

2, 851, 151 

25.0 

11.5 

No.  3 . 

4, 266,  477 

1,368,  566 

17.4 

5.6 

No.  4 . 

1, 906,  947 

98,  558 

7.8 

.4 

Lower . 

1, 034,  584 

125, 990 

4.2 

.5 

Ungraded . 

3, 276,  694 

2,307,958 

13.3 

9.3 

Total . 

24, 522, 488 

24,  762,  764 

100.0 

100.0 

1  Includes  opening  inventories.  2  Includes  closing  inventories. 


Table  26. — Results  of  mixing  operations  in  wheat  by  two  Duluth  elevator  companies 

for  the  crop  year  1915-16. 


Quantities. 

Percentages. 

In.i 

Out.2 

In. 

Out. 

No.  1  hard . 

Bushels. 
764, 860 

Bushels. 

269,030 

1.9 

0.8 

Northern  spring  wheat: 

No.  1 . 

12, 037, 298 

26, 633, 060 

30.4 

75.2 

No.  2 . 

12, 127,  498 

6, 054, 514 

30.7 

17.1 

No.  3 . 

5, 664, 477 

304,  747 

14.3 

.9 

No.  4 . . . 

1,434, 282 

132, 542 

3.6 

.4 

Lower . 

2,  426, 892 

75, 983 

6.1 

.2 

Ungraded . 

5, 133,  922 

1, 922, 186 

13.0 

5.4 

Total . 

39, 589, 229 

35,392,062 

100.0 

100.0 

1  Includes  opening  inventories.  2  Includes  closing  inventories. 


Table  27. — Results  of  mixing  operations  in  wheat  by  two  Duluth  elevator  companies 

for  the  crop  year  1916-17. 


Quantities. 

Percentages. 

In.i 

Out.2 

In. 

Out. 

No.  1  hard . 

Bushels. 
243, 968 

967, 664 
1,207, 048 
986, 500 
471,  732 
1, 156,  983 
2, 616,  777 

Bushels. 

12, 130 

5, 411, 044 
3, 458, 883 
121, 635 
20, 204 
997,  762 
1, 812, 389 

3.2 

12.6 

15.8 

12.9 

6.2 

15.1 

34.2 

0.1 

45.7 

29.2 
1.0 

.2 

8.5 

15.3 

Northern  spring  wheat: 

No.  1 . 

No.  2 . . . 

No.  3 . 

No.  4 . 

Lower . 

Ungraded . 

Total . 

7,650, 672 

11,834, 047 

100.0 

100.0 

'  Includes  opening  inventories.  2  includes  closing  inventories. 


APPENDIX  TABLES 


317 


Table  28.— Results  of  mixing  operations  in  wheat  by  two  Duluth  elevator  companies 

1912-13  to  1916-17. 


Quantities. 

Percentages. 

In.i 

Out.* 

In. 

Out. 

No.  1  hard . 

Bushels. 

Ft  487  211 

Bushels. 

5,489,827 

105,245,694 
14,534,371 
2,491,379 
254,092 
1,470, 150 
7,355,011 

A  1 

4.0 

76.9 

10.6 

1.8 

Northern  spring  wheat: 

No.  1 . 

K4  AQS  fiQI 

4.  1 

No.  2 . 

XOOy  OvX 

4U.  2 

No.  3 . 

ox  Xy  0X0 

12  478  780 

U 
n  0 

No.  4 . 

8  847  fU8 

Lower . 

12, 667, 274 
14,098,364 

Z.  0 

.  2 
1.1 
5.4 

Ungraded . 

y.  0 

lU.  4 

Total . 

LS.*)  692  481 

136,840,524 

100.0 !  100.0 

i 

1  Includes  opening  inventories.  2  Includes  closing  inventories. 


Table  29.— Results  of  mixing  operations  in  wheat  at  six  licensed  public  elevators  at 

Kansas  City  for  the  crop  year  1913-14. 


No.  1  red . 

No.  2  red . 

No.  3  red . 

No.  4  red . 

No.  1  hard . 

No.  2  hard . 

No.  3  hard . 

No.  4  hard . 

No.  2  mixed . 

No.  3  mixed . 

No.  4  mixed . 

No.  2  western  psring 
No.  3  western  spring 
No.  4  western  spring 

No.  2  durum . 

No.  3  durum . 

No.  3  spring . 

No.  4  spring . 

No.  2  Pacific  coast. . 
Sample . 

Total . 


Quantities. 

Percentages. 

In.i 

Out.* 

In. 

Out. 

Bushels. 

Bushels. 

8,108 

1,000 

0.1 

1,322,039 

2,038,674 

10.0 

15.5 

329, 975 

8,217 

2.5 

.1 

151, 698 

6,426 

1.1 

.1 

76,445 

368, 652 

.6 

2.8 

9,004,804 

10, 137, 259 

67.8 

76,9 

1,203,338 

185,683 

9.1 

1.4 

306,  111 

18,523 

2.3 

.1 

364, 709 

156,047 

2.7 

1.2 

1  154,191 

140, 452 

1.2 

1.7 

^  70, 564 

6, 099 

.5 

23, 545 

36,342 

.2 

.3 

36,957 

25,058 

.3 

.2 

571 

14,708 

15,816 

.1 

.1 

2,199 

2,932 

4, 120 

l'358 

i  2,479 

j  5, 798 

1  205, 733 

27, 068 

1.5 

.2 

13,288,092 

13, 175,606 

100.0 

100.0 

1  Includes  opening  inventories.  2  Includes  closing  inventories. 


56976°— 22 - 22 


✓ 

318  TERMINAL  GRAIN  MARKETING'. 

Table  30.~ResuUs  of  mixing  operations  in  wheat  at  six  licensed  public  elevators  at 

Kansas  City  for  the  crop  year  1914-15. 


No.  1  red . 

No.  2  red . 

No.  3  red . 

No.  4  red . 

No.  1  hard . 

No.  2  hard . 

No.  3  hard . 

No.  4  hard . 

No.  2  mixed . 

No.  3  mixed . 

No.  4  mixed . 

No.  2  western  spring 
No.  3  western  spring 
No.  4  western  spring 

No.  2  durum . 

No.  3  durum . 

No.  4  durum . 

No.  2  Pacific  coast. . 
No.  3  Pacific  coast. . 
Sample . 

Total . 


Quantities.  , 

Percentages. 

In.i 

Out.2 

In. 

Out. 

Bushels. 

Bushels. 

949 

1,557,014 

2,321,493 

4.6 

6.8 

872,693 

286, 142 

2.6 

.8 

348,346 

84,006 

1.0 

.2 

14,335 

.1 

8,446,530 

14,604,129 

25.0 

42.8 

14,379,000 

13,824,558 

42.6 

40.5 

6,137,452 

2, 107, 987 

18.2 

6.2 

199, 086 

32,872 

.6 

.  1 

404,940 

173,396 

1.2 

.5 

199, 424 

189,526 

.6 

.6 

13,508 

16, 106 

.  1 

70,938 

65,285 

.2 

.2 

12,924 

1,100 

12, 279 

12,245  1 

11,303 

12,318  1 

1,236 

. ... 

6, 728 

706 

1,111,328 

422,120  1 

3.3 

1.2 

33, 800, 719 

34,153,283 

100.0 

100.0 

Table  31. —Results  of  mixing  operations  in  wheat  at  six  licensed  public  elevators  at 

Kansas  City  for  the  crop  year  1915-16. 


No.  2  red . 

No.  3  red . 

No.  4  red . 

No.  1  hard . 

No.  2  hard . 

No.  3  hard . 

No.  4  hard . 

No.  2  mixed . 

No.  3  mixed . 

No.  4  mixed . 

No.  2  western  spring 
No.  3  western  spring 
No.  4  western  spring 

No.  2  durum . 

No.  3  durum . 

No.  4  durum . 

No.  2  Pacific  coast... 
No.  3  Pacific  coast... 

No.  3  spring . 

No.  4  spring . 

Sample . 

Total . 


Quantities. 

Percentages. 

Ili.P 

Out.2 

In. 

Out. 

Bushels. 

Bushels. 

36, 882 

91,833 

0.2 

0.5 

233,  078 

426, 872 

1.2 

2.3 

931,111 

248, 907 

4.7 

1.3 

1,221 

804, 547 

3,037,122 

4.0 

16  3 

5, 692, 409 

10, 416, 824 

28.4 

56  1 

9, 066, 228 

3, 609, 055 

45.2 

19.4 

46, 522 

7,103 

.2 

284, 107 

70, 904 

1.4 

.4 

441, 257 

240, 466 

2.2 

13 

1,468 

9, 423 

1 

126, 090 

214,  714 

.6 

1.2 

49,116 

7,373 

.3 

8, 355 

5,  011 

10, 974 

.1 

4,176 

7,905 

3, 248 

1,102 

3, 375 

2, 299,  536 

198, 390 

11.5 

1.1 

20, 052,  707 

18,583,997 

100.0 

100.0 

1  Includes  opening  inventories. 


2  Includes  closing  inventories. 


APPENDIX  TABLES. 


319 


Table  32. — Results  of  mixing  operations  in  wheat  at  six  licensed  public  elevators  at 

Kansas  City  for  the  crop  year  1916-17. 


Quantities. 

Percentages. 

In.i 

Out.2 

In. 

Out. 

No.  1  red . 

Bushels. 
4,868 
856,  659 
511,114 
340, 150 
105,  454 
9, 930,  439 
4, 672,  865 
2, 355,  807 
281, 028 
384,  493 
235,  274 
1,  416 
60,  070 
16, 537 
1,476 
3,804 
5, 089 
49, 252 
10,491 
1,649 

Bushels. 

No.  2  red . 

1,093, 336 
.  263, 941 

118, 685 

4.0 

2.4 

1.6 

.5 

46.5 

21.9 

11.0 

1.3 

1.8 

1.1 

4.7 

1.1 

.5 

No.  3  red . 

No.  4  red . 

No.  lhard . 

No.  2  hard . 

15,649, 61  i 
2,142,  719 
2, 541, 447 
16, 089 
312, 075 
455, 195 

67.5 

9.3 
11.0 

.1 

1.4 
2.0 

No.  3  hard . 

No.  4  hard . 

No.  2  mixed . 

No.  3  mixed . 

No.  4  mixed . 

No.  2  western  spring: . 

No.  3  western  spring . 

No.  4  western  spring . 

171,306 

.3 

.1 

.7 

No.  2  durum . . 

No.  3  durum . 

1,689 

No.  4  durum . 

No.  2  Pacific  coast . 

46, 368 
2,484 

.2 

.1 

.2 

No.  3  Pacific  coast . 

No.  4  Pacific  coast . 

No.  2  spring . 

1,467 
3,820 
356, 734 

No.  4  spring . 

Sample . 

1,537, 294 

7.2 

1.5 

Total . 

21,365,229 

23,176, 966 

100.0 

100.0 

1  Includes  opening  inventories.  2  includes  closing  inventories. 


Table  S3.— Results  of  mixing  operations  in  wheat  at  six  licensed  public  elevators  at 

Kansas  City,  1913-14  to  1916-17. 


No.  1  red . 

No.  2red . 

No.  3  red . 

No.  4red . 

No.  1  hard . 

No.  2  hard . 

No,  3  hard . 

No.  4  hard . 

No.  2mixed . 

No.  3mixed . 

No.  4mixed . 

No.  2  western  spring 
No.  3  western  spring 
No.  4  western  spring 

No.  2  durum . 

No.  3  durum . 

No.  4  durum . 

No.  2  spring . 

No.  3  spring . 

No.  4  spring . 

No.  2  Pacific  coast... 
No.  3  Pacific  coast . . . 
No.  4  Pacific  coast... 
Sample . 

Total . 


Quantities. 

Percentages. 

In.i 

Out.2 

In. 

Out. 

Bushels. 

Bushels. 

13, 925 

1,000 

3,  772,  594 

5, 545, 336 

4.3 

6.2 

1, 946,  860 

985, 172 

2.2 

1.1 

1,771,305 

458,  024 

2.0 

.5 

197, 455 

368, 652 

.2 

.4 

28, 186, 320 

43,428,121 

31.9 

48.8 

25, 947,  612 

26, 569,  784 

29.3 

29.8 

17,865,  598 

8, 277,012 

20.2 

9.3 

891,345 

212,111 

1.0 

.3 

1, 227,  731 

696,  827 

1.4 

.8 

946,  519 

891, 286 

1.1 

1.0 

39, 937 

61,871 

.1 

.1 

294, 055 

476, 363 

.3 

.5 

79, 148 

8,473 

.1 

36,818 

33, 072 

28, 280 

16, 939 

10, 501 

* 

1,467 

5,222 

1,358 

5,  854 

3;  820 

69, 683 

46; 368 

.1 

.1 

14, 445 

2,484 

1,649 

5, 153, 891 

1,004,  312 

5.8 

1.1 

88, 506, 747 

89, 089,  852 

100.0 

100.0 

1  Includes  opening  inventories. 


2  Includes  closing  inventories. 


Table  34.  Ins  ’  and  ‘  Outs’^  and  mixing  profits  ^  in  wheat  of  the  Minneapolis  public  terminal  elevators  for  the  crop  year  1913-14. 


320 


TERMINAL  GRAIN  MARKETING. 


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1  For  methods  followed  in  computing  profits,  see  Chap.  V,  sec.  2  (especially  footnote  6.) 

2  Includes  1,764  bushels  taken  in  Sept.  1.  Figure  for  Aug.  31  is  57,375. 

3  Includes  2,345  bushels  taken  in  Sept.  1.  Figure  for  Aug.  31  is  21,728. 

<  Includes  1,106  bushels  taken  in  Sept.  1.  Figure  for  Aug.  31  is  1,527. 

6  Includes  1,449  bushels  taken  in  Sept.  1.  Figure  for  Aug.  31  is  228,053 


Table  36.  “/ns”  and  “Outs’'  and  mixing  profits  ^  in  wheat  of  the  Minneapolis  public  elevators  for  the  crop  year  1915-16. 


324 


TERMINAL  GRAIN  MARKETING. 


10 

Overage, 

all  grades 

as  appor¬ 

tioned 
to  grades. 

7-f-9 

53  ^  00  (N  — 1  00  CO  "f  lO  >0  •»><  O  O  1-t  . 

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rH  CO  ! 

5,762,486 

9 

Amounts 

as  appor¬ 

tioned. 

.  $2  ??  !2  2S  £J  fS  “5  “O  ro  o  o  1-1  ' 

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cq  : 

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8 

Apportion¬ 
ment  un¬ 
graded  over¬ 
age  to 
grades,  on 
basis  of 
total  outs 
graded 
wheat. 

92  3J 29 ^  cs  Oi  (M  50  t-- 00  CO  ’ 
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i 

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sq  :  CO-'  :  :  :  :::::: 

CO 

GO 

•* 

CO 

•s 

6 

Total  out. 

4+5 

Bushels. 

1, 981, 865 
13, 243, 094 
13, 632,  414 
6,075,201 
'  1,537,695 
839, 109 
646,  421 
142,  818 
460,  980 
332,  444 

84,  264 

20,  459 

1, 955,  395 

1, 645,  042 

65,  224 

291, 389 

994,  792 

43, 948, 606 

•  5 

On  hand 
Sept.  1, 
1916. 

'coc^io  'Oo? 

f^^^^COOt'^.-HCOiOOO  'C^OOO 

cq  <N -r  .  *  : 

•  • 

•  . 

6, 677, 289 

4 

Inspected 

out. 

Bushels. 
1,689,556 
11, 190,301 
12,072,508 
5, 466, 828 
1, 258,  616 
613, 355 
608, 306 
133, 156 
458, 387 
326, 553 
84, 264 
19, 220 
1, 905, 570 
1, 120,  991 
65, 224 
258,  482 

37,271,317 

3 

Total  in. 

1+2 

Bushels.  1 
2, 879,  797 
12,471,476 
10, 602,  784 
5, 401, 681 
3, 191, 645 
723, 301 
2, 592,  955 
179,  577 
457,  801 
487,  795 
176,  894 
111,290 

1,  742, 094 

1, 927,  494 
80,  692 
966,  742 
39, 362 

O 

00 

CO 

co' 

CO 

o 

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2 

Inspected 

in. 

3-1 

Bushels. 

2, 879,  797 
12,354, 989 
10, 596, 199 
5, 400, 296 
3, 191,  645 
723, 301 
2,592,955 
179, 577 
457,  801 
487,  795 
176,  894 
111,290 

1, 742,  094 

1, 915, 263 
80,  692 
964, 997 

43,855,585 

1 

On  hand 
Sept.  1, 
1915. 

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APPENDIX  TABLES, 


325 


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*t-H  OT 

^tS 

Pi^ 

.a 

®  2 
M 

^  >1 
>  g 
do 

o2 

-A 

O)  2 


tfl  O 
Png 

bc^j 

.ag 
"S  o 

r?  ®5 

a  > 

o  ® 

d  ® 

'O  5 
®  to 

L4 

o  ® 

O  ’fh 

p 
w  .2 

■gs 

a| 

II 


a> 

rP 

CO 


CO 

I 

CO 


CM 

-4  s 

•  O 

•  40 

•  05 

•  05 

.  CO  40 
.40 

•  O 

.  40  CO 
.  CO  to 

T-1 

ss 

cm  00  CO 
40  CO  40 
Ht1  CO 

O 

CO 

CM 

nf 

«C  05 
^  00 

Ico' 

•  40 
.  CO 

,  co’'c^ 

.  CO 

•  05 

'  40*'cm’'^ 

'  40  05  05 
•  fH 

CM*'40'40'‘ 
00  fH  t>. 
CM  to 

r>r 

00 

CQ 

•  rH*' 

•  rH 

40*' 

a> 


(m 

o 


p  p  p  p 

t-4  b4  bH 

q;>  q;>  o  0^ 


^  a  ®" 


•w4J4^-H>4-»  ,  •r'r'^r^r^ 

tHUiint-iUi^ObfabbO 
C8  O  O  O  O'd^  3  p!  p!  3-rj 
^  PI  q  3  0^  a’d'3'3'3  5_-  ^  .J, 

g  feb® -s-^  a 

66666 ’57  o6d66oa!;^>iS 

!z;  :zi  Jz;  Iz;  Iz; « !2;  :z;  ;zi  ;zi  :zi  Iz;  ^  ^  m 


tZ3 

3 

ildt! 

o«3  ® 

Eh  P  ft 


-1-=  Q 

®  a 

Izift 


326 


TERMINAL  GRAIN  MARKETING. 


O  . 


oa§£S8 
•'"  .9  c3 


CsOiO 
00  CS 

CO  O  CO 
O  1-^  <N 
Oi 


?t^;S5C1^s?r::*^^^’^ooQooocooooooc 

t"^COCSC^GC)CO»-li-H'^CSTj<r^OOC^r-HOOCOiO 

«?Si?2!£SS5£9^SS'-^oiotoioc5coc4 
2?2I>;:;^ot^t^C500'^ocooot*^co<N^ 

rV'  c^'o'co'  t-T  1 


rH  ^  CO  CO  ?0  (N 


a> 

^  o 

'S  c3 

o_g 


(X* 


O  00  o 

l  ^  CO 

O  Cft  o 

00  <N 

O  CO 

csT 


00  l>*  lO  <N  CS  lO  I 

CO  lO  C^  Oi  00  00  c 


05 

yp 

(N 

CO 


)  IC  o  O  05  »o  < 

)  ^  05  00  CO  <N  < 


>  lO 

>  CO 


•  o 

•  lO 


^''  I 


I  0^  d  ^  ^ 
«  T!  b  '3  3  O 

H  g  °  2  s  a 

''0.9  03 


'  OJ 

ft 


9  9 

-  41 

ft 
ft 


;3j  e: 


r^'03-3 


• 

: 

•  IM  O 

•  CD  X 

•X 

•  Tp 

•£0^0  •  • 

•  O  iD  fh  •  • 

Tp  05 

05 

:8  :  : 

• 

•  X 

7. 

459. 

185. 

•  *D 

•  X 

•  05 

•  X  X  CD  •  « 

•  05  r-  ID  •  • 

•  05  cs  •  • 

'<m‘  CD 
ID 

O  05 

^05  *  • 

•  CO  •  • 

.  X  •  • 

* 

* 

• 

.  .  . 

fH  X' 

.  I  I 

'w'  S./  '•'4  WV  U«)  t.~>J 

O  O  00  05  05 

JO  O  C>  lO  O  05 
22  ’“<  C^  '— I  i-H  05  r-l 

o  (^^  to  lo  CO 

u 


CO  ‘(N  C 


>  O  lO 

>  00 


•  lO  CD  00  lO  ^ 

•  (N  O  lO  O 

•  CO  rfi  CO 


CO 

00 

o 

CO 

05"“ 


05  ( 
05  < 


5  lO  ( 
>  CO  c 


>o 

)  lO 


Q  CO  05  05  o 
o  CO  CO  ^ 
CO  05  J-H  CO 

1— I  05 


4^  O  I 

o  ; 

Pi  3  ' 

2^  u  - 

3  eg  4> 

o  g  .S  o 
,o 


UJ  05  < 
05  CO  < 


>  "-H  T}'  00  I 

)  CO  ^  < 


•  t^  CO  io  CO  r'*  < 


CO  05  o  <N  CO  C'J  CO 
GO  t'-  Tf  ^  C5  CO 
O  O'!  05  CO  05 


•C^O’-HiOOuOCO'^X'CD 

•  CO  (N  QO 

*  IS  ^  ^  ^  ^  ^ 

•C^XcDi-HioO^OC^COCS 
•l'^  ■^CSCO’-^cOCDC^cO 


•  iO 

•  05 
.  CO 


CO 


<N 


rt  CO 

t?  p 
^  o  ^ 
®  (-.  ft 

o:s-s^ 


:8 

•  O  fH  05  • 

;  X  X  •  . 

•  CS  X  Tp 

•  X  Tp  fH 

iO 

X 

X 

05  05 

05  • 

(N  • 

•  05 

•  ID 

» 

•  ID  (M’  CN  .  . 

•  ^  fH  05  •  • 

•  CD 

•  CO  CD  05 

•  O  X 

• 

dl 

Tp 

CD 

cs 

CDO 

TT1 

<M  • 

'  1  i 

• 

»d' 

fH  • 

05  1"-  O  ^  ^  < 


S8§f5 

00  io 


00  CO  rfi  CO 
CO  lO  00  CO 
DJ  lO  05 

f-TT-Tcvr 


•  O  O  CO  O  —H 

•  CO  O  (N  lO 

•  05  o  lO  o 

•  r^iO(N  cocs 


CO 

kO 


r>.  iO  CO  05  o 

CO(N  OOCS  i-H 

00  O  ^ 
O  00  o  05 
CO  C^  CO  CS  CD 

t-T  CD*'  i-T 


0)  I 

O  f~4 

P  d 

9  d  w 

o"c3.B 


TP  t>.  O 

O  t^o 

C5  O  00 
1— {  CD 

fH  CD  iO 

CO 


o  o  r>- 

O  O  05 

^  (N  Tp  c4 

S  CO  S  ^ 

O  •«I'  05  00 
»»  »» 

1-H  (N 


:R 

•  05 

•  05 

•  CO 


'd  n  '  • 

X  TJ  fe  *2  p  o 
p.2  2  g  fl 

9^  Eb.S  «3 


•  00 

•  CO 

•  ^ 


•  05  fH  X  •  •  • 

•005 
•  <N 

•  X  •  • 

•  X  •  • 

•  csi  o  CO  •  •  . 

•  05  Tp  1  *  , 

•  CD  fH  •  ♦  • 

•  •  •  • CO 

i  TH  O 

:  : 

•  (N  •  • 

•  rj  c/5 

**-=*  y  >-« 

9^  O  <1> 

°S-3 


TP  lO  < 
O  05  c 


>  05  *-H  o 

>  CO  CO  05 


o  00  00  00  00  (N 

Tp  TP  CO  »D  IC 

r-»  o  ID  O  »-H  O  00 

CO  th  i-Tf-i  CO* 


^  o  o  !>•  05  u:) 

CD  CD  00  iO  o  fH  o 


•o 

'  Tp 


123£'®SI'2’-'*p> 

^05»— (OOcOTf^  ICO 
CO  CO  (N  CO  CO  05  00  'esf 

cs"  r-H  rn"  ' 


1  4>  3  li  oj 

'O  o  '3  S 

a  3®  9  s 
S  W).9  3 

ft 


05 


»D  05  !>. 

(N  Tp 


ID  00  O 
05 
t>. 


^  S 

^  2 

O  prt 

C5^g3 


C/3 

c:) 

a, 


Q  (M  ^  CD  ID 
TP  00  00  CO  CD  O 


»D 

TP 

CO 

csT 


CD  CD  05  1-H  t-H  ID 
CO  1-H  00  CD  *-H  Tp 
05  Dl  CD  Tp  O  00 


S 

Tp 

CO 


g  0,9  9  aj 

05  v-i  2  P  o 

S'-c  2  g  3 
H  ®  W).g  3 
H 


■e  9  2 

ft 

ft 


8 


!> 

Tp 

CO 


8S§8S 

Q  CO  CD  ID  1-H 
»D  05  Dl  05 
CO  00  CD  CD  CD 


•  iDCS  TP 

•  Tp  00  o 

•  Tp  W  o 
•€»^00 


Q  iDC^  l>-  ID 

00  *-H  »D  CD 

SOO  ^  ID  fH 
t^O<N  05 
CO  X  Tp  00  CD 


o  o  o 

og.9 

S  3 

I 

3 

P  O  t-i 

+i  4)  ca 


6B6  : 
0^0  . 

3  oTb^a 

+5>^  3^ 

CO 

ii.”i 

I  §-3^ 
P5QWO 


3  CO 

)  Tp 


»D  1-H  CDC^  C 

00  CO  X  CO  C 


ID  CD  CD  Tp  O 
CD  ID  iD  CD  X 
CD  Tp  1— I  O  O  Tp 


.  !>, 

.  CO 

•  CO 


05 

CD 

ID 


ID  CD 

X  CD 


•  (N  X  X  CD 

•  iD  Tp  Tp  ID 


ID  05  •  X  1-H  C'J  Dl  !>. 

(M  CD  •  CS  CD  X  Tp  CD 
CD  Tp  •  CD  Tp  CO 

•  C^  i-T 


;$hC305  05(Nc^xo 
C^iDi-HCDTPC^OOiD 


05CDl^i-HTpTPOO 
TP»-Ht>.C^i-HO5C0lD 
X  <)  X  Tp 


.  Tp 

•  X 


Tp  CD 

X 


05  X 
Tp  X 
<M  X 


8 


05  •  r-. 

lO  •  X 


8^  •  X 

.  TP 

(N  ‘TP 


Tp 

05 


X 

X*' 


05  ^  (N  ID  O 

CD  O  C^J  ID 


1-H  TP  o 

<N  X  05  ID 
O  Tp  Tp  TP  rH 

i-H*'co' 


^  ID  1-H  X  < 

Tp  00  ( 


3  Tp 

5(N 


X  CD  X  CD  X  1-H 
1-H  05  t>-  ID  X  05 
1-H  TP  t>.  t>,  00  CD 


»D  ID 

t>*  Tp 

CO  CD 
fH  05 
fH  tp 


.  O- 

oO 


o 


o  o 

C")  M 

■u  >.'i^lo 

£  |’|33  g 

=sgo|wf  9 

tn^C^  4)^0 
iL  C3  CS  4<  O  3  _ 

oteMw;§c5“t) 


8 


CD 

05 


^  X 
X  X 
FH 


<N 


rr.  CD  Tp 

XX(N 

(N  c4  FH* 

Tp  05 
05  f-H  CD 


o 

o 

Sh 

05  , 


O 

•  o 

':§ 

:  9  • 
■  t 


•  X 

•  ID 

•  o4 

I  Tp 

•<N 


05 

TP 

ID 


.  O 
•O 


O 

Q 


O' 

O 


o 

CO 

3 

O 

-q 

3'-'  r'-'  I 

^  U  9  =3^ 

^  §  S  «  o 


CO 

05 

C5 

q 

M 


d 

4H 

o 


1  The  books  of  a  majority  of  the  concerns  were  closed  with  the  crop  year;  10  concerns  followed  the  calendar  year  as  a  fiscal  period. 


Table  38  —Deviations  over  and  under  Grain  Bulletin  card  prices  by  four  types  of  country  elevators  in  Minnesota,  North  and  South  Dakota,  and  Montana 

combined,  for  consecutive  crop  years,  1912-13  to  1916-17. 

No.  1  NORTHERN  WHEAT. 


APPENDIX 


TABLES. 


327 


Total  prices  which 
followed  card. 

Per  cent. 

CO  CO  to  • 
^  • 

coc4co  • 

2.  37 

1.65 

1.87 

1.  87 

1.77 

1.21 

.41 

.60 

1.01 

.90 

M  1 

00  1 

to  05  •  *  1 

05  CO  •  * 

«  • 

*  * 

*  • 

f  • 

1  • 

•  « 

1  • 

CO 

CO 

Number. 

o  ^  * 

CO  to  1-H  • 

■ 

1 

« 

1 

< 

• 

92 

(N  t^(M  * 
to  rH  • 

• 

• 

« 

• 

• 

« 

^H 

05 

00  O  •  ■ 
f-H  1-H  •  • 

1  1 

«  ■ 

1  1 

•  • 

«  * 

t  I 

28 

37 

56 

93 

1  f 

f-H  O  •  ' 

04  •  1 

•  f 

•  • 

«  I 

«  1 

«  1 

04 

Total  prices  below 
card. 

Per  cent. 

\ 

37. 41 
39. 14 
37.46 

3.  08 

36. 76 

cO  00  ^ 

CO  to  (N  CO 

f-H  05  o  to 
^  CO 

21.01 

f-H  tO  CO 

CO  CO  05 

(N  CO  1-H  CO 
(M  CO 

33.  75 

<N  05  05 1- 

f-H  to  ca  to 

--15  o  CO  c4 
(N  (N  CO 

23.  37 

28.  45 

33.  45 

34.12 

26.  23 

30.  53 

Number. 

to  r>- o 

»0  CO 

CO  Oi  ^ 

1,425 

iO  ;p 

00  ^  05 

<N  to  ^ 

1,082 

CO  O  00  cp 

CO  O  O 

CO  cO  C^l  1-H 

1,  587 

to  to  !>•  05 

00  JO  05 

00  <M  CO 

2,646 

to  00  to 

(N  O  rH  to 

to  tO  1-H 

1,312 

Total  prices  above 
card. 

Per  cent. 

59.43 

58.73 

59.29 

96.92 

00 

o 

CO 

05  to  CO  CO 
05  to  00  CO 

<0  00 

co  ^ 

77.  22 

to  iO 

O  (N  CO  O 

to  CO  00  CO 
to  l>  to  CO 

to 

CO 

to 

CO 

f-H  1-H  CO 

00  ^  rj’ 

Ti?  00  CO 

i>-  to  r— 

75.  81 

o  to  00  r^- 

to  i-i  00  r- 

o  to  to  CO 
o  co 

68.  84 

Number. 

564 

1,406 

201 

189 

o 

CO 

CO 

1,027 

2, 391 
435 
124 

3,977 

t-H  O  to  1-H 

CO  oc  05  oc 

OC  1-H 

rH 

3, 087 

O  t--  1-H 

05 

00  to  c<i 

8, 585 

1,  551 

1,005 

222 

180 

2,  958 

Total  deviations  of 

2  cents  or  more. 

Per  cent. 

17. 91 
16.00 
22. 12 
27.17 

17. 57 

CO  CO  (N  1-H 

CO  o  o  ^ 
1-H  CS  (N  to 

08*61 

CO  to  <M  »0 
to  oc-  CO  to 

1«H  tJH  05  CO 
CO  CO 

38.  87 

44.26 
49.64 
29.  98 
47.43 

45.  93 

CS  O  CO  tO 
CO  00  ^ 

to  04  00  1-H 
to  CO  to  00 

64.  79 

Number. 

O  CO  to  CO 
00  lO 

f-H  CO 

681 

00  05  O 
^  CO  CO 
^  CO  1 

994 

05  f-H 
f-H  Tft  Tfl  05 
to  00  1-H  f-H 

1,804 

Tf  CO  00  CO 

(N  00  c<i  to 

tO  O  CO  1-H 

f-Tco* 

5,201 

to  Tji  00 

CO  to  05  05 
Hf  05  1-H  1-H 

1-H 

2, 784 

2  cents  or  more 
below  card. 

Per  cent. 

4.84 

3.  72 
3.83 

3. 82 

.90 

1.05 

1. 56 

1.05 

19. 97 
7.98 
15.  51 
23.69 

13. 53 

1£|(M  tH 

oc  CO  (N  iO 

irj  i>: 

6.82 

15.  02 
18.96 
18.99 
18.85 

16. 94 

Number. 

CO  Oi  CO  • 

Tf  GOt-H  i 

148 

<N  O  • 

r-H  CO  f-H  • 

1 

« 

• 

• 

* 

1 

1 

54 

to  CO  00 
05  05  to 

636 

tc  CO  oc  CO 
f-H  L-f  to  f-H 
(N  TJ1 

772 

O  00  CO 

CO  00  to 

CO  JN 

728 

2  cents  or  more 
above  card. 

Per  cent. 

t>-  00  05 

O  (M  ^ 

CO  c4  00 

^  f— ♦  f-H 

13.  75 

^  OOC^  TtH 
t>-  f-H 

oi  05  00  -^H 
^  1-H  tO 

18.25 

21.66 
26.  87 
14.11 
42.86 

24.84 

38.40 
42. 02 
23.  77 
42.86 

39.11 

o  o 

CO  00  ''f  CO 

o  CO*  05  c4 
to  Tji  CO  CO 

47.85 

Number. 

Tfi  (N  CO 

CS  05  CO  to 

»-H  <M 

533 

CO  t-  O 
to  00  (M  CO 

^  to  ^ 

940 

f-H  CO  f-H  CO 

(M  to 

CO  CO  1-H 

1,168 

05  O  O  O 

O  1-H  to  to 

to  f-H 

i-h^'oT 

4, 429 

to  CO  CO  (N 
O  CO  CO  to 
^  tO  1-H  ^ 

2,056 

Number 

of  prices 

tabu-  ■ 

lated. 

05  05  to 

05  CO  05 
05  CO  CO  f-H 

cT 

3, 877 

^  ^  ^  ^ 
CO  CO 

CO  O  CO  f-H 

f-H*'c^ 

5, 150 

1, 482 
2,430 
503 
287 

4, 702 

05  f-H  O 

to  1-H  05  to 
to  (N  O  CO 

co^ciTf-r 

11,324 

05  HjH 

05  f-H  CO 
f-H  lO  CO 

C^'i-h'' 

4, 297 

Crop  year  and  type  of  elevator. 

1912-13: 

Cooperative . 

Line . 

Independent . 

IVTill  _ 

■j 

'  o 

3 

1913-14: 

Cooperative . 

Line . 

Independent... . 

Mill  nwnftH  _  _ 

XfLlX**  V/  ff  i.kN.'V*  >  •  - - - 

Total . 

1914-15: 

Cooperative . 

Line . 

Independent . 

Mill  owned . 

Total . 

1915-16: 

Cooperative . 

Line . 

Independent . 

Mill  owned . 

Total . 

1916-17: 

Cooperative . 

Line . 

Independent . 

Mill  owned . . . . 

Total . 

328 


TERMINAL  GRAIN  MARKETING, 


o 

?s 

e 


<3 


e 

to 

o 

e 


tci 

to 

o 

CQ 

si 

« 

to 

?t 

cT 

o 

GO 

S£ 

?«?**  3 


5-  ^ 
1'^ 
ec 

=0  S 

^  8 

•c* 

o  ^ 
-13^ 

SJ 

'w  s 
o 
S  « 

•S 

'TS 

s 

e 

o 

os 

?e 

o 

• 

e 

•<t> 

?> 


OS 

CO 

w 

n 

-»5 

E-i 


w 

W 

:zi 

pt 

w 

w 

P5 

C 

;z5 


d 


1 

1  Total  prices  which 
followed  card. 

.  Percent. 

•  .o 

.  .C^l 

.  .o 

•  « 

«  • 

(  • 

•  I 

•  « 

1.97 

•CO 

|CO 

6.17 

•T-l  C<| 
•05  CO 

• 

• 

« 

t 

,69 

<M  O 
OO  p-  CO 

'co 

Ol 

CO 

.31 

1.00 

.63 

!  Number, 

i 

•  I 

»  « iO 

•  • 

k  i 

«  » 

•  1 

•  * 

•  1 

•  t 

t  « 

kO 

jio 

•O 

•  pH 

CO  ^ 

00 

•  • 

cs  •  • 

•  1 

1  • 

■  • 

1  * 

•  • 

«  t 

•  • 

05 

Total  prices  below 
card. 

Per  cent. 

37.50 

44.83 

20.  53 

36.22 

•  c^ 

•CO 

22. 22  j 

28.85 

39. 47 

46.86 

37. 34 

19. 95 

18.  92 

37.84 

20.82 

O  CO  CO  o 
iM  <N  O  t>« 

CO  05  05  00 
CO  CO  <N  Tj* 

36.62 

Number. 

?0  CO  CO 

CC  ^  T— 1 

92 

loo 
*  ^ 

GC 

00  lO  N 
t>.  CO  ■rr 

755 

1H  1^(N 

270 

1 

CO  CO  00  O 

(N  04 

520 

Total  prices  above 
card. 

Per  cent. 

62.50 
55. 17 
63.  27 

1— < 
00 

CO 

100.00 
68.  92 

71.61 

71.15 

59.  62 

51,  82 

61. 97 

79.  21 

80.96 

58.  56 

00 

1  pH 

••ti  t'-  CO  04 

C£5  05  c5  pH 
CO  »0  lO 

62.75 

Number. 

OCO^ 

CO 

rH 

kO 

i-i 

58 

05  (>.  t- 
CO  lO  lO 
tf  «o  >— ( 

1,  253 

Ol  (M  lO 

00  r>*  CO 

Ol  CO 

610 ‘I 

1H  o  05  pH 
CO  (N  PH  04 

891 

Total  deviations  of 
2  cents  or  more. 

Per  cent. 

57.96 
31.03 
46.  94 

52.  76 

00 

lO 

53.08 

49. 43 
47.91 
29.70 

45. 65 

53.  09 

61.20 

46.  84 

57.  75 

67. 18 

67.00 

66. 67 

90.24 

67.74 

Number. 

C5  CO 

O  M 

134 

CO 

43 

^  00  o 

O  (N  OS 

CO  >C 

923 

05  00(M 

OC  Oio 

pH  iO 

749 

CO  pH  QO 

CO  pH  CO 

962 

2  cents  or  more 
below  card. 

Per  cent. 

23. 30 
3. 45 
12.  25 

18.  89 

6.76 

6.17 

8, 10 
17.42 
12.  54 

00 

CO 

pH 

^  ^  pH 
^ 

COr^  '•Sf? 

pH 

8.02 

18.34 

28.02 

7.41 

43.90 

23.66 

Number. 

^ 

00 

IC 

lO 

O  (N  00 

IC  Osco 

280 

^  CO 

01  CO  pH 

104 

05  (N  00 

pH  05  pH 

pH  pH 

336 

O) 

U 

Si 

o  « 

Per  cent. 

34. 66 
27.58 
34. 69 

33.86 

51.35 

46.91 

41.33 
30.49 
17. 16 

31.80 

46.  35 
53.  49 
32.43 

49.  73 

00  CO 

00  05  (N  CO 

CO  OC  05  cd 

CO  iO 

00 

o 

”  > 

§o 

(N 

Number. 

1-H  00 

O  1—1 

CO 

00 

00 

■o 

t  38 

lOCO  04 
lO  CO  iO 

OQ  CO 

643 

165 

444 

36 

645  1 

o  05 

pH  pH  pH 

CO  04 

626 

Number 
of  prices 
tabu¬ 
lated. 

CO  Oi  05 

lO 

CQ 

oc 

<N  CO 

^  o  o 

CO  1-H  CO 

2,022 

CO  O  pH 
•O  CO  iH 

CO  00  pH 

1,297 

os  gj  >-i 

'^O  t'. 

1, 420  1 

Crop  year  and  type  of  elevator. 

1912-13; 

Cooperative . 

Line . 

Independent . 

-1 

LWdi . 

1913-14: 

Cooperative . 

T  .in  A 

i  ^ 

loiai . 

1914-15; 

Cooperative . 

Line . 

Independent . 

m  _  1 

lotai . 

.915-16: 

Cooperative . 

Line . 

Independent . 

xutai . 

916-17: 

Cooperative . 

Line . 

Independent . 

Mill  owned . 

• 

« 

• 

* 

( 

• 

• 

1 

1 

• 

• 

« 

• 

• 

• 

• 

1 

1 

• 

• 

• 

t 

t 

f 

• 

• 

f 

( 

• 

• 

H 

7i 

H 

0 

Table  40. — Deviations  over  and  under  Grain  Bulletin  card  prices  by  four  types  of  country  elevators  in  Minnesota,  North  and  South  Dakota,  and  Montana 

combined,  for  consecutive  crop  years,  1912-13  to  1916-17. 


APPENDIX  TABLES. 


329 


APPENDIX  TABLES 


331 


Tabi,e  42. — Profits  and  losses  on  the  first,  second,'  third,  and  fourth  scalps  of  180  cars  in 

the  Minneapolis  market,  crop  year  1916-17. 

FIRST  SCALP. 


Sold  at  profit. 

Sold  at  loss. 

Net  profit. 

Number 
of  cars. 

Average 

profit 

per 

bushel. 

Number 
of  cars. 

Average 
loss  per 
bushel. 

Number 
of  cars. 

Average 
net  profit 
per 

bushel. 

Cents. 

Cents. 

Cents. 

Wheat,  grade  3  or  better . 

31 

6. 47 

4 

4.22 

1  37 

4. 97 

Poorer  than  3 . 

69 

6. 39 

7 

5. 45 

76 

5. 30 

Unclassified  2 . 

4 

14. 75 

4 

14.  75 

^^^leat . 

104 

6.  74 

11 

5.00 

1  117 

5.52 

Barley .  , 

21 

2. 86 

3  22 

2  73 

Oats. . 

11 

1.27 

3 

1.46 

14 

.69 

Corn . 

12 

1.93 

10 

2. 45 

<25 

-.06 

Rye . 

1 

.2.  50 

32 

2.50 

Coarse  grains . 

45 

2.21 

13 

2.22 

5  63 

1.12 

All  grains . 

149 

5. 37 

24 

3. 50 

6  180 

3.98 

SECOND  SCALP. 


Wheat,  grade  3  or  better . 

12 

1. 15 

12 

1  1^ 

Poorer  than  3 . 

41 

4.80 

41 

A  fiO 

Unclassified  2 . . 

1 

.  50 

1 

e;o 

Wheat . 

54 

3.  91 

54 

3.91 

Barley . 

9 

.78 

3  10 

70 

Oats.' . 

1 

.  75 

1 

Corn . 

1 

2.00 

1 

♦  1 0 

2.00 

Coarse  grains . 

11 

.89 

3 12 

.81 

All  grains . 

65 

3. 40 

3  66 

3. 35 

- 

THIRD 

SCALP. 

WTieat,  grade  3  or  better . 

2 

1.44 

2 

' 

1  4.1 

Poorer  than  3 . 

8 

1.97 

1 

22.00 

9 

-.70 

Wheat . 

10 

1.86 

1 

22.00 

11 

-.31 

FOURTH 

SCALP. 

Poorer  than  3 . 

2 

5. 25 

0 

5. 25 

1  Two  cars  resold  at  same  price. 

2  Grade  not  obtained. 

2  One  car  resold  at  same  price. 


*  Three  cars  resold  at  same  price. 
^  Five  cars  resold  at  same  price. 

*  Seven  cars  resold  at  same  price. 


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REPORT 

OF  THE 

FEDERAL  TRADE  COMMISSION 

■'  on’  - 


vcyL.  Ill 

TERMINAL  GRAIN  MARKETING 


December  21, 1921 


:  GOVERNMENT  PELTING  OFFICE 


